Is the Bulgarian property boom over?

Bulgarian property market in troubleWhile it would be unfair to single out Bulgaria as one of the only countries in Europe with a troubled property market it looks as though the bubble has finally burst.  We are seeing some major companies dropping assets in the country to increase their liquidity but will they come back in or will they look elsewhere when the markets pick up?

Over the last few years Bulgaria has literally come from nowhere to become one of the property hot spots of Europe and while many had been predicting a cooling of interest at some stage there are concerns that the speculators may have done more damage than first suspected.


The country of Bulgaria has a population of just under 8 million people, joined NATO in 2004 and only last year became a full member of the EU. As has happened so often over the last few years, when new members join the EU, the country now has access to substantial EU funding to increase the quality of all aspects of the country from law and order to the country’s infrastructure.  Many people have pin-pointed EU membership as a major turning point for Bulgaria.

Even though Bulgaria has witnessed substantial economic growth over the last few years it is classified as the second poorest nation in the EU which to some investors offers an interesting opportunity to get in on the ‘ground floor’.  The country has seen gross domestic product rise at around 4 to 5 percent for the last few years and while it will suffer in 2008 as the credit crunch hits home it will still be one of the better performers across the EU.

The country hit serious trouble in 1996/97 when a major economic crisis saw inflation spiral out of control and unemployment move substantially higher.  This turned out to be the country’s darkest period of recent times but it also served as a floor for future growth and allowed the country to move towards a free market, join the EU and begin to build from the bottom upwards.


The Black Sea coast has become one of the more popular European tourist destinations of recent times and seen substantial investment not only in services but in property.  Many investors were quick to recognise the growing importance of the area as a means of attracting tourist to the region and property in the area became very popular to say the least.

In many ways the Black Sea resorts have the perfect location for the tourist trade offering excellent services and access to central Europe.  The country itself offers a very interesting mix of old and new and has a varied history which many people will be unaware of with castles, mountains, and a very colourful cultural background to say the least.

The introduction of direct air flights to the country was also a major step in the development of Bulgaria as both a tourist attraction and property hot spot which the government milked as much as they could!


Like so many developing markets there were a number of speculators who took a chance on Bulgaria some years before the country formally joined the EU in the knowledge that this would, if it happened, be a ground breaking move for the country.  However, few could have forecast the massive growth in the Bulgarian tourist market which has served as a very useful means of promoting the country as a whole.

While property prices started from a very low base they have shown substantial growth over the last few years and even though some of the speculators have left and moved to pastures new, many property investors have been tempted to stay in a market which still looked as though it had potential for the future.  Then the credit crunch struck home and many property investors seem to be having a serious rethink about their exposure to countries such as Bulgaria.

Recent developments in the property market

The last few months has seen a general winding down of new property developments across Bulgaria and a reduction in interest across the board.  The market has contracted markedly of late and there seem to be more and more properties appearing for sale each week.  It is estimated that there are around 50,000 holiday homes for sale in the Black Sea resorts but very few buyers which has seen prices slip lower and lower.

We have seen prominent names in the Bulgarian property market eager to ditch their assets in the country with the likes of Equest disposing of its City Centre Sofia shopping mall operation to a US real estate company.  While they seemingly realised a gain of around £6 million this is small change compared to the perceived value of the operation just 12 months ago.  We have also seen a number of large scale developments either put on hold or cancelled in the face of the changing economic climate.  Indeed Immoeast AG alone has either frozen or cancelled over £1.5 billion of projects which had been pencilled in for the future.

Many of the smaller property investors who were attracted to the area by the tourist operations are now dumping their holiday homes on the market with many lucky to get back the price that they paid for their property.  It would be wrong to say there is widespread panic but most certainly the froth has been taken out of the market and we are witnessing what could turn out to be a marked correction in the Bulgaria property market.


Like so many recent additions to the EU, Bulgaria went through something of a honeymoon period with both investors and tourists during which it could seemingly do no wrong.  Even though the economy had seen substantial growth over the last few years there was still much more work to be done, something which many investors seemingly took for granted.  However, the credit crunch and the economic downturn in Europe has caught many people off guard and seen some property investors repatriate their investment funds in the hope of living to fight another day.

While speculators had fed the fire in the Bulgarian property market many had sold up and moved on before the current downturn began, leaving other investors to pick up the pieces.  It may well take some time for the property market to recover (2010 is the consensus among many investors) but we are starting to see interest from Russian and Middle East investors who seem to be bottom fishing for distressed assets – whether they have timed their investments to perfection remains to be seen.


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