Friday 8 February 2008

The Brits disappear and the Bulgarian housing market crashes

Unfortunately, the overseas property speculator has vacated the Black sea coast. She better turn up soon because the Bulgarian holiday home market is quickly sliding towards total collapse.

According to today's Financial Times, demand for holiday properties in Bulgarian "hot-spots" like Bansko has almost completely evaporated. Two years ago, British speculators were buying around 500 properties a month. Today, sales have fallen to about 30 a month, while the buyers were almost entirely Russians and Greeks.

The sudden collapse of demand has prompted desperate Bulgarians to offer steep discounts. So far, the price cuts have not encouraged the Brits to return. Then again, it would take some pretty hefty discounts to counter the poor construction standards and mediocre rental yields that have typified Bulgarian holiday homes.

However, the comments of Mihail Chobanov, chief executive of Bulgarian Properties, must have sent an ice-cold chill down the spines of the British owners of Bulgarian holiday homes. He believes that about 50 per cent of UK investors who took bought into the Bulgarian market four years ago are now trying to sell their properties. "Speculative buyers want to cash out and move on," he said. Bag-loads of supply and no demand can only mean one thing - housing crash.

For the Bulgarian economy, the disappearance could provoke a major economic crisis. Last year, foreign exchange from property sales paid for about a third of the Bulgarian current account deficit.It was a great scam. The Bulgarians have been selling their dilapidated communist-built shacks for overinflated prices and using the proceeds to buy imports. Now that the Brits have departed, the Bulgarians will have some difficulty in paying for those flat-screened TVs and washing machines.

Well, that is globalization for you; the foreigners come and buy up your home, only to find out later that they scammed you with an over-inflated price. If only it could continue forever.

7 comments:

Anonymous said...

Any chance of a link to the FT story please Alice?

Alice Cook said...

http://www.ft.com/cms/s/0/290fc504-d6b2-11dc-b9f4-0000779fd2ac.html

Anonymous said...

It was only a matter of time. Who wants to dine on hind leg of a young dog in a rich ox gravy (slaszovek), and drink "balkijbe" (the Bulgarian aperitif made from boiled rutabaga), when they can stay home in Britland and enjoy gallons of lager and a nice takeaway? On second thoughts...

Anonymous said...

UKHB: ¨Well, that is globalization for you; the foreigners come and buy up your home, only to find out later that you scammed them with an over-inflated price.¨

Now come on, by all means write something but unless you are determined to pander to the lowest common denominator, you ought to try harder than that.

At the point of the sale, both parties - absent any coercion - were happy with the deal.

¨Only to find out later you scammed them¨

Ha, ha, ha! what a really silly thing to have written. I bet the Bulgarians knew all along what their property was worth, they knew they were getting several times its worth than if they were selling to a domestic buyer. The Bulgarian vendor was very happy - the sheepie foriegn buyer thought he was very happy, now of course it is a little different as he cannot offload his purchase. That is not the fault of the ´Bulgarian scammers´, that is the fault of the rediculous media hype, that has encouraged everyone to think they are overnight a property magnate.

Once again, if you must play the blame game, select the right target, it is not ´Globalisation´ which would be a good thing if governments could stay the hell away, it is (in our case) the BBC and all the other meja who gave the bandwagon its momentum.

Anonymous said...

only to find out later that they scammed you with an over-inflated price.

It's the last bagholder who gets scammed in any bubble - the last foreigner, in this case. Prices will come down, and (better-off) locals will buy in again.

Anonymous said...

good to hear bansko is crashing...now if only some of the nice resorts in france/switzerland/austria could have a solid property crash i could get myself a little chalet somewhere i'd actually want to go...

Anonymous said...

the FT link didn't seem to work, try this instead.