The Dynamics of the Prices of Land in Urban Areas in Bulgaria for the Period Between 2000 and 2012
According to most of the global property market indexes Bulgaria has suffered one of the biggest decline in property prices after the property bubble burst in 2008.
Expectedly, the different property market segments show different level of price decrease but the land in urban areas unquestionably heads the list with an average drop of 70%.
A pure and one of the most striking examples of this negative trend is the capital of Bulgaria-Sofia.
If we look at the prestigious south suburbs of Sofia, the land transactions records for 2008 show an average price of 300 EUR per sq.
m.
Four years later the plots of land in the same area are offered at prices not exceeding 80 EUR per sq.
m.
Almost the same statistic applies to the urban land prices in holiday areas such as Sunny beach, Golden Sands at the Black Sea coast and Bansko and Pamporovo in the ski resorts.
The prices of urban plots in these areas in 2008 reached 200 EUR per.
sq.
m.
At the end of 2012 the same plots of land are available for as little as 10 EUR per sq.
m.
The trend has its rationale.
For a better explanation we need to mention some historical facts.
During the 45 years of communism in Bulgaria the property market did not exists as the people, with a few exceptions, were not allowed to own, respectively to buy and sell land.
The so-called land reform conducted after the fall of the communism in the period between 1996 and 2000 restored the ownership of land to the inheritors of the original owners from which the land was taken away during the nationalization carried out by the communist in 1946.
The reform virtually restored the property market and opened the doors for investment and development in the sector.
This newly born property market, in a European country destined to join European Union and in an economic environment with booming property investments was bound to immediately attract a lot of cash.
Due to limited number modern and potentially profitable properties to buy the process of investing began with very intensive land banking.
Investors from all over the world were competing for urban plots, which resulted in a rapid appreciation of land values and prices increasing by 50-80% per year.
According to analysis by leading estate agencies in Bulgaria more than 60% of the land transactions between 2000 and 2008 can be classed as speculative investments.
In other words, the plots were bought with the only purpose to be sold on to the next buyer betting on the land prices continuing to rise.
This land speculation spiral was ended in 2008 with the beginning of the financial crisis.
The sudden withdrawal of cash brought the Bulgarian land market to a total collapse.
In 2009 only the prices dropped by 50%.
The fall continued and in 2012 the prices got back to the original levels of 2000.
Again according to the estate agencies offering lands, the vast majority of the land transactions in 2012 are as a result of repossessions, distress offloading of assets or bankruptcies.
Expectedly, the different property market segments show different level of price decrease but the land in urban areas unquestionably heads the list with an average drop of 70%.
A pure and one of the most striking examples of this negative trend is the capital of Bulgaria-Sofia.
If we look at the prestigious south suburbs of Sofia, the land transactions records for 2008 show an average price of 300 EUR per sq.
m.
Four years later the plots of land in the same area are offered at prices not exceeding 80 EUR per sq.
m.
Almost the same statistic applies to the urban land prices in holiday areas such as Sunny beach, Golden Sands at the Black Sea coast and Bansko and Pamporovo in the ski resorts.
The prices of urban plots in these areas in 2008 reached 200 EUR per.
sq.
m.
At the end of 2012 the same plots of land are available for as little as 10 EUR per sq.
m.
The trend has its rationale.
For a better explanation we need to mention some historical facts.
During the 45 years of communism in Bulgaria the property market did not exists as the people, with a few exceptions, were not allowed to own, respectively to buy and sell land.
The so-called land reform conducted after the fall of the communism in the period between 1996 and 2000 restored the ownership of land to the inheritors of the original owners from which the land was taken away during the nationalization carried out by the communist in 1946.
The reform virtually restored the property market and opened the doors for investment and development in the sector.
This newly born property market, in a European country destined to join European Union and in an economic environment with booming property investments was bound to immediately attract a lot of cash.
Due to limited number modern and potentially profitable properties to buy the process of investing began with very intensive land banking.
Investors from all over the world were competing for urban plots, which resulted in a rapid appreciation of land values and prices increasing by 50-80% per year.
According to analysis by leading estate agencies in Bulgaria more than 60% of the land transactions between 2000 and 2008 can be classed as speculative investments.
In other words, the plots were bought with the only purpose to be sold on to the next buyer betting on the land prices continuing to rise.
This land speculation spiral was ended in 2008 with the beginning of the financial crisis.
The sudden withdrawal of cash brought the Bulgarian land market to a total collapse.
In 2009 only the prices dropped by 50%.
The fall continued and in 2012 the prices got back to the original levels of 2000.
Again according to the estate agencies offering lands, the vast majority of the land transactions in 2012 are as a result of repossessions, distress offloading of assets or bankruptcies.
Source...