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TV “News”

Tuesday, July 14th, 2009

Hi there,

I was looking at a French national TV channel’s report of a visit to the Bulgarian Black Sea Coast last night. I won’t name it – but it’s French and the number comes right after one. I was not surprised – it was “confirming” the typical and predictable French opinion of the Bulgarian scene – and proceeded to report that “all” the large hotels on the Bulgarian Black Sea Coast are owned by the Mafia (Bulgarian or Italian, they didn’t say). Then they showed that the resorts were empty, and then they showed some 60% finished apartment units and ran them down as well. I have to admit, I was not surprised by the totally biased reporting (if you can call it that) and I reflected that it would be nice to see a balanced report about “our” coast at least one time on tv, but I guess that won’t sell air-time.

What really bugged me though was that they then – in the same program – switched to the (French) Côte d’Azure and proceeded to show how wonderful it is. With all the fancy Italian sportscars and all the fancy almost-naked models. Never mind that at least as many large hotels (and many more of the fancy girls) there are owned by the Mafia (French or Italian) as in all of Bulgaria, they speak French and that makes it okay. Did you ever swim there in the summer? Yuck!

Ciao for now

Craig
for
Bulgaria Realtor

Jimmy Craig Websites

P.S. Remember, you read it FIRST on
Bulgaria Realtor!

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Construction Costs Dropping

Tuesday, June 9th, 2009

Hi there,

As predicted, the costs for construction of real properties are dropping. There are two reasons for that, one is that the costs for materials are lower due to lack of demand and lower energy and transportation prices. The other is the lack of jobs for contractors and strong competition for the little amount of work available.

The second item – competition in the construction arena – will tend to even out over time. What we expect to happen is that the weaker (presumably marginal) contractors will be forced out of business on a financial basis. The buyers will (have) become more discerning, making sure that their contractor lives up to the contract and does the job properly the first time. The days of the “slap it together and get rid of it” are over, at least for the near to medium term.

Finally, the market prices will be limited by the partially-finished properties that were stopped due to the lack of money and buyers. It will be less expensive and faster to finish the better of these than to start from scratch. The less viable incomplete construction (with design and/or infrastructure problems) probably will be demolished over the medium term, which will reduce the pressure on the lower end of the price range.

Craig
for
Bulgaria Realtor

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Real Estate Prices Holding Steady

Wednesday, May 13th, 2009

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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