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Archived Articles
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.
Global Real Estate Project
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Bulgaria: Short-term boom, mid-term dangers
Two very powerful rumors fire up the market. First, Bulgarians are made to believe that by 2007, the presumed date of official entry into European Union, real estate prices should match those in Central Europe, e.g. Hungary, Czech Republic or Poland. Following this rumor, which has no real foundation whatsoever, prices in Sofia should double or even go higher in the next two, two and a half years. Even if such rumor has no economic foundation, the very fact that buyers believe in it means they see the current price levels still as good deal. Second, private banks believe, also without any reason, that 2007 will open the internal market for new competitors from EU. They will offer mortgage loans at 3-4% instead of contemporary 8-9%. For them it's "now or never" to fish for homebuyers. These two rumors nourish each other. The higher prices go, the lower mortgage rates fall. The lower the rates are, the more potential buyers go to market. The higher the demand, the higher prices go. The higher the prices, the more people believe in these two rumors. The result is almost doubling of the prices in Sofia and Varna since last September. People prefer paying $500/sq.m now even with higher mortgage rate than wait until 2007 and pay $1,500/sq.m as rumors make them believe. Some banks have announced they won't condition the loans upon the household financial situation proof. Meaning people with ability to pay several monthly payments will get credits that ultimately will turn to be bad. Whether these credits are "good" or not good enough will show up within 1-2 years. Perhaps the general plan is to sell the house or apartments before the buyer becomes insolvent benefiting from the higher price. The last buyer will get the hot potato, which will occur when the market in mid-term starts correcting. We can expect this to happen within 3-4 years, maybe even earlier. What we have just described here isn't an illegal financial scheme, but its results will look like the NYSE crash after February-March 2000. But for the next year, perhaps two, the market will keep current direction, although it isn't sure whether it could keep the present pace of development. There is good news for the foreigners who want to buy land in Bulgaria. So far this was prohibited under Bulgarian constitution, yet there was a backdoor buying land under company, registered in Bulgaria. Starting probably next year, gradual process of liberalization of the land market for foreigners will be applied. The ultimate date for full liberalization is expected to happen by 2014. ---- *Prices are put in USD for convenience only. In reality most buyers and brokers in Bulgaria nowadays prefer making deals in EURO.
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See also the directory of companies providing real estate services in, and general real estate information of Bulgaria.
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