Most of the data and forecasts emerging in recent months about Bulgaria’s property market has emphasised a developing trend of supply exceeding demand, of stagnation, of a slowing down. It is not as if there are no optimistic voices, just a rather small and muted chorus in comparison to the cacophony of recent years.

For all the talk of bubbles bursting and opportunities shrinking, especially against a background of slowdown in economies that are considerably more developed and influential, prices and spending have continued to rise. The question is - for how long?

In early September 2008, UK-based property consultancy Knight Frank said that Bulgarian home prices had gained more than 30 per cent year-on-year in the second quarter of 2008, placing the country atop Knight Frank’s global index, and meaning that Bulgaria had topped the ranking in terms of housing price growth for a fourth quarter in a row.

However, Bulgarian daily Dnevnik said that these figures contradicted Bulgarian real estate agencies’ data on a price slow-down since early 2008.

Speaking to Darik Radio a few hours before the reports about the Knight Frank report, National Property Association vice president Lachezar Iskrov said that there were about 20 000 unsold homes on the real estate market in Sofia because supply exceeded demand, especially in the part of the market where middle-income earners would be looking to buy.

He predicted strong growth in luxury property prices (a term about which there seems to be no agreed definition in Bulgaria), although it has to be borne in mind that this is a small and specialist part of the market. Around the same time that Iskrov gave his take on the market, the head of ERA real estate agency Teodora Dimitrova predicted that prices of luxury properties in Bulgaria could increase by 15 per cent in 2008 because of a lack of supply.

Dimitrova reflected concerns in many quarters in predicting a further decline in the holiday residential market, and said that large supply in the market in real estate projects that are not yet completed would push down prices.

She said that property prices were increasing in Dobrich, Blagoevgrad, Vidin and other small areas, moving to catch up with big-city levels. Small homes in these towns were on offer for an average 600 euro a sq m, against 450 euro a year previously.

A report in Bulgarian daily Monitor quoted Mihail Chobanov of Bulgarian Properties as saying that lower-segment properties might see price decreases, especially Black Sea holiday homes, which already had slipped to 500 or 600 euro a sq m.

In a September 2 report, Dnevnik said that “despite upbeat expectations of the Bulgarian Government and realtors for the housing market development, those who read between the lines can see fear of a sobering-up and price stagnation, market sources said ahead of the BalREc/BalPEx property conference and exhibition, due in early October 2008 in Sofia”.

Dnevnik added: “Supply in some market segments outpaces demand, which increases the time for striking a deal”.

The market was undergoing a segmentation and there was a more clear-cut division between the low, middle and high price range. Luxury properties make up only three to four per cent of the market.

The middle level includes housing for 1200 to 2000 euro a sq m and more than half of the deals involved such properties.

Around the same time, in an analysis of the market, wire agency SeeNews quoted industry officials in concluding that hectic growth rate of Bulgarian residential property prices would moderate this year as the market matured amid a global liquidity crisis and some prices might even head downwards.

“The real estate market in the country has boomed in the past few years as a large number of foreign companies invested in or unveiled projects in Bulgaria, attracted by prospects for high growth after its entry to the European Union in 2007. In the past few months, however, prices grew more moderately as some of the speculative foreign buyers withdrew and the market entered a more mature stage.”

The agency quoted Nikolina Nikolova, general director for Bulgaria of Spanish real estate developer Hercesa, as saying that mid-range prices of between 900 and 1000 euro a sq m would increase by between five and 10 per cent on a yearly basis.

“The market is entering a more mature phase and consumers take more time to evaluate a buy, there is more competition between developers, which constrains somewhat the rise in prices,” Nikolova said. The financial crisis also inevitably had an impact, she said.

In August 2008, AFP quoted a study by the Bulgarian Properties real estate agency, which works exclusively with foreign clients, saying that holiday property sales in Black Sea and mountain resorts had dropped 40 percent in the first half of 2008 compared to 2007.

“The withdrawal of British and Irish buyers from the Bulgarian market was prompted by the financial crisis in their countries but also by the bad infrastructure and the excess of concrete here,” said Dobromir Ganev of the Property Association in Varna on the Black Sea. He said that between 20 and 30 per cent of newly-built apartments on the coast had no chance of finding a buyer over the next two years, said Ganev.

There is also the alleged involvement of money launderers who took advantage of the perceived opportunities in Bulgaria’s property market to create an opportunity of their own.

AFP said that Bulgaria’s authorities had had to admit that they could not prove where the money that fed the construction boom came from.

“More and more often we come to a point where we see how money, that we have reasons to believe came from criminal activities, is wired through foreign banks and returned here in the form of investment,” Bulgaria’s investigation service chief Boiko Naidenov said during a conference in May.

In August, Bulgarian-language media reports said that a rising number of banks in Bulgaria had been declining bids to fund building projects for hotels along the Black Sea coastline and Bansko winter resorts.

In a separate report, Bulgarian-language daily Trud, quoting Bulgarian National Bank (BNB) figures, said that the Bulgarian property market had shrunk 17 per cent year-on-year to 727 million euro in January to June 2008 as speculative British and Irish investors pulled out.

BNB said that UK citizens who used to swarm to purchase real estates in Bulgaria, spent 219 million euro, “down a staggering 40 per cent”. Irish investments in Bulgarian properties plunged 68 per cent to 37.6 million euro. The market attracted smaller interest from the US and Spain as well. US investors put in 26 million euro in H1 2008 versus 114 million euro in H1 2007. The Spanish slashed their investments to 53.5 million euro from 243 million euro. On the other hand, the Bulgarian real estate market attracted more buyers from Germany, Austria, France, Italy and Greece, most of whom were making investments in the commercial and agricultural land sectors.

In August, US-based global real estate brokerage CB Richard Ellis said that the total investment volume of the Bulgarian real estate market rose 29 per cent year-on-year to 745 million euro in H1 2008.

“Despite difficulties in the American financial market and the credit squeeze that has affected the leading European markets, the first half of 2008 proved to be a period of continued growth in investment volumes for the Bulgarian investment market,” CB Richard Ellis said.