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The property market: serious mismatch between demand and supply
Residential market in Sofia was again put a difficult period. Although active banks offer mortgage loans and even reduce the interest thereon, the number of transactions for the sale is not growing. The reason this time is not lack of interest from buyers in a serious mismatch between demand and supply states in its new market analysis real estate agency "Address".
"Our goal was to directly examine customer behavior and analysis showed that in 10 new clients 5 were also potential buyers," said Tsvetelina Taseva, executive director of Address.
"So speaking, the market looks balanced. But in practice, typically offered properties are larger than 100 square meters at a price around or over 100 000 euros, while demand for one-bedroom homes worth between 40 000 and 50 000 euros. Difference is too large to be pinned to trade discounts or negotiations. More important than price difference appears to be the question of property parameters. Currently, in Sofia properties being demanded are not "Unpin for sale”. This makes transactions difficult”, added Taseva.
According to "Address", the market will be significantly strengthened if proposals for so-called within the industry "dark windows” occur. These are all those homes, which for some reason the owners do not use, not rented and not sold. Properties that remain sealed and unused, gradually are depreciated and when appear as tender after several years, will not fall into the category of active customer demand.
"Unfortunately most of the owners still see their properties as inviolable. Once they acquire them, it’s hard to part with. A property, even when we live in it, is an investment. This applies with greater force when it is not our main residence”, explains Taseva.
"It is necessary that the owners have a good plan for this investment and to calculate carefully. For example, for an apartment in the capital higher taxes and maintenance fees are applied, even bills to utility companies are not so small.
If we add to this the cost of mortgage credit, when available, especially in the absence of a clear prospect of a decline in interest rates and thus contributions to their previous debts, it appears that the sale is more advantageous.
By realizing that situation, sellers are more motivated to get rid of their property and to keep a certain amount of cash they can invest more appropriate”, said Taseva.
Typically, customers who sold such property, invest in more liquid or use the funds for education of children or improvements in the main house. Older sellers benefit from the interest of banks.
In general, this type of owners want to wait for better times, hoping to get their property a greater amount, but often fail to calculate costs incurred during the years of waiting.
Another common reason for "holding" of property mutual ownership is after inheritance. Relatives want to sell one property and buy two similar, but once they understand that it is unrealizable, abandon the sale hoping that the market will improve and this combination will be possible.
Their expectations are not groundless since within the boom years many people sold their apartments in the center and with the money they bought two other properties in pretty close to the center districts.
At that time, however prices in the region of Doctors' garden were at times higher than those in neighboring areas.
"The situation today is very different. It is a fact that most expensive properties noted a greatest loss in value, those that were overvalued before the crisis under the influence of various subjective factors.
Today, byers are more rational in their choices and are willing to pay extraordinary prices for a specific property in a perfect location. They prefer to buy a larger home in the next street. Therefore, there are no real deals to 3000 euro a sq m.”, says Taseva.
Actively are dealt newly built properties at the moment. The old brick homes are with large sizes and high prices and do not meet the financial capacity of buyers. Banks are reluctant to finance deals for prefabricated housings and thus choices, given a decreased number of available small apartments with Act 16, appears very limited.
According to the "Address" contrary to the economic logic, despite the weak supply prices may not rise.
Crisis situation does not allow it - buyers' budgets are low and can hardly be exceeded, because the savings are clear, while external financing from the bank is calculated at minimum risk and it is not compromised.
Prices in the summer were stable. Some districts even reflect a slight increase. In Lozenets, downtown, Borovo already firmly established and at about 1000 euro per sq m. The opportunity of making a bargain is reduced even in areas with higher supply of prefabricated housing and any newly built. However, there is a slight decline in this particular type of neighborhoods - Liulin, Druzhba and Student City.
The agency expectations till the end of this year are to no significant changes in the market. The emergence of quality supply may affect the volume by increasing the number of transactions, but not the price levels which will remain close to current.
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23 September 2010 |
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