Coronavirus infects Bulgaria’s Property Market.

Virus applies brakes to an otherwise helathy sector, market is on pause for forseeable future. 

As Coronavirus sweeps through Europe the feared economic impact is becoming reality. Bulgaria’s property market shows showing signs of wavering as the usually busy month of March strongly reflects the unsettling lull of 2008: the tide of demand from buyers, sellers, tenants and holidaymakers has turned as the industry wonders what will happen next.

All foreigners from outside the EU and residents of Coronavirus affected EU countries are no longer permitted entry into Bulgaria, this includes British nationals. Only those with valid Bulgarian residency permits can pass through customs, each of whom are required to complete 14 days self-isolation.

Bulgarians themselves are now confined to the city of their registered residency by law, travel for pleasure is not permitted as Police check points are present on every major road in and out of urban areas. Bansko has been placed under strict curfew from Tuesday 17th March with no entry or exit allowed. 

All owners, sellers and landlords will all be affected.

Property Values:

It is too early to review any impact on values, but we can be sure that none of this will help increase prices. It is important to remember that unlike 2008 there is no systemic failure here; there is no fundamental issue with Bulgaria or its property market, no overdevelopment or a singular narrow source of financing (FDI as in 2008). Bulgaria’s property market and general economy has been flourishing with a healthy domestic demand at its core, which will provide a solid foundation for recovery from this unprecedented crisis.

However, the concern for values is that if this situation extends into many months and perhaps into 2021, then certainly in that time a significant volume of owners will sell for whatever can be achieved. Motivated by their own personal financial pressures and although no fault of their own, in large enough volumes they will inadvertently trigger a resetting of market values. No market can sustain a pause for long, but to minimise the risk of widespread devaluation the banks must continue lending without hikes in rates or substantial reductions in successful mortgage offers, meanwhile the notaries must become available for the administration and completion of transfers. All owners should monitor these indicators as this crisis unfolds.  

Residential Rentals:

Already a wave of residential tenants have given notice or simply left their rented accommodation. Few tenants operate on a cashflow that allows them to go unpaid for weeks and still afford their monthly rent, with Bulgaria’s restaurants and bars entirely shut down many staff have been laid off causing tenants to return to their family homes in an attempt to live for less. Property that would have rented within a day last month is now sitting vacant and without interest, furthermore viewings are inadvisable as unnecessary movement is curtailed.

Landlords with vacant property should expect a void period that cannot be avoided, likewise any placement of new tenants before a turning point in this crisis should be expected a lower rate of rent. Be prepared to enter negotiations with your existing tenant if they suffer employment loss, consider offering a reprieve equal to their deposit to help facilitate time to find new employment rather than encouraging a vacant property at your immediate cost.

Property Sales:

Anyone currently selling a property with a deal agreed and deposit collected should expect delays in the completion of their transfer. Unlike the UK, Bulgaria’s state immediately implement strict laws against freedom of movement and declared a state of emergency on Friday 12^th March with a unanimous vote from all MPs. This triggered the closure of all publicly accessible businesses and services other than supermarkets, pharmacies, petrol stations and banks. Notaries across the country have ceased operations, meaning that any sales in certain districts such as Bansko and Nessebar cannot complete at this time. Officially, this restriction is in place until 13^th April, but there is no suggestion of it being lifted then and it is only likely that it will remain in place for the foreseeable future.

Anyone needing to sign sales documents in the UK, Ireland or elsewhere should do so as soon as possible. The Bulgarian embassies in London and Dublin have closed their services to the public and you should now sign in front of a local Notary Public. We recommend doing so before these too close when the UK and Ireland implement further restrictions, as is likely in the days ahead.

Any owner seeking a valuation or who is currently marketing their property should expect a pause in activity and interest for the time being. Agents and prospective buyers are restricted in their movements and can no longer freely access complexes. All of Bansko is currently shut down and under enforced quarantine, residents and visitors cannot leave their homes or accommodation unnecessarily by law. Embassies are working with the authorities to repatriate the remaining foreign tourists as quickly as possible. Bansko has been isolated due to an outbreak last weekend, no buildings there can be accessed for valuations or viewings at this time. Many complexes in Sunny Beach have taken the same precautionary measures although there are no roadblocks or curfews there at this time.

Holiday Rentals:

Owners of holiday property will likely be the worst affected, especially those owning on the Black Sea this summer. Sunny Beach generally maintains a population of 200,000 during off peak summer weeks and up to 450,000 at peak summer weekends. Few of whom are staying in their accommodation, almost all of whom are mingling in close proximity on the beach, in restaurants, bars and night clubs. Unlike a regular city, the entire population is out sharing space and thus the resort presents the perfect breeding ground for what we so far know about the Coronavirus’ ability to infect.

The authorities have demonstrated their willingness to tackle this situation with urgency and vigor, there is no reason to believe that they wouldn’t act the same with a far larger and potentially more dangerous catalyst such as Sunny Beach or Golden Sands. Owners who have taken bookings for this summer should carefully consider their liabilities and policy for refunds. We have noted a 70% drop in bookings since the first week of March, typically the busiest booking month of the year.