For sellers

Price of Bulgarian Holiday Property hits new low, yet the Russians keep buying. Why aren’t prices going up?

14 February 12

Russian demand for Bulgarian property shows no signs of slowing, in some areas there even good signs of increase. Optimists like to assume this is due to the growing appeal of Bulgaria amongst Russians, but in reality the catalyst continues be the ever dropping prices offered by British and Irish vendors. Speculative reports suggesting that ‘market recovery has begun are overly enthusiastic’ says NewEstate, a professional Bulgarian property consultancy.  It is misleading to think that because more Russians want to buy cheaper property, that Bulgarian property will suddenly become more expensive. The demand pattern is entirely down to the low price and truly disconnected from the raw value of land, rental returns or potential profit available from property related investment etc. Much like the Christmas sales, people will buy more when stock is available ‘cheap’, when the price goes back up the demand slows and normal spending returns. Pockets of Bulgaria’s holiday property market are in such a ‘sale’ right now, with British and Irish owners offering ever lower prices as they compete for attention from a limited number of buyers, the trouble is that it is on a macro scale and could last years rather than seasons.


In this buyer’s market, it is apparent that the wide spectrum of Russian property media are concurrently and heavily promoting the availability of Sunny Beach region property at entry prices; studios at 10-15,000 Euros, one bedroom apartments at 25,000 Euros and two bedrooms from 35,000 Euros. As with any marketing it only exists to cause commercial impact, however with sky high Moscow and St Petersburg prices and growth rates still heading upward the new appeal of these very low cost, low risk second homes in the sunshine is considerable. Forget the tales of the multimillionaire oligarchs, Bulgarian property is selling to the middle classes on budgets and they represent the only demand for Bulgaria’s holiday property market. Responsive to the media coverage they enquire collectively and repeatedly for property options at these price levels only, anything much more expensive, inland, unfinished or away from the water simply doesn’t fit the current demand and it unlikely to sell. Agencies relay requirements from their few active buyers to the British and Irish vendors, who in turn are educated on how much bigger the supply is than the demand, asking prices are dropped by the most keen vendors, offers from the buyers result and only the lowest price vendors win.


One might argue that if the above is true then all that needs to happen is for the media to report higher values or for the agents to demand higher prices, but that doesn’t put available cash into the bank accounts of would-be buyers. You can’t sell a 10 Euro note for 11 Euros whilst your neighbour’s are selling them for 9 Euros, no matter which agencies tries or how hard they market its availability. Any property is only worth as much as someone else is willing to pay for it and right now that is Russians willing to pay small amounts only, whereas seemingly no one else is prepared to pay anything at all.


Market shifts show that 80% of property transactions in the Sunny Beach region are now below 40,000 Euros. Anything grand, impressive or more expensive will be within the minority of deals above 55,000 Euros, which is seemingly the revised ceiling price for ‘bigger spenders’.  Above 55,000-60,000 Euros the chances of selling are unfortunately minimal, even if your property is ‘worth’ that much by todays’ lower rates its nominal value puts your property in the scope of less than 15% of buyer’s affordability. By far the bulk of deals are between 15-33,000 Euros which covers the greatest spectrum of available studios and 1 beds in a range of locations throughout the Sunny Beach area.


For those who blame the bulgarian property agents for pushing prices down it is worth casting minds back to approximately 36-48 months ago; property stock was the same, asking prices were 30% higher, demand was inconsistent and few sales resulted, all in all vendors stayed as owners willingly or not, a stagnant market for everyone. Today the asking prices have come down to meet the level at which the buyers are willing to pay, demand has thus become consistent and stabilised. As vendors succeed to sell agencies can strive to profit, thus enabling them to spend on advertising, reinvest in the marketplace and promote the availability of property to make more sales happen. Without transactions no one can benefit and like any capitalist circuit this is essential for a market to exist. The rural areas and the ski resorts are perfect examples of what happens when transactions stop, agencies leave, advertising collapses and no exit is possible for owners who wish to sell.


The question on everyone’s lips is ‘when will prices go back up’? Without a crystal ball there is no accurate suggestion, however what can be said with certainty is that without the volume of vendors slowing and without supply starting to be restricted, there is no way for prices to head upward. Since the recession started in 2008 vendors have waited for recovery, it hasn’t come and every month more and more decide to give in waiting for a higher price and sell for less. This constant fuelling of the market keeps the spiraling prices in a downward pattern and this must stop before real recovery has any chance. How long will that take? The truth is that with more than 100,000 properties for sale along Bulgaria’s Black Sea coast and with 100 vendors for every one buyer, it could take 5-10years at best. Anyone hoping for a change sooner is best advised to think again.