​What happened to the real estate market in Bulgaria in 12 years?

20 October 2022

What happened to the real estate market in Bulgaria in 12 years?

At the end of last year and the beginning of this year, prices reached the levels of 2008 and are now even higher

Over the past two years, the global economy has faced several crises that have occurred one after the other. On the one hand, the COVID pandemic broke out, which blocked all production and halted the development of many sectors. After the health crisis subsided, the Russian war broke out in Ukraine. Inflation, on the other hand, does not stop growing.

Inevitably, these events also had an impact on the real estate market. Therefore, Economic.bg decided to analyze the real estate market in Bulgaria for the last 12 years - how prices rise/fall, what are the reasons, trends, and what awaits us from here on.

Up and up again
From 2010 to the second quarter of 2022, housing prices in Bulgaria have risen by almost 60%, and rents have risen by more than 20%, according to Eurostat data.

At the European level, house prices and rents followed a similar trajectory between 2010 and the second quarter of 2011, after which they took a different path. While rents rose steadily through the second quarter of 2022, house prices showed considerable volatility.

After falling sharply between the second quarter of 2011 and the first quarter of 2013, house prices remained relatively stable between 2013 and 2014. After a rapid rise in early 2015, they began to rise faster than rents.

During all these years, incomes did not stop growing, inflation was even at negative levels, which somewhat slowed down the growth of prices. Unemployment was falling, the economy was growing, and in fact we have a decade in which the crisis of 2008 was first overcome and economic growth followed," commented Polina Stoikova, executive director of the real estate company Bulgarian Properties.

According to her, the development of the real estate market in Bulgaria during these years was normal and calm.

The years in which there was a more significant increase in prices are a kind of compensation for the first five of the period under consideration, during which the market was stagnant. And it is in the last two years that some of the biggest growths have been reported due to the dynamic situation in which the market is located.

Where is the price increase the greatest?
For the period under review, property prices in Estonia, Hungary, Luxembourg, Latvia, Lithuania, the Czech Republic and Austria more than doubled. When compared between the second quarter of 2022 and 2010, house prices rose more than rents in 19 EU member states.

During the period under review, they increased in 24 member states and decreased in three. Prices more than doubled in Estonia (+196%), Hungary (+168%), Luxembourg (+135%), Latvia (+131%), Lithuania and the Czech Republic (+130%) and Austria (+121%) . Decreases were observed in Greece (-23%), Italy (-8%) and Cyprus (-6%).

Comparing the second quarter of 2022 with 2010, rent levels increased in 25 member states and decreased in two, with the highest growth recorded in Estonia (+214%), Lithuania (+139%) ) and Ireland (+82%). Decreases were recorded in Greece (-24%) and Cyprus (-0.2%).

Change of situation
The situation we found ourselves in in 2022 was one of available demand and no supply. Withdrawal of projects and an even more limited choice for buyers, so we already see a favorable trend - building permits in 2022 in the country will grow by 25%, in Sofia by 15%," said Stoikova.

According to her, this data shows that there is potential for better supply. "Plus, on the secondary market, all owners already understand that now is a good time to sell, and this will unblock the market from the supply side and give it an opportunity to calm down, as well as the rate of price growth," believes Stoikova.

According to calculations by Bulgarian Properties, in the period from 2010 to the last quarter of 2020, the growth in prices is 30-40%, in Sofia it is 50%. And already after adding the data for 2021 and 2022, a growth of 60% is reached. That is, to some extent, the increase reported by Eurostat, which is far from the largest in the European Union, is mainly due to the last two years of the period.

In the different regions of the country for the decade we have an increase of between 30 and 50% in prices, and the additional increase is the result of the last two years after the pandemic", says Polina Stoykova.

She says that against this background, in the first decade of this century - between 2000 and 2010 - there was a 200% growth. "Then there was a bigger and faster increase in prices than in the second decade, half of which was stagnant. At the end of last year and the beginning of this year, prices reached the levels they had in 2008 and are now higher of them," she adds.

Increase in prices and decrease in transactions
The last two years have been the most shocking for the real estate market in Bulgaria and with the greatest growth in prices, according to Alexander Gergov, manager of the real estate company Antre.

In the last two years, the growth of property prices has been around 30%, we are talking mainly about Sofia and the big cities. In previous years, the standard increase was around 9% per year. In the last two years, there were simply many catalysts for the increase in prices," clarifies Gerov.

Traditionally in Bulgaria, people invest mainly in real estate, and in a situation of rising inflation and devaluation of money, these investments increase in order to "save" income. On the other hand, many of the investors are delaying or even not realizing their projects at all because of the increase in the price of raw materials, which leads to insufficient supply and demand outstrips it, which of course further increases the prices.

There certainly won't be another rise in house prices – at least not the kind we've seen over the past 12 months. Buyers are set to wait and see what the winter holds. Maybe winter will be key for the entire real estate market, but also for the economy as a whole," believes Alexander Gergov.

At the same time, according to the latest data of the Registration Agency, a decrease in the number of real estate transactions was reported. The data of the Registration Agency for the period July - September show 62,459 sales and purchases of real estate, which is 7.23% less compared to the same period of the previous year, or measured in transactions - 4,869 less. The data are for confessed transactions with buildings, parts of buildings and lands. At the same time, out of 113 registry offices, only 24 saw an increase, and in four a retention in the number of purchases and sales.

We can read this as a fear of an impending global recession and the start of raising interest rates on loans.

Source: https://www.economic.bg/