Skip to content

Bulgaria records first official property price decline last year since the boom began

The data shows that average prices have fallen by 4.1% Veliko Turnovo registering the steepest decline with a drop of 11.7%, Varna a significantly smaller drop of 1.3% and the capital city, Sofia, seeing a fall of 0.5%.

The official figures from the National Statistical Institute indicate that prices did not begin falling until the end of last year. But this is on contrast to reports from estate agents who claim they have seen price falls much earlier.

Officially prices were strong in the first half of 2008 with increases of 6 to 7%. But property experts warn real estate investors to be wary of the official figures as in reality prices have been falling for many months with some agents reporting a drop of 20%.

Agencies are also reporting a drop of 30 to 40% in sales as a result of increased interest rates, lack of liquidity and lenders reluctant to lend.

The official data also shows that overall, prices for 2008 rose by 24.9% in relation to the market prices in 2007, which was stronger than the annual rise of value in 2006, which was estimated at 14.7%.

The statistics are unrealistic, according to Strahil Ivanov, owner of real estate agency Yavlena. He said that although prices rose in the first quarter of 2008 they have now slumped by 10 to 20%.

Lack of buyers are putting developers under severe pressure to reduce their costs significantly, as they need to sell the apartments before they are even constructed in order to keep themselves in business and pay off bank loans.

Customers, however, are leaving the market in droves in their expectations of sharp value declines in the future.

The predicament in the market is further exacerbated by the fact that the banks have sharply tightened their belts and have become far more conservative. They have a far more elaborate selection process in regard to borrower income, payment potential and the future employment guarantees that a potential borrower must present – measures that did not exist previously and made lending and borrowing a lot easier.

The over all fear is that, should the real estate market register an increasing slump in value, this will have a severe impact on the construction sector, generating increasing unemployment, which, in turn, will have even stronger repercussions for the sector and the economy as a whole.

Related