ECONOMY

Bulgaria’s real estate boom looks set to slow

SOFIA (Reuters) – Demand in the fast-growing Bulgarian property market is likely slow in the next two years due the global credit crisis, industry experts said this week. Analysts told a conference in Sofia that international banks have reduced resources to their local arms and credit lending to real estate entrepreneurs had ebbed as funding was more costly. «The impact on Central and Eastern Europe and Bulgaria will be negative… It will be a healthy cooling off,» said Martin Gikov, head of real estate finance at UniCredit Bulbank. Real estate deals and construction have boomed in Bulgaria in recent years, partly fueled by increased foreign demand and in line with a property boom in Eastern Europe. Property prices in Bulgaria are low compared with Western Europe, despite sharp increases in recent years. Housing prices grew 34 percent in the fourth quarter of 2007, the fastest rate in the world, British consultancy Knight Frank said last month. Analysts and bank officials warned of possible trouble in some real estate sectors, such as resort and office building due to widespread and badly planned construction. In February, global risk management consultancy Coface said bankruptcies in Bulgaria’s construction sector were likely to increase by about 50 percent. The rush for quick profits has affected construction quality and led to excessive supply at Black Sea and mountain resorts. Analysts told the conference banks should become more selective when extending credit to property developers. About 40 percent of Bulgaria’s over 6 billion euros of foreign direct investment last year went into real estate, according to central bank data.