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Record housing market prices in Bulgaria and still going up

Wednesday, Jul 20, 2022

After six years of strong house price rises, Bulgaria's housing market remains vibrant. The nationwide house price index rose by 7.51% (6.83% inflation-adjusted) during the year to Q1 2021, accelerating from a y-o-y rise of 4.7% during the same period last year, according to the National Statistical Institute (NSI) – the strongest house price growth in three years.
Prices of new dwellings rose by 6.7% during the year to Q1 2021, sharply up from the previous year's 2% y-o-y rise. When adjusted for inflation, prices increased 6%. During the latest quarter, prices of new dwellings were up 3.4% (2.5% inflation-adjusted).
Prices of existing dwellings rose by 8% (7.3% inflation-adjusted) in Q1 2021 from a year earlier, the biggest y-o-y growth since Q1 2018. Quarter-on-quarter, existing house prices increased 3% (2.2% inflation-adjusted).

In recent years almost zero interest rates on bank deposits have encouraged people to invest in real estate. That's why the housing market started to rise in 2014 and has been accelerating ever since, recovering from a massive crash after the boom from 2000 to 2008, when residential property prices surged around 300%.

Demand continues to rise. In Sofia, Bulgaria's capital, there were 6,683 registered property sales in Q1 2021, up by 26% from a year earlier, according to the Registry Agency.

The housing market made a very strong start in 2021. The activity was greater than in the beginning of 2020 before the pandemic, and from the same period of 2019. At times it was even euphoric. It seems that the housing market has overcome the pandemic crisis and continues its upward cycle.

In H1 2021, residential building permits rose by 21.3% y-o-y to 3,291 while completions increased 13.8% y-o-y to 1,763 units. However construction is expected to slow in the short term due to the rising construction materials costs. New construction prices will go up by 10% to 13% in the coming months.

“It is expected that demand will outpace supply, due to its high levels and the slower pace of new construction in the second half of the year,” said Colliers International in its H1 2021 Residential Market Report. “The rising prices of construction materials could affect the start of some projects, postponing them until next year. In the short term, this will lead to a decline in supply and higher prices.”
The economy is projected to grow by 4.6% this year and by another 4.1% in 2022, after declining by 4.2% during 2020, according to the European Commission. In Q2 2021, Bulgaria's economy expanded by 9.9% from a year earlier, following a 1.8% contraction in Q1, according to NSI. It was the first quarter of y-o-y expansion in five quarters, mainly due to low base effect from the pandemic shock last year.

European Union citizens can purchase properties in Bulgaria, including land. Before January 2012 foreigners could purchase land only in the name of a legal entity and were not allowed to own a property.
According to the National Statistical Institute, in most large cities in Bulgaria a significant part of the purchases are with savings, while those with mortgages are about 25-35%, unlike in Sofia, where mortgage payments are 50% of the deals.

The coronavirus lockdown, distance work and online learning have prompted people to look for more spacious housing, says Dobromir Ganev. In 2020 about 200,000 Bulgarians have changed their place of residence from a larger to a smaller city, in an effort to have more access to nature and more open spaces. Most people are also thinking of buying a second home.

Source: www.bnr.bg