Fall of Bulgarian Government Causes Instability in the Property Market.

On the 20^th February 2013, Bulgarian Prime Minster, Mr Boyko Borisov, along with the rest of his cabinet resigned from power causing upheaval and disruption to the Bulgarian markets. The former fireman, security guard and Mayor of Sofia stated that he would ‘not participate in a government under which the police are beating people’. Just three months ahead of general elections and with his centre right party (GERB) flailing in the polls, many regard this as a brash political manoeuver conjured to boast his appeal in the run-up to an unwinnable election, he however disagrees.

The preceding weeks saw Bulgarians take to the streets to protest in numbers not seen since 1997, when riots culminated with the burning down of parliament. Initially motivated by public dismay at ever increasing electricity prices (up 13% since July 2012), it manifest to a formidable nationwide anti-government demonstration, which called for the removal of monopolies, the end of mafia powers and resignation of the government. The streets were awash with protestors of every age and type, with the highest numbers and most poignant rallies in Varna and Sofia where two men set themselves on fire and dozens were beaten by police. In a country where some 22.3% of the population live below the poverty line, it is not surprising that price hikes in basic commodities cause unrest to this degree, however protests have not been seen on this scale in Bulgarian for 16 years when the aftermath of the fall of communism was still raw and incontrovertible.

A day before stepping down, Mr Borisov appealed for calm and in a last ditch attempt proposed a cut in electricity prices to the energy regulator (-8%), but this failed to appease the public and he resigned the following morning. Most likely, a technocrat cabinet will now be appointed to administer the national interests in the interim period until fresh elections can appoint the replacement leader. Borisov will certainly be running and undoubtedly hopes this unsettling time will be demonstrative of the good work he believes he previously achieved, whereas his rivals in both the parliament and the business world will look to take advantage of his absence from power and ensure he does not return. Since the implementation of democracy 24 years ago, there has not been a government that won two consecutive terms, with the elections expected to be brought forward to May we will soon see if GERB and Mr Borisov will be the first.

So how has this impacted the property market? In a nutshell, the reality is that the pause button has been unequivocally pushed; government instability on this level inevitably causes subconscious deterrents in any market, not more so than in an already struggling property sector that offers limited returns or opportunities, sadly the few active buyers are not immune. February has seen a sudden stagnation as decision makers hold back from their final choices and seemingly linger for what feels like an indefinite period. Seen across the market from the domestic residential demand in Sofia through to the Russian touristic demand in Sunny Beach, buyers hold onto their funds whilst the media continues to spout. Long term, the effects are likely to be superfluous; a new government will come into power and this dust will settle, but in the immediate and short term future the social unrest and lack of effective government looks to remain an influential factor forcing vendors to keep hold of their assets and buyers their money, all whilst the prices continue to tumble further.