PROPERTY IN TIMES OF CRISIS

PROPERTY IN TIMES OF CRISIS

Mon, 06/01/2009 - 21:05

Investment in Bulgarian real estate can be very profitable if you know exactly what you are doing

The Chinese character for "crisis" means both "danger" and "opportunity". Bulgarian real estate agents are trying to make us believe that the potentially disastrous economic situation holds out great opportunities for a profitable investment – but beware.

They promise prices have hit rock bottom and the only way is up, so now is the time to buy. But agents have been promoting two conflicting theories. They swore that prices for high quality or new properties would never drop, but they are also saying that we should ride the crisis wave and purchase such properties now because they are cheaper. Often enough these two viewpoints can be heard from one and the same professional, depending on who their client is.

The truth lies somewhere in the middle. One can indeed take advantage of the lower prices and get a decent apartment or office for a bargain price these days. On the other hand, price levels have not dropped that dramatically, at least not in the segments worth investing in. According to a survey of the National Institute of Statistics, mid-price residential buildings are now only 12.4 percent cheaper than at the end of 2008. There is no official data about price levels in the high quality end of the market but unofficial statistics suggest the two segments are comparable.

It can be a good moment to invest in all types of properties (if you can afford to), not so much for the lower prices but because of the major shift in focus in the market. It is no longer the sellers but the buyers who call the shots. The crisis has undermined the rule that "a property costs as much as the seller says" – now "it costs as much as the buyer is prepared to pay." The question here is what traps to avoid.

Too cheap is too risky

"Cheapest must be best" is a hazardous rule to follow when shopping for real estate. Prices may have dropped but if a property is too cheap it probably means extremely poor workmanship, so will hardly be a good deal. Apartments or offices on offer for less then 1,300–1,400 euros per sq. m in the centre of Sofia and 800 euros per sq. m in the suburbs are a definite risk.

In Varna, 1,200 euros per sq. m in the centre and 600 on the outskirts are reasonable minimal levels. In Burgas and Plovdiv, do not be tempted by offers less than 1,100–600 euros per sq. m respectively.

Know what you are buying

Now, more then ever, it is essential that you request a report on the technical aspects of your property of choice. This should indicate how it was built, what materials were used, whether all elements of the construction comply with state requirements, the energy efficiency class, and so on. If you do not understand the technical terms, get an expert to translate them. Right now the market offers properties of varying quality for roughly the same price. Why not get the best your budget allows?

Do not hesitate to bargain

Negotiating some 15–20 percent off the initial price has become a regular practice nowadays. If it is off-plan, the "correction" may even be up to 30 percent. Many Bulgarians believe haggling over the price too assertively is a vulgar display of bad Balkan taste. That should not stop you from exercising your bargaining power as a buyer.

This is good not only for your bank balance, but for the market as well. If your property agent refuses to discuss discounts, just find another who will. The other option is to contact the construction company yourself and have a consultation with the experts (brokers, lawyers, architects) once you have reached a discount agreement.

Avoid buying off-plan

This applies even if the price reduction you are offered sounds amazing. Unless the developers have a spotless reputation and can prove one hundred percent that the project will be completed, walk away. It is highly unlikely you will get your money back in the event of bankruptcy, so be sure to check the company in the Registry of construction companies. You will find this on the Bulgarian Construction Chamber website at www.ksb.bg.

Think twice about payment plans

An increasing number of developers are being forced to function as banks, too, now that getting a loan is so problematic. Usually, buyers pay from five to 60 percent of the property price to the company and are given possession. The rest of the amount is to be paid over the next two to 15 years, according to individual payment plans.

Of course, there is interest added to the overall price, usually 7.5–10 percent. The advantages are that, unlike banks, no additional taxes are required and the interest rate counter starts ticking only after the building is officially certified with a final permit, formerly known as Act 16.

This has worked well so far but it is a new development, so nobody can be sure that problems won't crop up in the future. A potential risk is that most companies only offer official ownership after the full amount has been paid.

Make sure you can get the credit you are looking for

If you are buying with a loan, never pay any kind of initial fee or instalment before you are sure the bank has approved your application. Lured by temptingly low prices, eight percent of all buyers this year lost substantial amounts of money by paying reservation and other fees in advance and then having their loan applications turned down.

