Dear Valued Readers,
With this issue we continue our tradition to inform you about the trends on the Bulgarian property market hoping that the article below will be of interest.
Bulgarian Property Market at The Beginning of 2011
After nearly three years of plummeting property prices and decreases in the number of property deals throughout Bulgaria, 2011 again started optimistically with predictions that the worst times were over. This would have been a great news - if this had not been the message in 2010!
According to the data from the national statistics average prices of city apartments around the country registered an increase of approximately 200% during the last 10 years. The years with faster growth being 2004-2005 with increases of around 40%. The property appreciation slowed down in 2007 and in the last quarter of 2008 prices began to fall. Both 2009 and 2010 brought decreases in housing prices of 22% and 10%. How does year 2011 look from its start?
The development of property market is connected with the state of the economy as a whole. Generally the Bulgarian economy has been in recession during 2009 with a 5.5% fall in GDP. The decline of GDP continued until the third quarter of 2010 and in the forth quarter of 2010 there was growth of 2,8% compared to the previous one. Thus the accumulated growth of the GDP for 2010 is 0.2%. So far the hopes for recovery are connected with growing exports. The National Statistics Institute reported that exports grew by 59% in the first two months of 2011 compared to the same period of 2010. The forecasts for 2011 are for GDP growth of about 3%. However analysists believe that exports alone will not be enough to fuel the recovery of the economy and whilst domestic demand stays low the growth will be very slow and uncertain.
According to recent research by Pragmatica Marketing Research Agency quoted by HumanCapital.bg the crisis has had a negative impact on 86% of the Bulgarian households in 2010. The fast growing food and fuel prices and inflation of 5,6% just for the first three months of 2011 add pressure to the Bulgarian households and the weak internal demand especially in the light of the fact that nearly half of the income of the average Bulgarian family is spent on food and energy.
Unemployment is approximately 11% (nearly double the 5,8% registered in October 2008). The sluggish recovery of the labour market and the growing inflation will be the main obstacles to the household consumption recovery, which gained momentum towards the end of last year. This is one of the main conclusions regarding Bulgaria presented in the latest economic quarterly analysis of the Central and Eastern Europe countries, prepared by UniCredit's analyst team.
In the light of the above it seems that many factors that influence the property market are still negative. The most influencial factor probably is lack of security. The unemployment and inflation result in uncertainty and people tend to keep "white levs for black days". In addition Bulgaria has the highest interest rates in the EU for loans. The restrictions in the banks credit policy (increased requirements and high interest) make funding of a new home purchase very problematic.
On the other hand despite the large number of properties for sale the supply of good quality properties is minimal as many owners are awaiting better times. Vendors on the current market are those who have little choice but to sell as soon as possible. This is the reason why it is quite possible for one to find exceptionally good deals. And whilst there are more properties at the bottom end of prices and some exceptional deals, there are also big variations in the prices of similar properties as many owners are hoping to get what they have paid for the property during the market peak of 2007.
Another obstacle for market recovery continues to be the bad infrastructure and not only roads but also electrical and water supply systems (the best example is the major power cut which happened along the busiest areas of the south Black Sea coast during the peak of last summer). In the resort areas where many properties were built in the last 10 years the market will only recover when infrastructure problems are resolved or at least relieved and better services offered to both tourists and property owners.
External factors may also influence the property market such as the political events in the Northern Africa which are expected to bring more people to the Bulgarian Black Sea Coast this summer.
According to the recent census only 5 regions in Bulgaria have seen growing population - these are Sofia, Varna, Burgas, Plovdiv and Veliko Turnovo. In some regions the decrease in population is approximately 20% in 10 years such as the northwestern regions of Vidin, Vratsa and Montana. 73% of the population lives in cities and towns and 27% in villages. During the last 10 years the population of Bulgaria decreased by approximately 580,000 people. Based on this we expect that prices in more populated regions and cities will stabilise sooner. On the other hand lovers of peace and quietness will have better choice but will have to accept that fast Internet connection will not be available in some areas for a few more years.
All of the above comments and observations lead us to the following conclusions. First, the recovery of the property market will take much longer than initially expected. Second, there are signs that some market sectors have reached the bottom and we expect that indicators such as number of deals will grow in 2011. Third, the speed of recovery will be very different and Sofia and some other cities will see recovery first. Forth, demographic trends will result in slower improvement of infrastructure in less populated areas thus making recovery of the property market there slower.
Based on the above we believe that 2011 will bring more demand on the property market but the growth will be very slow and many owners will be put under pressure to sell much below the original asking price.
Seven Motorways in Ten Years
This is the ambitious plan of the Minister of Regional Development and Infrastructure Rossen Plevnaliev. The plan envisages completion of seven motorways and seven high speed roads by 2020 for an estimated total amount of 6 Billion Euro.
The list starts with the Lyulin motorway which last 20 km will be completed by the middle of May 2011. The road connects Sofia and the neighbouring town of Pernik.
The pride of the present government is the Trakiya motorway which will connect Sofia to the coastal city of Burgas. According to the plan the connection with the city on the coast should be ready in January 2013 at the latest. By end of 2013 one should be able to travel from Sofia to the Turkish border at Svilengrad only by motorway as well. Whilst these three projects seem easy to complete and soon to be ready, the other four on the list might be problematic:
Struma motorway will connect Sofia with the Greek border at Kulata-Promahon pass. This is one of the busiest roads in the country and has prime importance for the trade connections with Bulgaria's southern neighbour. The pass through the Kresna gorge, however, is complicated and there are lots of controversial opinions on how it should be built in order to preserve the unique habitat for many rare species. Despite this difficulty the Minister has stated 2015 as final date for completing Struma motorway.
Kalotina motorway will connect Bulgaria's capital to the Serbian border and to Belgrade. 73 kilometre of the road have to be built which will be funded by the EU Transport Programme.
Hemus - the long-ago-started connection between Sofia and Varna has not been the focus of the Government as just about 160 km of about 450 km have been built over 30 years! Until recently Hemus motorway was not included in the list for funding from the EU programmes but it was just announced that it will be funded for the programming period 2014-2020.
Cherno More (or Black Sea) Motorway to connect Varna and Burgas - funding of this motorway is planned for the period 2014- 2020 as well. In addition the road from Varna to the Romanian border at Durankulak will undergo major improvement. This is very important for the Bulgarian tourism as many Romanians now prefer to spend their holidays on the Bulgarian Black Sea coast.
In addition to the above 7 motorways which should be ready by 2020 there will be 7 high-speed roads which will focus on problematic passes or busy connections between the motorways or points which are important for the economy.
8th International Tourist Fair Cultural Tourism - 2011 in Veliko Turnovo
The Veliko Turnovo Municipal Tourist Agency organised the annual edition of the International Tourist Fair Cultural Tourism from 13th to 16th April 2011. The fair which was initially organised as a small regional event now attracts large number of participants from all over Bulgaria and many other countries. It took place at the Rafael Mihaylov Galleries in the center of Veliko Tarnovo. This year the motto of the event was Veliko Tarnovo - Balkan Capital of Cultural Tourism. This award was given to Veliko Tarnovo during the 47th International Congress of International Hotel and Restaurant Association.
The fair hosts a number of events such as tourist exhibition for tourist organizations, cultural institutions and municipalities, discussion programme focused on new tourist sites, attractions, problems of tourism and sustainable development, film festival "On The Eastern Coast of Europe" to presents movies about Bulgarian cultural heritage.
Monthly Travel Guide
Below is a link to the Jamadvice HRG Bulgaria Monthly Travel Guide. It provides useful information as well as some interesting facts from the travel industry.