Residential property prices in Bulgaria will start to stabilise later this year and move towards recovery in the first half of 2010, according to the latest report from Colliers International.
The Bulgarian property market was considered one of the top property investments a couple of years ago but has suffered in the economic downturn and from an oversupply of apartments in popular resorts like Sunny Beach and Bansko.
The report indicates that the average price of a property in Bulgaria decreased by about 14% in the first quarter of 2009 compared with the first quarter of 2008. The worst fall in prices has been along the Black Sea coast.
It also shows that the country’s construction industry has been hit the hardest by the global financial crisis and the overall drop in investment is expected to reach over €1.2 billion.
Although demand for property in Bulgaria has fallen in recent years, the fact that construction levels have dropped in Bulgaria, means that the existing oversupply of residential stock is still being absorbed, thus easing some of the pressure on the market.
While the report is upbeat other factors are unlikely to help the property recovery in Bulgaria. Banks who have taken over properties from loan defaulters are now offloading them cheaply at auctions.
Banks are also demanding higher incomes from loan applicants. Research from consultants the Credit Center shows that the amount needed for a mortgage has doubled in the last year from 1,000 to 2,000 leva.
Its latest survey also shows that borrowers still feel intimidated by high interest rates, with 21% of respondents saying they are a major barrier.
Banks have also limited funding to between 40% and 60% of the cost, down from between 80% and 90% in the middle of 200. Indeed, 100% loans were available at the height of the property boom in 2007. But the centre reports that loan volumes are expected to increase later this year as cheaper prices tempt buyers into the market.