Банкеръ Weekly

Briefs

NOT EVERY REAL ESTATE IS A GOOD INVESTMENT NOWADAYS

Most properties in Bulgaria have been extremely overestimated for more than one year now. Even real estate agents are already commenting that this trend cannot last very long, as it is not related to a real change in the economic situation of the country. A number of brokers claim that the latest prices of ordinary flats - both pre-fab and others built some 15 to 20 years ago, are really incredible. The price of a pre-fab flat in a quarter like Mladost 3 or Lyulin 6 (EUR30,000) cannot be explained by economic reasons. It can only be defined as a temporary situation of the market, influenced by the pressure among people willing to buy a home. Deals made by most real buyers today are explained by their desire to make an investment, providing they have access to relatively lucrative credits with 8% to 10% annual interest rates. There are fewer people who want to buy a flat to live in it instead of offering it for rent.But what does an investor get in case he buys a property in a distant quarter of Sofia? Should we trust the prices, a pre-fab flat in a large 20-year-old building costs EUR30,000. One alternative is to rent that flat. The average rent of a flat in Lyulin is EUR120 and in Mladost - EUR110-130 a month. Therefore, the average annual income will be EUR1,440. Costs deducted, the sum will go down by EUR200-300. It means that the average annual profit from the rent compared to the price paid is nearly 3.5 per cent. At the same time, most banks provide a yield that is the same or higher if we keep our money in a longer-term deposit. Some types of Bulgarian securities (the eurobonds, for example) provide a 6% yield. Experts who trade on the stock exchange in turn note that a well managed portfolio may bring an annual yield above 12 per cent. It means that if EUR30,000 is invested properly, there will be enough money to pay for an almost double rent. Therefore, the real price calculated on the basis of the profit from the flats described above should amount to EUR10,000. The rest results from temporary speculations and th

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