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Startpage»  Property in Bulgaria - INFO FOR INVESTORS - MARKET OVERVIEW - Crediting |
Crediting |
The most important factor, which influences the market of Real Estate, is the availability of crediting. It is determined by the costs of capital in the World's Markets. Libor USD 6m index was on its lower position -1% at the beginning of 2004. At the second half of 2004 this index reached the level of 2,5%. But despite this growth the average percentage rates of credits issued to the private persons stayed unchanged - they preserved themselves at the level of 5%.The predominating majority of credits were issued on the conditions of changing percentage rates, i.e., after joining the EU the additional Bank fee reduced.
Despite the fact that credits for the purchase of accommodation were taken for the long period with changing % rates, because of the lower credit percentage rates the predominating quantity of credits were taken in USD. Thus the receiver of the credit undertakes the risks of both the change of currency value and the change of percentage rates.
From the total quantity of credits issued to physical persons approximately 70% are designated for the purchase of accommodation. The quantity of credits issued in 2004 is as twice as big in comparison with 2003 - in 2004- 47 millions LVL per months as average, in 2003 - only 26 millions LVL per months as average. For the purchase of accommodation in 2004 were issued credits for 33 millions of LVL, in 2003-20 millions of LVL.
The liberal policy of banking crediting attracted more and more new credit takers. The first payments were reduced and the terms of payment were prolonged.
In order to reduce the risks of credit taking the bank of Latvia on the 11th March, 2004 decided to increase the refinance rate for 0,5 percent points, that increased the value of financial resources in LVL for 3,5%. That is why banks were supposed to increase the credit percent rates of LVL. Since the middle of nineties the rate of refinance was diminished step by step. The last time it was done on the 13th September, 2002, when the rate was reduced by 0,5 percent points till 3%. Nevertheless, the largest quantity of credits is taken in foreign currency because of the low percentage rate, that is why changes of the refinance rate do not influence the quantity of taken credits gradually.
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