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Although Sofia values steadily dropped from 2008 to 2011 by some 30-35%, it seems that 2012 has so far suffered considerably reduced rates of loss (down 3% in the first half), however a new and more concerning trend looks to be a prolonged stagnation of demand across the entire Sofia market. Domestic demand has been propping up the market since the property crash and the exodus of foreign money, but seemingly even with the availability of high loan to value mortgages and vast choices of affordable property at 2003 prices, demand has slumped to an all-time low.Official data shows that by comparison to 2011 there have been 27% less property sales completed in the Sofia district in the first half of 2012 (source: National Institute of Statistics), which has resulted in properties staying available for as much as twice as long. Ever growing stock levels fed by a continuous stream of vendors coming to the market bolsters the oversupply and causes everyone in the market to wait longer for results. Fundamental market rules typically ensure that prices drop when supply is high and demand low, but unusually this market has simply shrunk and stifled instead, not good news for those selling Bulgarian property or businesses operating in the property sector as less transactions only limits volume and opportunity, thus raising costs. In effect, the lowest prices are still not selling in Sofia at the current time, even when slashed by as much as 15-20% below the known current ‘market price’, enquiries from buyers are estimated to be half of that from this time last year.Larger and more expensive properties have been hit hardest, previously proven as the dead-end of the market we now see the ceiling prices of these commonly traded larger properties dropping further still. It used to be the case that almost any apartment over 125,000 Euros was hard to sell, but today we see that really anything over 80,000 Euros doesn’t attract significant attention from the common market and 2 bedroom apartments over this bracket are seldom sold. Naturally there are exceptions in central areas where this does not hold true, but for the bulk of available stock in the majority of non-central areas buyers for 80,000+ Euro properties are sporadic and infrequent, as such few property business can afford to survive by marketing property stock from this sector.So what has stunted demand and slowed selling Sofia property? One theory is that those who had cash to invest in the post-recession downturn have done so, now the market is left solely to those moving sideways or upwards using mortgages and seemingly there are fewer of them. Seasonal shift can also be held accountable; unlike in the UK the springtime in Sofia sees a period of inactivity as far fewer property searches are conducted from mid March to end of April than at any other time of the year (source: imot.bg data). This year saw it’s usual post-Christmas burst of property interest, but then slowed for Easter and never came back up to normal levels. Many hope that the Autumn will see renewed interest as the holiday period ends and buyers refocus once again, but that is yet to be seen.Sofia Rental rates also continue to play an important role in keeping buyers away; at their lowest since the property boom started it is proven cheaper to rent than it is to buy, thus removing a key market catalyst that typically encourages ownership, sales and growth. Young salaried couples can invest, borrow and buy at 90% LTV, but for a typical 1 bedroom apartment it will cost them 480 Euros / month in repayments, but for just 210 Euros / month they can rent the same property and carry no risk. In effect, the monthly interest cost of borrowing from the bank is more than the gifting of monthly rent to a landlord, as such eventual ownership has to be an expensive personal desire to make any logical or financial sense. In simple terms, the average annual return on investment for most landlords is 3-5% (at today’s value and rental rates), yet the average mortgage is 8-10%, any prospective homebuyer can quickly see the cost of living is substantially cheaper by being a tenant instead of a mortgaged owner.Without a crystal ball we can never be sure when the market will return, but as a growing European capital benefiting from continued and unrivalled domestic migration, the mid to long term prospects for property demand are still encouraging. Selling in the short term is the major issue confronting vendors today, sadly drastic price cuts remain the only lever of control any vendor has to encourage activity.