site.btaUPDATED Analyst Does Not Rule Out Speculative Price Rise for All Types of Properties in Bulgaria Upon Eurozone Entry

Chief analyst at the Bulgarian National Registry for New Constructions and Reconstructions Petar Mastikov said that he does not rule out a speculative rise in prices of all types of property in Bulgaria when the country joins the eurozone. According to him, the increase will be short-term, it will not have the intensity of the past two years, created in 2020-2021, and then there will be a stabilization of price levels.

For 2024 a growth of between 2% and 5% can be expected in the sector, as the leading events boosting this industry are the processes related to Bulgaria's entry into the euro area and its full membership in Schengen, the analyst said in an interview for BTA. 

Expectations for residential construction in 2024 are for a cooldown and a slight decline of up to 5%. 

Office space will maintain the 2023 trend of 30% growth, the expected increase in holiday construction is for over 20%.

Optimistic expectations for the new sites in industrial space, office buildings, holiday rentals and hotels are related to Bulgaria's accession to Schengen and the euro area, processes that should lead to an increase in the competitiveness and growth rates of the country's economy and therefore people's incomes, and the emergence of more disposable income for the population to buy property for residential and investment purposes, and for businesses to develop their operations and open new production facilities.

"Not since 2008 have we had the volume of new construction in all types of functional segments that we are reporting in 2023," Mastikov said. The figures in 2023 were 7,650 million sqm of useful floor area, which, while not a large percentage increase over 2022, is a record for the past 15 years.

The sector in Bulgaria is driven by residential construction, which accounts for 70% of the total square metres (sqm) of space that was newly set under construction in 2023, with 5.376 million sqm of such space in 2023, according to data from the National Registry of New Constructions and Reconstructions in Bulgaria. Mastikov pointed out that this was a year-on-year decline of 6.56%, which was offset by growth in other segments - in particular, public and specialised buildings, hotels, and holiday space, which saw increases, albeit in smaller volumes, but sufficient to overcome the slight negative trend. The expectations for 2024 in residential construction are for a continued decrease of up to 5% in new starts.

Recovery in office buildings started quite quickly in the past year, reaching 30% growth, Mastikov said. Based on announced and to be launched projects, the growth can be expected to be in the same percentages in 2024, the expert believes. He said that the reason for that is the massive return of employees to the offices, which predetermines the demand for more and better quality work spaces.

In the past year there were also increases in holiday construction - second home type housing - mainly on the southern part of the Bulgarian Black Sea coast. In 2023, there was also resurging interest in the mountain resorts with the implementation of new projects in Borovets, Pamporovo and Bansko. In this segment, 220,000 sqm of such holiday projects were launched last year, an increase of over 20% year-on-year. Through the prism of Bulgaria's full Schengen membership, the analyst's expectations are for positive growth in this segment in 2024 as well, in particular the Romanian market will contribute to this and this will have a positive impact on the development of the northern part of the Black Sea and the mountain resort, he said. Probably the increase in holiday construction this year could reach over 20%, Mastikov assumed.

High investment activity last year was recorded in specialized buildings - for example hospitals, kindergartens, schools, with 16 projects launched in hospitals alone - mostly private, but there are also state and municipal ones.

In new hotel construction, there has been an increase of nearly 100% in 2023 - from 70,000 in 2022 to over 140,000 sqm of useful floor area, with the positive trend applying to both city and seaside hotels. The positive trend is expected to continue in 2024.

2023 saw a 4% increase in retail space and launched construction volumes reaching 400,000 sqm with the retail parks prevailing. In Sofia alone, two new large retail parks were launched in 2023 and another large one is being expanded. Conceptually, the number of malls is sufficient for Bulgaria, but the possibility of a large-scale investment decision cannot be ruled out, the expert commented and reminded that a new project is currently being prepared in Plovdiv. Purely evolutionarily, globally, smaller and medium-sized shopping centers have given way to large and mega shopping centers that offer more entertainment and retail space, the expert noted.

Sofia-city maintains its leading position in new construction with 3.5 million sqm of construction started, followed by Plovdiv - with 1.1 million sqm. In the third position there is a shift, with Burgas managing to overtake Varna with 560,000 sqm of construction started. More dynamic is the development of the two regions of Ruse and Pleven, which have seen a significant increase in investment in new buildings. For Ruse the growth is almost one and a half times, and for Pleven it is more than 2.5 times - 160,000 and 138,000 sqm of construction space respectively, with the leading segments being residential and industrial construction, the latter in Ruse reaching over 90,000 sqm. The expert expects that with the development of the highway links connecting Sofia - Pleven - Ruse, the trend for distinct industrial construction will develop.