How to buy a home during a crisis
Revolutions often take place in a time of crisis. Some significant changes took place in Bulgaria since the beginning of the crisis in the real estate sector. Developers and real estate agents affirm that now it is the buyer to dictate the rules on the market. But does he know it?
Demand for homes is a steady constant. It is to remain in Bulgaria with or without a crisis. Official statistics show that 96% of Bulgarians own the properties they live in. Hardly ever more than 2/3 of the population worldwide and in most developed countries, in particular, lives in their own homes. The big dilemma a buyer faces is: should I buy now? Housing prices have tripled since 2002. At present the average price has reached 680 euro/sq m, while it was just 160 euro/sq m seven years ago. Prices continuous uphill led to a construction boom in the big cities. So currently customers are faced with numerous options to choose from. In 2008 over 21,000 houses & flats have been completed, a number which is slightly more than twice the amount of properties built in 2004. A lot of developers are disposed to give discounts in order to get rid of the excess of units they have available. Along with opportunities, buyers and real estate market participants have encountered some challenges, as well. In the past three years buying a property was never related to tackling such a long list of questions.
Shall I obtain a loan?
Of what amount should it be?
Should I take the risk of buying a larger property?
What if I lose my job?
What if banks don’t approve my income?
Do deferred payment schemes really work?
Are they safe enough? Is off-plan buying cheaper? (I still remember those ‘pyramids’).
What if the developer goes bankrupt? Prices are falling now.
What if tomorrow they fall even faster?…
The downturn has turned the real estate market into a market of rumors and guesses, destroying the mutual trust that market participants shared before. As a logic consequence, not only the projects with problematic locations, infrastructure and designs suffer, but also the developers, who should have known better.
The lack of trust, however, is much worse than the lack of money. Many developers do have a clear concept of dealing with the problem of lack of trust – slowing down construction, focusing on already started projects and postponing new ones, cutting off costs, using a more innovative marketing strategy by offering flexible financial tools and schemes. However, buyers’ wretchedness is far from being finance-related only. Faced with an insecure future, they have to spend with a lot of care on properties and often choose to postpone purchasing expensive properties, cars or furniture. Meanwhile, they are flooded with offers which at first seem to be of good quality, but at the end hide certain risks.
When loss of trust becomes an issue, the reputation of developers is crucial, especially in a market of short lived companies. In a time of crisis, it is vital whom you are working with.
The problem may be partly solved by means of using professional advice – on legal, credit-related and construction aspects of deals.
When buying, you should require a property description of façade, interior and windows. These details are technically stated and every description involves a certain product quality. Therefore, construction characteristics should be evaluated by an expert. Buyers are actually surrounded by loads of “bargain” deals.
The risk is that some developers try to save quality in order to get lower prices. Real estate professionals advise buyers to pay attention to the lowest prices. Mislead by “prices of 200 – 300 euro/sq m, buyers can come up against trickery.They should better involve in proven relations to avoid losses. Don’t buy cheap. There is no way low prices can have proper quality. For some buyers certain prices might look high. Professionals, though, make it explicit – quality costs money. People, who expect to receive real estate properties for free, might be misled. To start with a buyer has to find the answers of two crucial questions: what do I need and what can I afford? Then he should choose the exact project and check if it corresponds to his requirements. When buying a property, one should make a careful analysis of the opportunities and the necessities. If you are looking for a bargain you can definitely have a good one these days. To encourage sales, developers are even inclined to put on the table properties they wanted to retain as investments. Often, these are the best homes in residential complexes. At present their price equals the price of all other properties on the market. But the best deal is not the cheapest one.