News from the finance Sector
Bad Credits in Bulgaria Jump by BGN 512 M in June 2009
Novinite News| July 24, 2009, Friday
The amount of bad credits in Bulgaria increased significantly by BGN 512 M only in June 2009, month-on-month. This was the biggest rise since the beginning of 2009, reports provided Friday by the Bulgarian National Bank showed. However, the overall share of the bad credits is still low - 4-5%, annalysts said. In banker's opinion, the levels of those types of credits are still within the normal limit. Bad credits are generally described as the ones not paid for over 90 days. Since January 2009, the average increase has been around BGN 200 M per month, which has not disturbed the financial institutions. In June, BGN 295 of the total amount of bad credits was from business loans, BGN 106 M - hosing credits, and BGN 86 M were consumer loans.
Experts Recommend Buy to Let for Properties in Bulgaria
Novinite News | July 22, 2009, Wednesday
The prices of the residential properties in Bulgaria are going down faster than the rents, so experts recommend buy to let. This is what the credit institution, Creditex, reported based on information provided by real estate agents, the Pari Daily announced. According to Creditex experts, the co-relation between both prices is important reference point for the Bulgarian real estates market. The average current residential properties profitability is 4,5% in the first half of 2009, while in the last six months of 2008 it was 4,1%.
The redeemability of such investment is measure through the so called "gross rental multiplier". It shows the number of month rents, by which the investment will be returned. The lower the index is, the better the redeemability is, and the faster the investment will be returned. The index for the first six months of 2009 is 209,4 months - a decrease from 237,3 months in the second half of 2008. The reasons for the increasing redeemability of residential properties are the lack of adequate financing from the financial institutions, which makes the prices go down, and the rise of the interest towards renting apartments, instead of buying them.
The increase of the current residential properties profitability since the beginning of 2009 shows that the most critical moment of the real estate crisis is may be passing, and the first signs of realties market recovery and stabilization are appearing, experts form Creditex commented. Creditex is non-bank, financial institution, specialized in business mortgage crediting, which has been on the market five year now. It is part of the registered in Holland, TBI Financial Services B.V.
Comment from our Mortgage Advisor
Dave Moroe of Bulkan Legal and Finance
The bad credits seem to be within a reasonable level.
A lot of British & Irish people aren’t paying their Bulgarian mortgage, but throughout the last 3 years, it was so difficult for British people to borrow out there, that I would guess that less than 1000 British people have loans. It was equally as difficult for other foreigners to borrow and as such, only a very small proportion of housing loan defaults would be due to foreign borrowing. Based on this, the apparently minor problems are in the main part caused by locals not paying their mortgage.
I would add, that it’s conceivable many locals aren’t paying their mortgage because quite simply the interest rates are very high (that is, the banks are making a big margin on the rates they borrow at, compared with the rates they lend to consumers at)
These excessive interest rates make renting a property more attractive for a tenant, but it makes it difficult for a buy to let landlord to cover their mortgages with rent received.This is consistent with the article about buy to let stating that because prices were dropping, relative rental yields were increasing.
Unfortunately this article , indicates that the reason rents are rising is because there isn’t adequate financing available which is one of the factors driving the prices of properties down.
There is no current easing of the mortgage market. I am working on bespoke solutions at present if successful it should clear the path for future mortgage expansion.
|
