How will the Bulgarian property market develop in 2008?

Stara Planina Properties, specialists in Bulgarian real estate, provides an insight into what 2008 has in store for buyers…

In 2008, the Bulgarian property market will suffer some problems related to its rapid growth; the global credit squeeze; and a drop in the UK property market which will discourage UK investors from buying overseas.

Firstly, there is strong evidence to suggest that there’s an oversupply of investment/holiday apartments along the Black Sea and in some ski resorts. There are severe infrastructure constraints which will also put some buyers off.

The property market will develop towards the improvement of management services and, in many locations, only now will people start to think about the development of the market and the services related to holiday rentals.

Secondly, the global credit crunch will put an upward pressure on interest rates which will affect the availability of mortgages in Bulgaria. This may have a dampening effect on mortgage demand and domestic residential property.

In this situation it is difficult to predict to what extent property prices in Bulgaria would be influenced by the global crisis. Our anecdotal evidence is for a drop in prices in major resorts; increasing prices in urban areas and their immediate hinterland; and the leveling-off of prices in many rural locations. Prime locations, such as central Sofia, and other main cities, will hold up well due to a combination of continued international and domestic demand.

Prices are just one side of the coin and the property industry should not focus only on the issue of price rises - especially when this is at the expense of other important issues, such as the quality of the built environment, and the ability to provide homes and housing to the entire population.

The function of any market is, after all, to provide a mechanism for the distribution of goods or services to society, in this case, a successful housing market could be judged on its ability to distribute homes and housing to those who need it. Furthermore, these homes should be of good quality and in places where people want to live, and which contribute towards modern sustainable cities.

The concern with property booms is twofold:

1. The rise in prices can make housing unaffordable to whole sections of society. For those who can get on the property ladder, fine, but for those who can’t, the lower rung becomes ever higher.
2. It can encourage poor quality and inappropriate over-development in the rush for profits. When these things happen, the property market begins to fail to fulfil its function of providing quality homes to those who need them.

Of course profits are essential to the workings of the market to encourage the development of professional companies, innovation and competition. However, profits should not be at the expense of the other important elements mentioned above.

In both the UK and Bulgaria, this has become a serious problem, with the ratio between earnings and house prices reaching very high levels. In Bulgaria, the widespread ownership of property and the extended family unit has, to some extent, reduced the negative impact, as each family seems to own one or more property. However, it has been reported recently that the earnings to house price ratio in Sofia, makes it one of the most expensive cities in Europe, which can’t be a good thing in the long-term.

Stara Planina Properties are specialists in the sale of Bulgarian property, being the first British-owned company of its kind in the country, servicing the needs of foreign property buyers.

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Information courtesy of Stara Planina Properties. | Last Updated: 30 January 2008