Property Prices in Bulgaria Down to 2007 Levels

The economic crisis and recession affecting the UK has had a knock on effect in many countries, particularly those heavily reliant on foreign investment and tourism, such as Bulgaria.

A recent report suggested that prices for property in Bulgaria had now dropped to the same level as it was back in 2007. There are no official statistics for this and the noticeable drop is simply based on listed selling prices between 2006 and 2007 and the fact that sale transactions have fallen drastically towards the end of 2008 and in the first few months of 2009.

Many are seeing this as a sign that the Bulgarian real estate market has completely collapsed and there is little hope of recovery any time soon. However, is this really the case?

The most significant price reductions are along the Black Sea coast in resorts such as Sunny Beach and Sveti Vlas and in the ski resort of Bansko, in the Pirin mountains. The properties most affected appear to be those in the middle band price range of around 50,000 to 70,000 Euros.

But is this much of a surprise and was a slump in the property market in these resorts not expected way before there was talk of a world recession?

There was (and to some extent still is) so much construction going on in these resorts that a time was bound to come when supply would outstrip demand and so the practice of selling apartments at high prices to willing buyers was bound to come to an end.

Bulgaria became a ‘hot spot’ to buy around 2004 with every magazine and TV program in the UK full of stories about how you could buy a holiday home in the sun or a ski apartment for the price of a car. Developers and agents pushed developments with promises of large increase in values expected, guaranteed rental agreements and discounts to buyers who purchased multiple apartments. Foreigners bought up the apartments in droves, fuelling yet further price increases and more development. Soon apartments were selling in resorts such as Bansko, Sveti Vlas and Golden Sands (near Varna) for close to 1500 Euros/sqm.

Rumours of Bulgaria hosting the winter Olympics, new airports being opened, ski areas being expanded and championship golf courses being built all added to the hype and rush to buy in these emerging resorts.

And the influx of foreign buyers, particularly British to Bulgaria, meant buyers started searching further inland and away from the over crowded and over developed resorts for a rural retreat. A few years ago an old property with a large plot in Bulgaria could be bought for a couple of thousand Euros. For a few thousand more the property could be renovated into a lovely little holiday home.

Over the next three or four years rural property prices increased significantly, around 20 to 30% a year in many areas. Foreign buyers were charmed by the traditional way of life in the Bulgarian villages, the pretty scenery and of course the low prices. Many bought several properties and renovated them for resale. Bulgarians, seeing how interested foreigner buyers were in rural properties that are of no interest to the local market, increased prices and thought nothing of asking the same price for their tumbling down wreck as the British owner was asking for his newly renovated village house. By 2008 it was increasingly difficult to find even an old small property for under 10,000 Euros and those that were cheaper, were usually in very isolated or poor areas of Bulgaria.

Stories soon started to emerge of rip-off builders, poor developments, late completion of apartments and poor rentals. Media coverage of Bulgaria became one horror story after another as British flew out to see their new apartment with sea views only to find that the development had not even started, or that their luxury apartment was actually a hemmed in box, in the middle of a concrete jungle.

It became harder for developers to shift their off plan properties. Many British, disillusioned by problems with rental agreements or disappointed with the massive over development in resorts such as Sunny Beach and Bansko and the associated rising costs of food and drink in these places, were listing their properties for resale. Developers had to reduce their prices to compete in a market where there were thousands of apartments for sale, both new and resale. Before long, the cost per square metre was falling down to well below 1000 Euros.

And in rural areas, foreign buyers were now more wary of dubious real estate agency tactics and with the weakening pound, buyers were taking more time to research their options and view more property for sale.

A fall in prices for property in the over developed and over hyped resorts such as Sunny Beach, Sveti Vlas, Golden Sands, Bansko and Pamporovo was inevitable, regardless of what was happening with the world economy and property market. Building could not simply continue unchallenged and prices could not continue to rise in a country where the average monthly wage is around 300 pounds. Indeed, prices had already started to fall in many areas before the recession really hit.

The Bulgarian property market was well over due a ‘reshuffle’ and for prices to come down to a more realistic level.

(c) Rachel Gawith. Free independent advice on buying in Bulgaria, property for sale and exchange. Visit http://www.thetravelbug.org