SOFIA (Bulgaria), September 1 (SeeNews) – The hectic growth rate of Bulgarian residential property prices will moderate this year as the market matures amid a global liquidity crisis and some prices might even head downwards, industry officials said.
The real estate market in the country has boomed in the past few years as a large number of foreign companies invested in or unveiled projects in Bulgaria, attracted by prospects for high growth after its entry to the European Union in 2007. In the past few months, however, prices grew more moderately as some of the speculative foreign buyers withdrew and the market entered a more mature stage.
Mid-range prices of between 900 and 1000 euro ($1,319 and $1,465) per square metre, will add between 5.0% and 10% in 2008 on a yearly basis, Nikolina Nikolova, general director for Bulgaria of Spanish real estate developer Hercesa, said.
The market is entering a more mature phase and consumers take more time to evaluate a buy, there is more competition between developers, which constrains somewhat the rise in prices, Nikolova said.
“The financial crisis also inevitably has an impact,” she added.
The credit crunch, which hit the U.S. last year, has impacted most of western Europe while southeast European countries like Bulgaria have not so far suffered any severe effects. However, intererest rates in the country are going up, making it harder for some to take out loans and for others to repay them.
Prices of residential property in Bulgaria jumped by an average 29% in 2007 from 2006, according to the National Statistics Institute.
“Prices in the middle- and high-price segment of the market, where demand is still strong (…) as well as of luxury property, supply of which is limited in Bulgaria despite the big demand, will grow I think by some 15% this year,” the executive director of the Bulgarian arm of U.S. real estate company ERA Real Estate, Teodora Dimitrova, said.
Dimitrova referred to apartments no bigger than 60 square metres offered at prices between 1,200 and 1,500 euro per square metre.
Prices of property in small cities, which have had slower growth so far, could go at a higher pace, she said. Towns such as Dobrich, Blagoevgrad and Vidin, could see growth of 30% this year, according to Dimitrova.
Prices in the lower end, of between 700 and 850 euro per square metre, will add no more than 50 euro per square metre by the year’s end, Ilian Nikolov, regional director for RE/MAX Bulgaria, part of International real estate brokerage franchise RE/MAX, said.
Nikolov disagreed regarding the middle-price segment, saying that prices will drop.
“Fast growth made it possible for similar properties to be offered at different prices. This will not be possible now – equal properties will be offered at equal prices (…) because the buyers will make it happen,” Nikolov said, adding that these prices will become equal as the higher prices come down to the lower ones:
“The price of properties being sold at 1,700 euro per square metre will go towards 1,200 euro, not the other way around,” he said.
Nikolov said that these properties, sold at 1,200-1,400 euro per square metre, may lose some 10% of their value in a year’s time.
Despite some prices falling, no major meltdown lies ahead as most clients pay their mortgage loans and the largest part of the developers successfully sell their property, Nikolov added.
To sell the property, however, the developer will need to offer higher quality, Nikolova and Dimitrova agreed.
“They [buyers] choose more carefully than a year ago,” Dimitrova said.
($ = 0.6842 euro)