For sellers

NewEstate launches new Bulgarian Mortgage for foreign owned tourist property.

13 June 09

The Bulgarian mortgage market has recently been in turmoil; May 2009 saw the withdrawal of the last mortgage products from the major banks leaving scores of applicants high and dry with almost no chance of borrowing. Simultaneously, the vast majority of developers have also endured dramatic knock-on effects as they too struggle to make commercial loan repayments as their clients fail to pay for their apartments on time. Widespread threats of repossession, legal cases and mounting late fees have made little effect as they come to realise that you simply can’t get blood out of a stone.

Without naming the specific banks themselves, the few that were active appear to now have an undisclosed ‘no lending policy’ for foreigners; unwritten but internally acknowledged it seems that all foreign applicants are to receive a rejection regardless of status, income or credit rating.

Since the start of 2009 New Estate Finance has advised all its clients to apply for no more than 450 Euros / sqm regardless of the property size, location or quality, thus reducing the risk to the bank and maximising their chances of successful application. However, even this low level lending has now been withdrawn as we have witnessed entirely credit worthy applicants receive outright rejections for no apparent reason, even when applying for less than 30% of the market value of finished Act 16 properties.

Unlike many brokers, we are not in the market simply to collect application fees and pre-approval costs; we genuinely want to provide financing solutions for clients who require it. Throughout May 2009 we declined considerable payment sums from clients requiring our services as we began to lose confidence in our ability to deliver the third party banking products. No longer 100% sure that our client’s applications would receive full and due consideration, we redirected efforts to the creation of a new mortgage product which we could be confident of.

New Estate Finance has been working closely with ‘Invest Bank’ over recent months to bring to market a new mortgage specifically for foreign owned tourist properties. Given the nature of the current global economy resulting in an almost entirely ceased circuit of capital, this was always going to be a difficult and troublesome task. However, we are pleased to announce that after extensive discussion, deliberation and negotiation, approval was received from the board of directors on 11th June 2009 and it will be available in the marketplace from 15th June 2009.

We would like to think that this is an early sign of the recovery for the market as a whole and perhaps an indication of the bank’s renewed willingness to engage with property, the public and private lending. However, our best estimates are that this is only a result of our endeavours and it will most likely be the only viable mortgage for foreign owners of Bulgarian tourist property for the rest of 2009. Naturally, we sincerely hope that other banks come back to the table and provide us once again with a greater product range, however this could be 6-12+ months away and we appreciate that off-plan clients have legally binding contracts to fulfil and they simply can’t wait that long.

For all enquiries or questions, please contact the author; Christophe Gater of New Estate Finance, , London office: +442079934197.