As Bulgaria's expected entry into the eurozone approaches, the residential real estate business is becoming increasingly attractive for both domestic and international parties, Dragomir Stefanov, associate professor at the Faculty of Real Estate at the Sofia National University of World Economics, said in an interview with BTA. Told. . Currently, Bulgaria is a popular country for domestic and international capital transfer through real estate transactions due to low mortgage interest rates, accelerated construction of new housing, high demand and supply, and high investment returns. It is an attractive country for many people. 7-10% per year). Due to the economic downturn in some countries in Western Europe, such as Germany, the Netherlands and Denmark, more and more companies are partnering with Bulgarian companies to direct funds to purchase residential buildings under construction in Bulgaria. .
When asked if there is a housing bubble in Bulgaria, he commented that he would not use that term to refer to real estate prices in Bulgaria. Prices are increasing in four cities (Sofia, Plovdiv, Varna and Burgas), a trend he has seen for 10 years. Prior to that, there had been nearly five consecutive years of declining prices. So experts who talk about a housing bubble are really only looking at the past four or five years, when price increases were in the double digits every year. Stefanov pointed out that from 2018 to 2023, real estate prices increased by 60-70%, and the income of residents of these four cities, which is one of the main indicators when analyzing the real estate market, increased even more significantly. he added. This means that housing in Bulgaria is becoming increasingly affordable.
According to Stefanov, there are several reasons why real estate prices are rising. The price of building materials and wages in the construction sector are rising. Increase in demand due to increase in people's income. Mortgage interest rates in Bulgaria are at record low rates (2.5-3%), which are among the lowest in the world, as a result, among other things, of more than 120 billion levs of natural assets and mortgage bank deposits. Click here for corporations.
One of the reasons why players are interested in buying in the Bulgarian real estate market in 2024 is the public's fear that mortgage interest rates will rise due to the country's entry into the eurozone. Another reason for the high demand is the knowledge that Bulgarians have between 75 billion and 80 billion levs in banks and about the same amount of cash savings domestically. As the euro switch approaches, BGN cash needs to be used as soon as possible, experts noted. This is because, among other things, in order to exchange amounts over 5,000 Lev into euros, you need to prove the origin of the money. According to Stefanov, that fact is the main motivation for a certain group of Bulgarians to invest in real estate. This is to justify hidden income on which no taxes are paid.
Experts told BTA that the rise in real estate prices poses some hurdles for Bulgaria to join the eurozone, as it increases the inflation rate. But that doesn't mean buyers and sellers in the market will stop building or buying homes. On the contrary, the more there is talk of joining the eurozone, the more sellers want to build houses and the more buyers want to buy houses, due to concerns about the expected rise in house prices in Bulgaria in the years following the introduction of the euro. It becomes like this.
Experts argued that it was Bulgaria's political instability, not the real estate market, that was driving up inflation. In the absence of a stable government with a long-term vision and constant elections, political actors are constantly trying to gain public support by increasing their income. Constant increases in minimum wages and pensions cause further inflation.
When asked if now is the right time to buy a home, Stefanov told BTA that the answer depends on the buyer. “If you're ready to buy a home, please do so,” he said, adding that financing conditions are good at the moment. But he cautioned that a high income doesn't automatically mean you can pay off your loan. Being able to save money is important. His advice to buyers is to buy a home if you can cover at least 25% of the cost with your own money and expect to be able to repay the loan over the next 15 to 25 years.
