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Bulgaria Real Estate Investments More Profitable Than Stocks

Submitted on Friday, 12 September 2008No Comment

Despite their low liquidity, real estate investments in Bulgaria yield significantly higher profits from sales compared to financial assets, according to a real estate market survey for the third trimester of 2008 conducted by Industry Watch.

In the course of one year, prices of housing properties in Bulgaria have gone up by 32%, while investments in stocks or mutual funds yield negative profitability on annual basis, and the effective interest profit from newly opened bank deposits is 6%.

After the middle of 2007, when the first effects of the global crisis became visible, prices of housing properties in Bulgaria have increased drastically. The difference between housing properties prices in the country and those in most European countries is getting narrower, according to the Industry Watch report. Still, housing prices in Bulgaria remain relatively low in their nominal value – an apartment in Sofia costs twice less than one in Vilnius.

Mortgage loans have a 12% share in Bulgaria, compared with 39% in the Euro zone, however, the total amount of mortgage loans in Bulgaria is now over BGN 7 B. Industry Watch forecasts mortgage loans’ growth of 20%-25% on annual basis over the next few years.

According to Industry Watch’s preliminary data, the influx of foreign investments in real estate in Bulgaria is slowing down. However, even with a more negative scenario for the decrease of foreign investments, the housing market would not be strongly influenced.

With lesser foreign investments, the importance of the Bulgarian immigrants as investors in the housing properties in the country is becoming more and more significant. In the last 12 months money transfers from immigrants to relatives in Bulgaria have reached BGN 2,7 B – more than foreign investments in real estate during the same period. According to Industry Watch’s experts, an eventual change in the immigrants’ preferences would have a serious influence on the external demand for housing properties and could even exert pressure over real estate prices.

The lesser demand and investments on the part of foreigners have a much more negative effect on the vacation villages’ constructions, as the report shows.

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