Investors should look carefully before putting money into Bulgarian property as prices in most areas have fallen for the first time – by more than 12% in some places, according to the latest Government statistics.
The biggest price rise for the last quarter of 2008 was just 3.7% recorded in the Montana, the provincial capital in north western Bulgaria.
The biggest losers in the same period were Veliko Tarnovo, Pleven and Targovishte, all recording losses of more than 12%.
Residential property prices were pushing ahead early in 2008 with increases of 6 to 7%, but property experts are warning investors to be wary of these figures as in reality prices have been falling for many months with some agents reporting a drop of 20%.
We advise that investors should be wary of property market information published on web sites selling property in Bulgaria a quick Google search shows most of the data has not been updated since 2007, even though quarterly house price figures are published by the Bulgarian government.
Figures indicating high capital growth are likely to be based on longer term statistics to ‘massage’ the current decline so that developers with properties completed or under construction can offload them before property prices slump.
These out-of-date figures are misleading in comparison to the latest release, and investors could mistakenly believe they are putting money in to a rising market if they fail to conduct their own due diligence with official figures rather than prospectus information provided by property developers and brokers.
Many sales sites are quoting overall price rises for the year without pointing out the latest data indicates the start of a slump in property prices.
We believe the best place to look for price evidence is not a third party interpretation, but an official, independent source of statistics like the Bulgarian government’s National Statistics Institute, where you can read the data and make up your own mind.
Contributory factors blamed for the slump Include:
- Investors, especially from the UK, tightening their belts at home and stopping spending on holidays and second homes abroad
- Bulgarian banks toughening lending policies to avoid bad debts
- Lack of buyers leading developers to cut prices to sell properties in order to pay off loans
Bulgaria’s commercial property market has also suffered a decline.Only a couple of new shopping centres are scheduled to open in 2009, reports consultants Colliers Bulgaria.
The malls are The Plaza in Burgas and in Plovdiv. Both are expected to open in March.
Shelved shopping centre projects include a Carrefour development in Sofia.
A year ago, property brokers expected an over saturation of commercial property, but these predictions have failed to materialise.
The largest shopping centres in Bulgaria total 170,000 square metres – 22 square metres per 1,000 people – less than many comparable eastern European countries. More than 800,000 square metres were planned to open by 2011, but many projects unlikely to go ahead while the property market looks to fall.
The Bulgarian government fears that a lack of inward property investment will have a knock-on effect as constructions and service jobs go and start to push the rest of the economy in to decline.
Photo credits: Maistora via Flickr