Most of these unfortunate cases are with off-plan properties but it can happen even with new, class A buildings. Nowadays, nobody can be too confident about their credit rating.

Bear in mind that the crisis may be nearing its end. If you are planning to invest in property, don't miss the boat.

Issue 33

Commenting on www.vagabond.bg

Vagabond Media Ltd requires you to submit a valid email to comment on www.vagabond.bg to secure that you are not a bot or a spammer. Learn more on how the company manages your personal information on our Privacy Policy. By filling the comment form you declare that you will not use www.vagabond.bg for the purpose of violating the laws of the Republic of Bulgaria. When commenting on www.vagabond.bg please observe some simple rules. You must avoid sexually explicit language and racist, vulgar, religiously intolerant or obscene comments aiming to insult Vagabond Media Ltd, other companies, countries, nationalities, confessions or authors of postings and/or other comments. Do not post spam. Write in English. Unsolicited commercial messages, obscene postings and personal attacks will be removed without notice. The comments will be moderated and may take some time to appear on www.vagabond.bg.

0 comments

Add new comment

The content of this field is kept private and will not be shown publicly.

Restricted HTML

  • Allowed HTML tags: <a href hreflang> <em> <strong> <cite> <blockquote cite> <code> <ul type> <ol start type> <li> <dl> <dt> <dd> <h2 id> <h3 id> <h4 id> <h5 id> <h6 id>
  • Lines and paragraphs break automatically.
  • Web page addresses and email addresses turn into links automatically.

Discover More

offroad bulgaria.jpg
OFFROAD MADNESS
Spring adrenaline often needs to find an outlet, and on 20-21 April you have the perfect excuse to let it all out. For two days Hadzhidimitrovo Village, near Yambol, will host Tundzha Trail, one of craziest 4WD competitions.

emma hoplins.jpg
EMBASSY RECIPES
Emma Hopkins OBE was appointed Her Majesty's Ambassador to Bulgaria in May 2015. Since then, she has been exploring Bulgaria, its people, culture, landmarks and, last but not least, its cuisine.

public trasnport sofia.jpg
TRANSPORT FOR SOFIA?
"Do I feel lucky today?" This popular movie tag could easily apply when considering whether or not to chance the public transport network in Sofia.

taxi sofia.jpg
IN FOR A RIDE
A French girl emerges from Sofia Airport and, before she even looks round for a taxi, she is bombarded with offers of a ride into the city.

BUYING PROPERTY IN BULGARIA
I’m reading “The English Neighbour” at the moment, a book about an Englishman who moves to a quiet Bulgarian village. Many people had recommended it to me.
GETTING A JOB
According to the National Employment Agency, Bulgaria's official unemployment rate is 9.6 percent. Eurostat, however, has produced different data, stating that in June 2011 the unemployment rate was 11.4 percent, compared to 10 percent a year earlier.
STUDYING HOW TO STUDY
You may have various reasons for choosing public education in Bulgaria, either for yourself or for your children, ranging from an inability to afford the fees at private educational institutions to being unable to access their services because you live, for
LEGALISE IT!
Whether you are buying property or marrying a Bulgarian, you will certainly come to a point when you will need to get documents officially translated and/ or legalised.
112 emergency number bulgaria.jpg
GETTING EMERGENCY HELP IN BULGARIA
Three young Finns set out in May 2010 to trek over the mountain pass at Bachkovo, in the Rhodope. The day started well but ended up as a nightmare when one of them fell and was injured.

HAPPY BUYERS?
"I bought a pair of winter shoes, they seemed stable. After two weeks the sole of one of them came off“ a friend of mine complained. "They were under warranty. I exchanged them for another pair at the shop. Two weeks later the sole came off again.
TRACED IN WARS AND DISASTERS
It could happen to anyone. Your brother or husband goes on what seems like an exciting trip to the Middle East or the Pacific. Then you switch on the TV and you catch some breaking news.
ADOPTING A BULGARIAN CHILD
There was a report in The Sunday Times a few years ago that described how easy it was to purchase a child from some Gypsy quarter in Bulgaria. A healthy child was priced at ₤16,000.