| As of December 2009 the Bulgarian Real Estate | | | | of foreign investors, who introduced capital in the |
| market is still heading in a downward spiral. The total | | | | interconnected economic sectors of tourism, Real |
| number of sales has decreased dramatically during | | | | Estate and construction of more than 10% of the |
| the last year, and the buyers still in the market | | | | GNP in '06, '07 and '08. From a geographical |
| prefer to continue their wait, expecting the prices to | | | | perspective, the demand for properties during those |
| go even lower. | | | | years was strongest in the vocation areas - the |
| In order to fully comprehend the complex situation, | | | | regions adjusted to the Black Sea and the larger |
| which the Bulgarian properties' market is in, we must | | | | winter resorts in the mountains of Rila, Pirin and |
| first analyze it. | | | | Rodopi. |
| Today there are more than 4 000 000 residential | | | | The global financial crisis that devastated the |
| homes in Bulgaria and about 14% of them are | | | | Bulgarian Real Estate market during the last year and |
| situated in the capital city of Sofia. Relatively small | | | | a half originated in the USA and began there in 2005 |
| amount of them are rented - 8% in the capital and | | | | with, incidentally, the burst of the American housing |
| about 15% in the rest of the country. There is a high | | | | bubble. The result was the subprime mortgage crisis |
| number of deserted and unusable homes - 14 to | | | | that followed in 2006 and 2007, which brought a |
| 16%, while most of the apartments are older than 20 | | | | surge of foreclosure activity and in turn fueled the |
| years and of relatively low building quality - an | | | | fears of the market and depressed even further the |
| inheritance from the communist regime. The | | | | already sinking prices of Real Estate. The next and |
| statistically average flat in Bulgaria consists of 2.8 | | | | final step in the financial storm was the collapse of |
| rooms, has 64 sq. m. of usable space and 2.1 people | | | | major lenders and investors, which signaled gloomy |
| living in it. | | | | days ahead as the worldwide economic recession |
| The data above shows that there are still too few | | | | ensued. |
| homes of modern standards, thusly the buyers in the | | | | Bulgaria felt the hit on its economy in the middle of |
| market of the future will be looking for apartments | | | | 2008 through a devastating blow delivered to the |
| of higher building quality and applied energy-saving | | | | Real Estate market and the adjusted industries. In |
| solutions, in addition to a good transport | | | | the following months the liquidity dried up, the |
| infrastructure nearby. | | | | participants were nervous and reluctant to close |
| Another specific feature of the Bulgarian Real Estate | | | | deals, the vast foreign capital that used to flood the |
| market is the extremely loose relationship between | | | | market disappeared and on top of that the local |
| the apartments' prices and the cost of renting. While | | | | banking system stopped to finance mortgages |
| in the countries of Western Europe a typical flat can | | | | practically overnight. |
| be bought for the amount of the rent for 8 to 12 | | | | As of now, more than one year later, the economic |
| years, the same relationship in Bulgaria is between 25 | | | | situation worldwide and particularly in Bulgaria is very |
| and 40 years. This unusual correlation is founded in | | | | complicated and the crisis is far from successfully |
| the fact that more than 90% of the Bulgarians live in | | | | resolved. So far the cost of properties has fallen |
| a home that they actually own, so there are much | | | | across the board with at least 25 to 30% from the |
| fewer people looking to rent and, in market terms, a | | | | levels before the bust, but even more worryingly, |
| combination of large supply and weak demand, which | | | | the market seems uneasy with the new prices and |
| drives rent prices down. This is good news for | | | | the activity remains extremely low, which suggests |
| anyone who is looking to rent, however the | | | | that worse times may lie behind the corner. |
| economic downside hides in the decreased | | | | There are however other indications of what could |
| profitability of the investments in Real Estate, thus | | | | soon be a positive turn of events, as the banking |
| creating a negative development trend in the long | | | | system is starting to open up and credit is once again |
| run. | | | | available to help with the healing of the economy. It |
| Between the years 2000 and 2008 the prices of the | | | | is impossible to say how the Real Estate market will |
| Real Estate properties in Bulgaria shot up nearly | | | | be influenced and to what extend, what is certain is |
| 400%. This massive change was due partly to the | | | | that the years of economic boom that drove the |
| increases in the Gross National Product and average | | | | properties so high up in value are not going to repeat |
| monthly salaries, but also to the successful attracting | | | | themselves any time soon. |