During the last six months of 2008, and particularly the fourth quarter of the year, the real estate market in Bulgaria witnessed a new trend, beginning to feel the impact of the global economic slowdown, the latest research findings from Colliers International show.

In the wake of the current global, financial situation, the developments of the Sofia residential real estate market have changed significantly in the last few months of 2008. This trend is expected to be further amplified as banks limit or retract their financing, affecting both developers and buyers.

Demand shows a remarkable contraction in the last few months of 2008. On a year-on-year basis (November 2007 to November 2008) the volume of mortgages issued decreased with 80% or 82 million euros, while the average interest rates increased 1-2 basis points. At the same time the portion of the purchase price covered by the mortgage has been reduced from 80-90% to 50-70%. Generally, buyers are now more inclined to buy at later stages of construction, thus mitigating the perceived risk.

Average asking sales prices across almost all areas decreased in the second half of the year. Sales prices in the new neighborhoods in the Southern part of the city have experienced decreases ranging from 9% in Vitosha to 2% in Krastova Vada when comparing to the average prices in the first half of 2008. Still, these areas retain average asking sales prices above EUR 1,000/m2. The prime neighborhoods in Sofia also experienced decreases - most significant in Lozenets with a fall of 8% compared to the first half of 2008. In Doctor's Garden and Ivan Vazov the decrease was 2%.

On an annual basis, the year 2008 ends still with a positive development in the prices - Iztok saw the largest growth with 18% year-on-year, followed by Doctor's Garden with 11%.

The difficult financing situation will continue to influence the residential market in the first half of 2009, as many planned projects will be postponed or canceled. Few new projects are expected to break ground in the first half of 2009.

The fundamentals of real estate (infrastructure, location, access, concept etc.) will again determine success or failure on the market. The demand for middle and high-end projects will continue to decrease, as potential buyers will experience difficulties in getting financing.

The market will be driven by the cash payers and by developer-financed purchasing schemes.