Small studio flats, predominantly newly completed and priced up to up to 25 000 euro, are reportedly staging a strong comeback on the market, accounting for 34 per cent of total sales, Address real estate consultancy firm said on April 23 2010.

In the first quarter of 2010, nine per cent of all transactions were conducted with 90 per cent external financing, the agency said.

"The supply of such types of studios (single room flats) is decreasing, while new construction for the moment is rather dormant," the media statement reads.

"Accordingly, this will likely create a tendency whereby in the next few months, the demand for the aforementioned is likely to surpass initial forecasts," Kaloyan Bogdanov, marketing manager of Address, was quoted as saying.

The agency reports that in 87 per cent of cases, clients sought discounts from the initial price during transactions completed in the first quarter, and in most cases they were given these, with the average discount rate going at about 3000 euro.

Owners were "urged" by banks to keep the prices high, but were "forced" to deflate them, make discounts or risk losing the deal. On average, the discounts allowed amount to about five per cent of the total price, with, of course, exceptional cases in which there was even a mild "increase" observed as well, the report said.

Overall, however, the decline in the market continues unabated with the agency citing "many transactions completed at very low prices". Address reckons that a mild rise in value in local real estate is not to be expected until the third, or perhaps even the fourth quarter, because of the economic situation.

Whether the bottom of the pit has been reached or not, and what the future holds, is still highly debatable. Property agencies like Aristo, Yavlena and B&H, argue that the low point has already been reached. Aristo claims that come the end of 2010, there will be a 10 per cent increase in value, although they fail to specify where – in Sofia, or nationwide.

According to agencies such as Foros, Colliers, Address and Bulgarian Properties, however, real estate values will continue to depreciate until the beginning of June. They reckon on a further 10 per cent decrease followed by stabilisation.

According to Industry Watch, real estate values are likely to drop by another 10 per cent due to the weak influx of foreign capital and delayed bank credit in Bulgaria.

For the period 2006-2008, foreign investment in Bulgarian real estate accounted for more than two billion euro, while in the preceding three years it was about 300 million a year before the global economic downturn eventually constricted the flow of cash.

Real estate in Bulgaria's largest cities and towns recorded an average devaluation of about 28 per cent in the third quarter of 2009,  compared to last year, the National Statistics Institute (NSI) has indicated. From Industry Watch, the estimation is that this is equivalent to a six billion leva loss sustained by all property owners.

Experts believe that the expected "flexibility" in the market, which will "save the sector", resulting from the drop in prices, is unlikely to materialise. They also deem unlikely a sudden rise in purchases because people with unstable or insufficient incomes will opt to rent rather than buy. In light of the economic crisis in Bulgaria and rising unemployment, the number of such people in the country is only likely to increase throughout 2010.

Source: propertywisebulgaria.