Bulgaria property market – last months of 2005

The tendency towards slowing down of the Bulgarian properties market continues further during Q3 2005. Bulgarian property prices growth registered Q2 was 4.3% compared to 10.6% for Q1 2005, 11.3% for Q4 2004, 12.0% for Q3 2004 and 12.3% for Q2 2004. Almost all major Bulgarian cities have registered even smaller growth than the average in the country. Prices in Sofia have registered a continuous growth of 2.5%, Burgas 4.1% and Varna, the most expensive city in Bulgaria, has even registered a negative growth of -0.2%.

The latest market data reconfirms expectations for market stabilisation and some degree of maturity. At the same time the rents continue steadily to grow (about 8% since January 2005) and the ratio price/rent has reached 130 months.

Expectations for the next 6 months:
• Stabilising positive growth of Bulgarian properties at about 10% annually.
• Higher growth for smaller regional centers.
• Negative growth for some overpriced segments of the market. This applies mainly for new developments along the coast, as well as some ski resorts.

Another major factor which is going to play a significant role on Bulgarian property investments, during next 12 months, is availability of bank credits, mortgages and Bulgarian National Bank interest rates. Forced by the International Monetary Fund and the World Bank the Bulgarian Bank enforced restrictions over bank crediting. These however, affected more higher risk crediting than mortgages. Underwritten mortgages continued to increase even though at slower rate (from 154% down to 145% at end of Q2 2005). Interest rates have dramatically gown down during last 3 months reaching levels of around 7.5%.

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