THE noted increase of hotel sale offers in Sofia, the Black Sea coast and mountain resorts in August served as the first signs of fallout from over-construction and an overheated real estate market.
Demand for these hotels is well outweighed by supply. As most deals do not go through agencies, it is difficult to calculate the total number of hotels sold. Still, according to most markers, deals have been infrequent.
Unofficial statistics show that 300 hotels are for sale. Most of the offers concern small, family-type hotels with no more than 40 beds. Their price ranges from 300 000 to 800 000 euro.
One hundred hotels are for sale in Sofia, most of them in the city centre. Some offers exceed 1000 euro a sq m. More than 200 hotels are offered for sale in Bourgas and nearby resorts.
One could provide a dozen reasons for real-estate concerns, but the most important would be the financial side. For almost two years, most Bulgarians have been buying first, as well as second and third homes, on mortgage credits.
Many of these mortgage-bought homes have now appeared on the market as many owners find it impossible to serve their bank loans. Many of these flats tend to be large.
Mortgaged flats, usually held against large loans, are cheaper than mortgage-free flats. Monthly instalments for these flats come out to 300 euro a month. Apartment owners usually incur a loss when they sell them.
Those who have taken loans and mortgaged their homes usually pay interests and only a small part of the principal in the first 12-36 months, depending on the loan term. Thus, they pay a substantial sum, while at a possible sale they get a smaller sum than the loan that they have taken.
Real estate brokers say that most of the flats on the market were bought about a year ago.
If buyers have enough money, they can buy mortgaged flats by immediately paying the entire principal of the loan, including a penal interest of 4-5 per cent.
Buyers can also take loans to pay for the flats, with the mortgage transferred in their names. In this case, it is necessary that the bank, where the flat is mortgaged, approves the new clients.
Despite the new offers of cheaper mortgaged flats, brokers do not expect a market collapse.
Their fears, at the moment, are mostly related to recent flood damages, wrought by torrential rains over the summer. The property market in flooded regions near Sofia and Plovdiv will experience a period of stagnation, according to a forecast by real-estate agency Forton International.
Still, they believe the situation will have a limited, short-term effect on the market.
The period of stagnation depends on how quickly state and local municipalities react, Forton said. International experience shows that if a state allocates enough efforts to rebuild and modernise damaged infrastructure, this may have a positive effect on the local level.
To disturb the sleep of some real-estate owners, the unclear future of the Trakia highway project has lowered prices of adjacent land plots. The real estate market was the first to react to the shaky political situation in Bulgaria.
The lack of clarity about the future and the priorities assigned to large-scale infrastructure projects has made investors planning to acquire land close to the highway route reluctant to buy.
