Topic: Property Prices in Bulgaria Down to 2007 Levels

[thetravelbug]

I have just written a piece about property prices in Bulgaria being the same now as they were in 2007. Doom and gloom merchants are saying that this means Bulgaria's real estate market has collapsed and no sign of recovery. However, my view is prices had gone silly for apartments in resorts over the last couple of years with prices per sqm being up to 1500 Euros in some developments. And in villages Bulgarians were trying it on, wanting 40,000 Euros for a wreck, just because they thought Brits had loads of money. I think that prices were already stagnating and coming down to more realistic prices regardless of the world economy and that this fall was needed really to bring things more into perspective.

The full article is at http://www.thetravelbug.org/blog

[mike]

Give the building site most tourist resorts in Bulgaria are in now I think 2007 prices are bit optimistic. (UK prices are trading about 20% off the highs and Irish prices about 40% off the highs now). I would have said about 50% off the highs for completed places as a guess for Bulgaria unfortunately. Any other ideas?

[thetravelbug]

Possibly right. I have a friend trying to sell a completed studio apartment in Fort Noks, near Sunny Beach. She paid over 50 thousand Euros for it (way too much) and is now trying to sell for around 20,000 Euros as husband is ill and will never likely use. This I think is a more realistic price given market now.

[MagicOPromotion]

Hi,
Im new to the list, from o/s and looking for market prices for the above areas.
My dad has ancestoral properties in both Sta Mesa and Quiapo and were trying to figure out how much they are worth.
Appreciate any help available.
Thanks

[BPAG]

Hi
I see that the The National Real Property Association (NRPA) has siad that the prices of the real estates in Bulgaria have almost reached their real market prices.

Not sure how reliable this NRAP is though.

Novinite News
http://www.novinite.com/view_news.php?id=104500

[thetravelbug]

Depends what you call a real market price I guess. Property is worth what someone is willing to pay for it at the time. I just sold a small rural house with field on ebay for around 3000 Euros. I would say market price for it is probably closer to 5000 Euros but no one was buying for that amount....

[dario]

Then the market price was €3000 by definition, no?

[BPAG]

Ebay is interesting because in many ways it does reflect supply and demand forces and therefore true market value of the property. In fact a property has no value at all unless someone wants to live there or rent it or use it in some way.

Perhaps you saw this on investment property rumours “the bargain of the century! 67000 square meters of land in Syria for the bargain price of €40!"  http://www.simplyzigzag.de/en/node/111. That’s because nobody wants to use it for anything there is no demand for it.

Unfortunately the Off Plan property market in Bulgaria was never linked to REAL demand for properties, ie people who wanted to actually use the property. The rampaging prices were only a reflection of REA's market hype.
REA's marketed off plan property in Bulgaria as being a good 'investment' because the property prices were rising so rapidly not because there were hundreds of people waiting for properties to live in, or looking for an apartment for their holidays. This is REAL demand.

People who have failed to understand this are now finding that their 'off plan' investments could only realise half of what they paid for it on today’s market because there is no REAL demand there was only REA hype.

The REA's also failed to tell people that Off Plan investment is in fact a very very risky venture.

What needs to happen now though is that Bulgaria needs to sort out its act and image as a tourist destination, so that there is a REAL demand for all those holiday units.

[thetravelbug]

I personally do not think eBay is reflective of proper market prices. Properties are either dirt cheap and attract buyers willing to wager a few thousand on something that have not seen and agents use it to get interest, a kind of loss leader.....or very expensive - just look at some of the classifieds!

The property I just sold (pending actually getting any money of course!) was bought for closer to 5000 E back in 2005. It is cheap at 3000 Euros but I listed it for a friend who wanted a quick sale and was not too bothered about taking a loss. There were many people watching the auction but not many bid. It needs a lot of work but has a decent sized plot and so think it could have sold for 4000 to 4500 Euros if she had been prepared to hang on and not so eager to sell.

[dario]

But the people bidding ARE the market.  This is the demand based on your supply.  It'd the age-old of difference between asking prices and sold prices.  In the current market, this is mostly going to be a large negative number.  In high inflationary times, this is often a positive number.

[BPAG]

and so I think it could have sold for 4000 to 4500 Euros if she had been prepared to hang on and not so eager to sell.

yes... but that's exactly the point market conditions change all the time every day, hour, minute, or second depending on your market. (look at those traders getting steamed up because in their market seconds count)
If she had held on to the property she would have been waiting for the market conditions to change. So she would have been effectively selling into a different market from the one that existed on the day that the property was sold.
Your view comes from the mistaken idea that property has some kind of intrinsic value which actually it doesn't, and neither does any other commodity.

The thing about any market is not what price the properties (or any other commodity) is being advertised for, that really doesnt mean anything. What is important is what sales are taking place and the price that they are traded at. Thats all a market is, the key is the exchanging, if nothing is being exchanged then there is no market.
Look it up on wikipedia "It is an arrangement that allows buyers and sellers to exchange things" http://en.wikipedia.org/wiki/Market

[dario]

If my view was based on a "mistaken idea", I'd have been out of my current profession many years ago Pamella!  Where exactly did I say that a property had intrinsic value?  Only derivatives have a defined intrinsic value in that they are based on an actual underlying market that has a set price (albeit an underlying market with no intrinsic value).  The extrinsic value in a derivative is it's optionality and volatility of the underlying.  Every day you get closer to the expiry of the option (as a buyer), you'll loose extrinsic value (your Theta), since the length of optionality has eroded.

A "market price" is whatever someone at a particular moment in time is willing to pay for that market.  That's the definition.

Perhaps you were not voicing that at me, but I think we agree....

[BPAG]

If my view was based on a "mistaken idea", I'd have been out of my current profession many years ago Pamella!  Where exactly did I say that a property had intrinsic value?  Only derivatives have a defined intrinsic value in that they are based on an actual underlying market that has a set price (albeit an underlying market with no intrinsic value).  The extrinsic value in a derivative is it's optionality and volatility of the underlying.  Every day you get closer to the expiry of the option (as a buyer), you'll loose extrinsic value (your Theta), since the length of optionality has eroded.

A "market price" is whatever someone at a particular moment in time is willing to pay for that market.  That's the definition.

Perhaps you were not voicing that at me, but I think we agree....

Actually we are agreeing
It was not you who I was suggesting had the 'mistaken' idea.

[thetravelbug]

Well whatever your definition of market price and thoughts on the market, appears that things have started to improve in the rural sector anyway and number of enquiries increased in last couple of months.

[Missizippi]

That sounds promising!