At. Garov: Client Shift Witnessed on Holiday, Investment Property Markets

Profit.bg talked to Atanas Garov, managing director of Colliers International, about the condition of the real estate market in Bulgaria, its short-term development prospects and whether the supply has shifted towards another group of clients, different from the ones from the western countries: Mr. Garov has the slowdown of the economy in Western Europe affected the real estate market in Bulgaria? The slowdown affected the domestic real estate market a long time ago but not all its segments. There was a price correction in some of the segments before the slowdown in Europe. For example the holiday properties market. A lot of segments of the market, such as the letting of commercial centers, the office space markets and logistics properties are developing well provided the present market conditions. One could say that the market niches where the deals are sealed between an entrepreneur and the end client have not been disrupted by the crisis (with the exception of holiday properties). The only market niche that was affected directly by the global trend is the investment market. There is a slowdown in the number of deals and a price correction at present. After all, this is a market that depends directly on the external factors for the country. On the other hand market segments, such as commercial space, offices and logistics and to a certain extent residential properties, which rely on domestic demand, have only been slightly affected by the recession. Have foreigners started selling properties in Bulgaria already? Colliers does not specialize in the sales of holiday properties (where foreigners own most properties) and unfortunately we cannot comment on this issue. What are the optimistic, realistic and pessimistic prospects before the real estate market provided the recession concerns in the leading euro area countries? Optimistic: The interest rates in the euro area drop to their levels prior to the crisis in the next quarter. The volume of deals sealed on the investment market rise considerably, which prompts more sales to end clients. Pessimistic: Interest rates retain their current levels in the long term. Similarly to the dotcom boom the interest and the clients shift to other sectors, such as alternative energy production and agriculture. Are there companies in the sector that have shifted to another group of buyers, different from the ones from Western Europe? This issue may be discussed from the standpoint of holiday properties and investment properties. There is a shift on both segments, however. Russian buyers are showing interest in holiday properties. No clear shift may be outlined on the investment properties market yet due to the decline in the volumes but Middle Easter companies have been showing interested in Bulgaria and Southeast Europe recently.Source: http://profit.bg/index.php?cid=4&sid=0&aid=4470&sec_name=LATEST

UniCredit Group: Bulgarian property market past peak

The Bulgarian property market scaled its peak in 2007 and is transitioning towards a more sustainable growth pattern in terms of both prices and number of transactions, UniCredit Group said in its latest overview of Bulgaria and the region. According to the banking group, some 15% of Bulgarian intend to buy a real estate property over the next decade. Demand is highest among the younger demographic and is driven by mortgage availability and expert Bulgarians. At the same time, the number of Bulgarians that can afford a new home remains limited. The acquisition costs per 1 sq m of housing space had doubled to 2.6 average monthly pays by the end of 2007. In an UniCredit Group poll, most of the potential home buyers said they will take out a mortgage loan. Intense competition between mortgage lenders has loosened the screening standards with the repayment period stretching out to 35 years. Some mortgage products on the market cover 100% of the market value of the transacted property. Mortgage loans added up to 2.9 bln euro by the end of 2007, accounting for 40% of household debt and 10% of the nation's GDP, said UniCredit Group. The Bulgarian property market remains stable on the backdrop of the global financial crisis, said the analysis of the banking group. There are indications for a softening on the holiday apartments segment where foreign buyers have been pulling back and the cost of borrowing has been on the rise. The stagnation of the segment was further compounded by planning mistakes in the development of some coastal areas. UniCredit Group forecasts that the demand/supply dynamics suggest a gradual moderation in property price growth over the next couple of years. However, credit growth and the leveling-off of real income will continue to point housing prices upwards. The number of housing units in Bulgaria stood at 3.729 mln in 2006 with 99% privately-owned. Over 80 of homes are old and of poor built. Some 40% of all homes have two rooms.

The Property Market Turnover Topped 11 Billion Leva Last Year

Last year construction activity in Bulgaria was up by 15% which makes it one of the fastest developing sectors in the country, according to a CED analysis. The hike was prompted by the demand for modern residential buildings, commercial and administrative properties, warehouses and logistics centers. During Bulgaria's first year as a EU member country the prices of construction materials and services rose by an average of 12.6%. This year the price hike is expected to be a little lower – at 11.8%. The appreciation is a result of the growing prices globally and of the more expensive services on the local market. The active construction sector stimulates all activities related to real estate. The record turnover of 11.36 bln euros made the sector the absolute leader in Bulgaria last year. According to a Global Property Guide survey dated January 2008 Bulgaria was number one in the world in terms of annual appreciation of properties (30%) last year. Some are talking about a market bubble, but analysts say that even though the price growth is expected to slow down, there are no indications that they will be declining any time soon. Most Bulgarians finance their home purchases with credits. December 2007 was a record month for the crediting sector in the country in terms of both size and number. The reason for that tendency are the high prices. Most banks have raised the amount of financing from 70% to 90% of the home price. The average size of credits reached 51,148 euros at the end of the year, passing the psychological 100,000 BGN. The market of commercial properties continues its dynamic development, the CED analysis also states. Demand for properties near newly opened commercial centers is soaring. Demand for office space is expected to stay stable. The Law on floor property management was not passed in 2007 and because of its three-year long delay Bulgaria will not receive funds via the Residential Policy framework within the EU's Regional Development program by 2010. After several attempts to pass the law, the Government gave a green light to the project that concerns some 4.5 mln people in Bulgaria who live in the apartment buildings. This year Bulgaria has to introduce the Eurocode 8 in construction projects, which concerns the development of seismic maps. All EU countries must introduce the code by 2011.

How long will it take to buy a property?

Generally it will take 3 weeks to buy a property. This is dependent on a number of factors, not all of which are in your control. Once you have decided on a property, contact will be made with the seller or his estate agent. The terms and conditions of the sale can be negotiated very quickly, depending on how easily we can instruct an independent surveyor to assess the property, which is our usual practice. It is important to have an accurate picture of the condition of the property, likely repairs that will be needed and its consequent value. Usually a surveyor can prepare a report within a week of instructions. The legal title to the property can be checked at the Land Register in a day or two. Searches with the local authority, trying to confirm the uses and building permissions associated with the property, will similarly take several days. The Preliminary Contract is then exchanged and a deposit paid. There is then a period of, at maximum, a few days while the money transfer is arranged and any final checks made. The sale will take place in front of a Notary at an agreed date and time.