Bulgaria’s real estate market, especially the one in the country’s capital Sofia, gained strong momentum in the first quarter of 2016. The property sales have grown significantly, which was due to the increased interest from local buyers - young families and people who are looking to invest their money elsewhere and buy homes, in order to rent them later on, the Managing Director of Bulgarian Properties real estate agency Polina Stoykova told Radio Bulgaria. Currently, the property market is in a really good state and the long-awaited recovery in that sector has become a reality, Ms Stoykova said and added:

“In the first trimester of 2016 we measured an 8% increase of the property prices in Bulgaria’s capital Sofia year on year. According to our forecast, the price of the real estate in the countryside is to grow with an average of 4%-7% in 2016, whereas home prices in Sofia will increase by nearly 8%. Of course, people should not be worried about that price increase, because property prices started to grow from a very low base. The prices of properties in this country were at the level of 2005 until last year and now it is quite normal to witness a moderate growth. Things look slightly different at the market of holiday properties. However, we should note that this year’s winter season was very dynamic and interesting and although the weather conditions were not that favorable for tourism, we managed to seal a number of deals with properties at Bulgaria’s ski resorts. With regard to the property market at Bulgaria’s Black Sea coast, the interest of the Russian investors has been resuming gradually. In my view, the prices of the properties there would not change significantly in the next couple of years, because currently the market supply is huge and demand is still weak. It will take some time for the market to absorb the current oversupply. Now is the perfect time for those who are considering the opportunity to buy properties at the Black Sea coast to benefit from the market conjuncture. There are many attractive offers at the seacoast starting from EUR 10,000 for a small studio flat. ”

Is Bulgaria’s construction sector able to meet the increased demand of newly-built homes?

“Construction is a relatively slow process. It takes some time until a given project is planned and completed, and ready for sale. The construction activity in Bulgaria was declining for many years after the crisis. However, last year we witnessed a 50% increase of the newly-built homes in Sofia. So, the local construction companies are trying to meet the increased market demand and many projects are sold off-plan.”

Why has the number of people who dare buying off-plan properties been on the rise?

“This is due to a number of reasons. Firstly, it is driven by the strong demand of properties. Currently, people are mainly looking to buy newly-built homes in given regions. When the supply of such properties can’t meet the market demand, people often tend to buy off-plan.  On the other hand, even during the crisis years there were many reliable construction companies and investors. In other words, there is a strong presence in the construction sector and people buy off-plan after they check the reputation of the entrepreneurs and the construction companies.”

In Polina Stoikova’s words, the demand of newly-built properties in all Bulgarian big cities such as Plovdiv, Stara Zagora, Varna and Burgas has increased. The Bulgarian citizens started to show bigger interest in properties, because the interest rates on bank deposits are meager and some of them are not that interested to keep money in banks anymore. This is a normal process and the real estate properties are becoming one of the main assets of the Bulgarians, Ms Stoykova went on to say and added:

“The increased demand of properties was felt in all Bulgarian cities. Moreover, many Bulgarians who live and work abroad are showing interest in Bulgarian properties and at the end of 2015 and the beginning of this year they bought many homes, mainly in Bulgaria’s capital Sofia, in order to rent them, or have a place to stay when they return to Bulgaria for a holiday.”

In Polina Stoykova’s words, the purchase of properties increased in parallel with the decline of the mortgage interest rates. We are witnessing the lowest interest rates on mortgage loans ever. Of course, these rates are slightly higher as compared to other European states, but taking into consideration the specifics of the Bulgarian market and the overall situation in the country, we can say that we are witnessing very attractive interest rates. Many local banks offer mortgage loans at 4.5% interest. Perhaps, these rates are close to their bottom and we are to see similar rates in the next 1 to 2 years. On the other hand, people are able to refinance their purchase and one year after they borrow a loan they can cover all their debts without having to pay penalties, which definitely boosted the real estate market. Our estimates show that people usually have at disposal between EUR 10,000 and EUR 20,000 and finance the remaining part of their purchase with loans.

The market of old homes is also stable. Many buyers prefer to buy homes in old brick buildings, or in panel buildings, because the area in those properties does not include common parts and the rooms are more spacious. Therefore, those who have limited budgets usually buy panel homes, Polina Stoykova concludes.

English version: Kostadin Atanasov