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Home > Reports By Country > Europe > Bulgaria
Bulgaria Real Estate Report Q4 2009
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The global recession hit home in the Central and Eastern Europe property markets in the first quarter ofthis year. According to CB Richard Ellis (CBRE) data, market turnover fell 57% between the last quarterof 2008 and Q109, from EUR616mn to EUR268mn.
It should be noted that corruption in Bulgaria is a major concern, and has led to the European Unionwithholding subsidies. It is also likely to generate more social unrest than usual, exacerbated by the factthat Bulgaria is now officially in recession, having experienced a decline in GDP during the first and thesecond quarter of this year.
The residential property market enjoyed a spectacular boom in 2005, 2006 and 2007, as anticipation ofthe country entering the European Union in 2007 led to a buying frenzy. In those three years, house pricesgrew by 37%, 16% and 27% respectively. Recent declines could be interpreted more as a normalisationof the situation, rather than any real crisis. According to the Bulgaria National Statistical Institute, theaverage price of a dwelling in the last three months of 2008 was BGN1,359 per m2, down 4.1% on theprevious quarter.
The normalisation argument will not be any comfort to the 5% of property agencies in the country thatshut down in January (according to ERA Real Estate (http://www.era.com/), and the fact that ERA saysa market recovery is not expected in the next two years offers little cause for optimism.
According to King Sturge, the industrial property market is hampered by relatively high prices ofbetween EUR48 per m2 and EUR66 per m2. The company expects development to almost come to a halt.Bulgaria was one of the few real estate markets to see rent rises in the first quarter of this year - withoffice rents in Sofia rising 9% year on year to US$27.60 per m2, putting it in the median price range,according to CBRE.
The key issues to watch out for that would signal an upturn in Bulgaria’s real estate sector, as mentionedin our previous report, are:
Stabilisation of the financial system, given that lending has been growing too rapidly.
Whether the fall in the loan-to-deposit ratio has an adverse effect on the absolute level of lending,which needs to rise from a low level.
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