BULGARIAN HOUSEHOLDS FINANCIAL WEALTH UP EVEN AS HOUSING PRICES DECLINE - STUDY

The financial wealth of Bulgarian households increased by four billion leva in 2011, but the value of their real estate took a drastic hit, the latest quarterly study of household wealth by local bank UniCredit Bulbank said.

Housing value was down to 207.9 billion leva at the end of 2011, compared to 220.6 billion leva a year earlier, according to the report.

But that decline was partially offset by the increase in financial wealth, which rose to 19.2 billion leva, including 1.8 billion leva in the last quarter of 2011 alone. The bulk of the increase came from savings, which increased by 1.4 billion leva in September-December 2011.

Deposits in leva were growing four times faster than deposits in foreign currency and accounted for 15.5 billion leva out of 30.9 billion leva total deposits. The main reason was the higher interest rate paid by banks for leva deposits.

"The absence of other established avenues for investment and the weakness of the real estate market have also contributed to the increased interest in bank deposits," UniCredit said.

Stock market losses, in particular, stood at 285 million leva for the full year 2011 and investments in stock now only accounted for 2.2 per cent of the total household wealth.

At the same time, household debt was on the decline; in the last quarter of 2011, it fell by 500 million leva to 20.7 billion leva. Bank debt in foreign currency continued to rise, but debt denominated in leva was decreasing at a faster pace.

The debt coefficient was at about 52 per cent, compared to the record 71 per cent recorded in 2009, according to the report. "We expect the debt coefficient to fall to 47 per cent by the end of the year and will only start stabilising in 2013," UniCredit chief economist Milen Kassabov said.