site.btaUPDATED House Prices Stagnant by End 2023, Rents May Increase After Bulgaria Joins Eurozone - Expert

It would be difficult to observe a fall in residential property prices by the end of 2023, although the number of property transactions for the first half of the year continues to decline, which will mainly depend on interest rates, Dobromir Ganev, chairman of the National Real Estate Association, told BTA in an interview. 

Rental prices are not expected to undergo a significant change in September-October, when the academic year for students begins, because since 2022 landlords began to adjust contracts with inflation clauses, the expert added. According to him, with Bulgaria's entry into the eurozone, rents are likely to rise because of the interest of foreign companies to relocate their teams in Bulgaria.

The main players on the holiday property market remain Bulgarian citizens, especially active are buyers who work abroad and are at the beginning of their careers, as well as Bulgarians who are at the end of their working career and are investing in properties for old age or for their children.

Property Transactions

A slight decrease in the number of property transactions in Bulgaria was recorded in the first half of 2023, a trend similar to the first quarter of 2023 and the last quarter of 2022, Ganev said. According to data from the Bulgarian Registry Agency, in the first half of 2023 the decrease was about 12%, with declines in almost all major cities: Sofia - 12%, Plovdiv - 14%, Varna - 15%, and for Burgas - 17%. Ganev pointed out that the decreases are in comparison with the same period of 2022, which was one of the strongest years for the real estate market in Bulgaria. The latest data show that in terms of the number of transactions for the first half of the year, 2023 ranks third after 2021 and 2022 for the last 15 years, which means that the market is good, although demand from some of the buyers has gone down, Ganev said. 

Prices

According to latest data for the first quarter, property prices are showing smaller increases compared to 2022, Ganev said. Property price growth in Sofia averaged 7%, Varna - 11%, Burgas - 19%, Ruse - 10%, Stara Zagora - 16%, compared to the same quarter of 2022.

Housing supply is also slowing down, which is especially visible in the capital, with a drop in new construction in the second quarter, Ganev said, adding that it is probably because some of the smaller developers are in a wait-and-see position. According to him, the trend explains the phenomenon of a falling number of property transactions and prices continuing to rise, albeit at a lower rate. Ganev noted that unlike most countries in Europe, Bulgaria continues to have some of the lowest interest rates, with very little change from 2022, which inevitably affects the market. He said that with the rise in interest rates, the tendency towards waiting on the part of buyers is expected to intensify, but the length of this period will depend on the interest rate policy of the European Central Bank, which has announced that interest rates will continue to rise in 2024 and possibly stop their growth, provided that processes at the macroeconomic level begin to improve. According to Ganev, a price decrease is unlikely and difficult to predict.

Savings

Ganev noted that the real estate market is not only driven by interest rates, but also by people's savings. In his words, the Bulgarian market is still far from the markets in Europe and the USA as a ratio between properties bought with credit and with savings. In Bulgaria, most transactions still happen without mortgage lending. The percentage of property purchases with loans is the highest in Sofia - 50%, while in Plovdiv, Varna, Burgas, Stara Zagora this percentage does not exceed 30-35%. In the USA this ratio is 75%-80% in favor of properties that are acquired with some mortgage lending, the expert said.

Vacation Properties

In the last three years, the market for vacation properties in Bulgaria has started to grow due to the desire of many Bulgarians to invest on the Black Sea coast and in Bansko, Ganev said. The reported increases in the number of transactions for this period, for example for Nessebar, " boosted" the municipality to fourth place in Bulgaria after Sofia, Plovdiv and Varna, and it even overtook Burgas. The low prices of vacation properties allowed many people to acquire homes for investment purposes or to work remotely. However, this has had a knock-on effect on holiday property prices, which are now approaching EUR 900-1,000 per square metre in some resorts. For these markets, data for the first six months of the year compared to the same period in 2022 shows a decline in the number of transactions. Transactions in Balchik, Byala, Kavarna, Nessebar, Pomorie, Tsarevo, Bansko are decreasing. Of the larger vacation property markets, only Razlog saw an increase of 4% in transactions.

Regarding the interest of foreign buyers in buying vacation properties, the expert pointed out that it is no longer possible to single out a specific group, as it was years ago - the UK, Russia, and to some extent Germany. Now transactions with foreigners do not significantly change the trend of the market. Traditionally in the last few years, mostly Bulgarian buyers are active on the holiday property market.

Overall, however, despite the weaker data compared to 2022 and 2021, for the last 15 years for some of the markets this is one of the strongest years in terms of number of transactions, the expert said and gave the example of Varna, for which this is the second strongest year, even surpassing the results of 2021.

Rents

The summer period is quite strong for the rental market in some parts of the country. For example, in the central parts of Sofia for short-term rentals, in Varna, Burgas, Plovdiv, which attract tourist visits, the market this summer is good, Ganev said. Mostly it is about the properties vacated by students, which are rented for short-term rentals in places that are attractive for tourists. In general, the rental market is buoyant after the pandemic, especially short-term rentals, although inflation has pushed up rental prices. According to Ganev, it is likely that with Bulgaria's entry into the eurozone, rental growth can be expected due to greater interest from foreign companies, which will have to relocate some of their teams to develop business in the country. The expert predicts that rental prices at the beginning of the academic year will probably remain at their May-June levels, when students traditionally leave their accommodation. In addition, most landlords started to include the inflation clause from the beginning of last year and prices are already fixed.

Buyers’ Profile

The trend of the last ten years of many Bulgarians living abroad wanting to acquire their first or second property in Bulgaria remains, the expert said. Some of them are in the early development of their careers - 35-40 years, others are in pre-retirement age and want to spend their well-deserved retirement in their homeland at the end of their working life, while others have a desire to buy property for their heirs.

Bulgarians living in Turkiye are also particularly active and this is especially noticeable on the housing market in Plovdiv, Haskovo and the whole of Southern Bulgaria. Other cities preferred by Bulgarians abroad include Sofia, Varna, and Burgas. Ganev pointed out that the growing interest in three-bedroom apartments has already reversed, with the two-bedroom apartments prevailing.