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Simeon Mitropolitski is a Canadian analyst, of Bulgarian origin, and a former syndicated columnist with the Bulgarian News Agency (BTA). He is the author of several hundred articles dealing with hot political and economic topics, both national and international.

He was part of the first group of Bulgarian intellectuals and students that began the opposition movement that finally put an end to the communist regime in this country in 1989, and in 1996-1997 participated in international observation teams during the elections in several Balkan countries - Romania, Albania and Bulgaria.

In 2002 Simeon and his family moved from Bulgaria to Canada where they live now in Montreal, province of Quebec. Simeon is a Master of Political Science from McGill University and a B.A. of Political Science and History.

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Since June 2004 Bulgaria has been into a focus of close attention for almost any international real estate investment company in Europe and maybe elsewhere. In the same vein, our short and mid-term predictions about this market have been put under close scrutiny ever since we dared to address this exotic and not quite ordinary new market economy. So far we were right in telling the customers what generally they might expect or not expect from the capricious local market. We hope we'll be again exact in our observations and predictions, knowing that if for us it's a matter of professional guess, for many investing in a far away country this may be a matter of their life savings.

But first let's look at the facts. Until not too distant past, I mean until 2001-2002, the market of this former communist country was underdeveloped by any standard, even by the standards of some other former communist countries. The average residential prices in the capital city Sofia, which was the most expensive city during that period, were barely reaching $300/sq.meter*. Then as the banks were sold off to foreigners, and the government that took power in 2001 liberalized the mortgage loan market, the prices began booming. Thus Sofia and the biggest Black Sea city Varna almost doubled the ceiling by early 2004. The prices went up in almost any area, for almost any type of property, for almost any kind of investment. It seemed for many that this boom would have no ends, and many rushed toward this new Balkan Eldorado. Back then in 2004 we said that inevitably the end would come, and that this end would come within 3-4 years.

Since our last prediction the market has begun to develop within more reasonable limits. Most short-term speculation fever has gone. During the last 15 months we have 10-15% increase of the residential prices for the country as a whole. This even moderate growth hides at least two important facts. First, the bulk of this growth has occured during the first half of this period, which means that during the last 5-6 months the prices has been basically unchanged, stalled by all sort of economic and political uncertainties. Second, the market was differentiated between areas and types of properties that still went up, although by more moderate pace, and those that showed no signs of improvement.

New real estate construction, especially if the investors are many middle-sized private companies, is a system that can't be easily stopped when the main engine is working at full speed. Many residential projects require up to 2 years before the investors can have their money, and hopefully the profits, back. The Eldorado boom of 2002-2004 made then many investors forget about the short-term dangers, but they are already concerned about the vanishing demand. Up to 10,000 new condominium units already stay empty, and for a country with no more than 200-300,000 upper-class families that's a lot. This number of unsold condominiums may be doubled until the investors finally step hard on the brakes.

Especially dangerous is the situation along the Black Sea coast. Literally billions of dollars have been poured during the last 4-5 years to build new hotels, condominiums and luxurious villas. The initial idea was to sell off as much as possible to the small local and foreign investors, but the construction jungle that replaced in many areas the pristine nature had the opposite effect of pushing away some of the brave newcomers. There are just not too many guests for the new modern facilities, so part of the tourist Eldorado needs to be sold as fast as possible. After the last summer season, the only season of 3-4 months when the Bulgarian Black Sea is more or less hospitable, up to 200 hotels are for sale and the buyers aren't lining up for the first time in almost 5 years.

So what way the Bulgaria real estate market may turn this time, given the unusual plateau that was reached and kept for months? Some answers are clearer than others, but we intend to reveal them all. First, the illusion that Bulgarian real estate market may reach the Central European levels will remain just an illusion. Even with prime properties sold for $1,200/sq.meter in Sofia or Varna they can't reach Budapest where even the average prices are higher. In these two Bulgarian cities the average asked price is usually within $650-750/sq.meter, and the final price is obviously lower than the asked. Unless we expect a sudden collapse by half of the markets in Central Europe, which we think won't happen, the difference between Bulgaria and Central Europe will remain stable and may even widen.

Second, the investors should look more closely to the market before putting money. The time when everything got more expensive is gone. There may be locations where the market will still go up, but there may be also locations where the prices will go down, or stay where they are today. Some segments of the market and some types of properties are oversupplied, but some areas may be still waiting for newcomers.

Third, after the end of the Balkan wars in 1999, Bulgaria had exceptional opportunity to develop within stable external and internal political environment. It was ruled by a market-oriented government and enjoyed overwhelming support by the West. The real estate market boom is partly a result of all these factors. Take one or two of them out of the picture, and the result could have been very different. Bulgaria as any other country may elude complete market explanation and prediction. But we can at least rule out the least possible and fantastic scenarios and focus on those that deserve our attention and interest.

* - The prices here are expressed in $US, although in Bulgaria almost all prices are put in Euro. Here we use the current exchange rate of 1 Euro = $1.20.