Home for everyone

If the state encourages residential purchases, everyone may benefit

If we forage through old newspapers, we will see that Bulgaria has a national housing strategy.  The fourteen-page long document can be found on the internet site of the Ministry of Regional development and Public Works of Bulgaria. But we can see the effects of the strategy in the very functioning of one of its focuses – the reform on property management. More than four and a half years after the strategy had been adopted by the government the condominium co-ownership law was not been enacted yet.
Some other measures stipulated in the document are also recommendable: for example the introduction of subsidized loans for overhauls and residential renovations.
Various versions of this strategy are being discussed since the end of last century. Some of them suggest that an example of mutual credit funds and other measures for stimulating residential saving like direct state grants should be brought in. However, there is actually no housing policy has been applied so far.
In the last few years it seems like the need for such policy has diminished – growth in credit and incomes filled the affordability gap between supply and demand and started off both prices (happily for property owners) and new development (happily for developers). In the last months of 2008, however, the numbers of home loans and transactions were declining. Developers are also expected to respond to it by cutting down the number of projects this year. This will not be a mere resetting for the market, but will mean that fewer people will be able to buy houses in year to come. Therefore, once the state has accepted the provision of home and maintenance of the housing stock as its priorities, we once again face the question how it could improve real estate affordability. Other markets' experiences show that the measures may be varied – from stimulating residential savings to decreasing taxes, indirect financing of affordable homes development by means of exchanging state or municipal land against certain commitments for developers. No matter which way will be chosen, developers admit that they do not expect that the strategy will do all that good in the short term, but it can be an important mainstay for the future.
"I cannot say they are the solution but for sure they would help to restart the market again. These are measures that are, first, helping the people, which is important. In Spain, ninety percent of buyers are young professionals who are just starting and do not have the money to buy property," said Mauricio Mesa, regional director of development company Hercesa Internacional for Romania and Bulgaria.
When asked if the real estate industry needs support, Toni Tonchev, general manager of development company Torin said: "It probably does not, but I am afraid that if we do not take advantage of the crisis and perceive it as a preparation for the next period of progress, we will surely wake up like characters in a devastated environment in which we will have to restore the clients’ confidence for years."
Mr. Mesa assumes that VAT on Bulgarian properties is quite high. In Spain for example the tax is differentiated and is just for homes 7%, compared to standard levels of 16%. However, in the country, whose constitution says all residents have the right of decent homes, this policy is helping people and not developers.
"We observe a migration towards larger cities and families with medium incomes find purchasing a property more difficult than ever. So I would say that stimulating birth rate and keeping young, intelligent and educated people in Bulgaria is the most important residential policy," said Mihail Chobanov, general manager of Bulgarian Properties, a real estate agency.

Read more:
The crisis in 2009: A chance for a restart
Way to quality
Municipal woes
Arch. Georgi Nikolov: Investments to be made in accordance with the property quality
Valeri Atanassov, executive director of Soravia Bulgaria: We are positive that new industrial and office projects will be needed
Tsonko Tsonev, Mayor of Kavarna: Better synchronization between municipalities and the state is needed
Evgeni Vasilev, general manager, Arco Real: Faster administrative services even at higher cost
Mihail Chobanov, general manager, Bulgarian Properties: Residential policies should stimulate young people and keep them in Bulgaria
Tsvetelina Taseva, executive director, Address Real Estate: State interventions should be precise to the maximum level
Toni Tonchev, general manager of development company Torin: Let’s take advantage of the crisis and put the branch in order
Mauricio Mesa Gomez, regional director, Bulgaria and Romania, Hercesa Internacional: VAT on property in Bulgaria is too high
Stefan Sharlopov, owner of Sharlopov Hotels: We have to be creative in the time of crisis
Bogomil Manchev, executive director of Risk Engineering: Completing large-scale infrastructure projects will bring good results.
Kalin Peshov, executive director of Glavbolgarstroy: In one-year time the market will stabilize
Lachezar Bogdanov, economic analyst, Industry Watch: Reforms to facilitate investment have to continue
Georgi Angelov, senior economist at Open Society Institute:Reasonable macro policy is what prevents economies from serious crises
Rosen Plevneliev, general manager of Lindner Immobilien Management:Factories have to come to the front