Hello again everybody,
I have been pleased, although I must admit, not all that surprised, at recent developments in the Bulgarian Black Sea coast real estate prices. They are holding steady, for the most part. And “holding steady” means just that, they are not dropping – not rising either, but more importantly for those who are holding real estate, not dropping.
“Why is that” you ask? Well, I’ve written about my sense of the Bulgarian market before, and a lot of this will be repetition, but here’s the reasoning:
- First of all, Bulgaria as a country is not suffering as badly from the world economic crisis as many more speculative real estate havens, Spain for example, are suffering. Bulgaria is not prospering in the face of the crisis, but it’s not suffering all that much either.
- Next, much of the vacation real estate that is new and complete (finished, more or less ready to move into) was financed by internal money, not bank loans or similar mortgages. This means that the builders are not going to die because they have to pay extraordinary mortgage interest rate payments and risk losing everything if they don’t meet the payment schedule.
- There is a continuing market for finished units and more expensive villas from the Eastern European non-EU countries – this is not all that much, I expect only around 5% of the total market of 3 years ago, but it is helping to keep the market from collapsing completely.
- What little construction is continuing – and this is almost nil – is doing so at much lower fuel and energy and material and labour prices than 2-3 years ago.
- Finally, I sorry to say, there are still the vultures there, ready to snap up a real bargain. This “bargain” is typically a vacation apartment unit that was bought (complete, probably furnished) 18-24 months ago by a non-Bulgarian, and the new owner thought that s/he could use rental fees to make the payments on the 85% or higher mortgage. When this person ran into financial problems at home, the first thought was to “unload” the non-critical real estate costs – i.e. the Bulgarian vacation property. The only problem was, that there were probably thousands of people in the same boat, and as a result of falling vacation rentals (both the prices and the number of vacationers were falling), no apartments were selling either. The only solution for the owner is a panic sale – and that’s where the vultures come out of hiding. There are one or two other scenarios you could make up that would also describe the situation in some detail, but the result is the same – the vultures are always there.
What does that leave us with? Lots of empty completed or very nearly completed apartments. Still “reasonably” priced, compared to prices 1-2 years ago. However, many of the units that were just being started last year have now been abandoned, for all practical purposes. These were “stop-loss” actions to keep from putting good money in after bad. In addition, there are units – new or nearly completed – in some areas that may never be sold, due to the problems with the infrastructure in some areas, and in others with design and/or construction weaknesses in the buildings themselves. Potentially, some or even most of these will be scrapped, rather than completed within the next three to five years. Quality is showing its value!
What does that all add up to? Well, to make it short, the prices for good quality apartments in the Black Sea vacation areas are holding steady. Units lacking significant construction progress, having poor infrastructure, or having design/construction weaknesses are continuing to lose value.
Back-up for this assessment takes the form of firm prices that are being experienced for older “massive-built” homes and buildings and well-built modern buildings in the non-vacation areas in Bulgaria. In comparison to this, the 10-25 year-old buildings tend to be losing value.
I hope you are all having a good spring, and I’m looking forward to seeing you on the Bulgarian Black Sea Coast this summer! :-)
Ciao for now,
Craig
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