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Appreciation of Housing Prices to Slow Down by 2-3% by End-2022

The appreciation of housing prices in Bulgaria is expected to slow down by 2 to 3% by the end of 2022, but prices are unlikely to go down since supply on the housing market is low, especially in Sofa, National Real Estate Association Chairperson Dobromir Ganev said in a BTA interview. He believes that how the real estate market behaves in the coming months and the beginning of 2023 will depend on how the caretaker cabinet and the next regular government deal with the energy and gas crises.

If government do well, there is no great risk of disturbances on the market. A slight decrease of 1% to 3% in the number of transactions is possible, though, Ganev said.

There are expectations that the fewer transactions in the second quarter will slow down price appreciation later in the year, but transaction numbers are not coming down across the country except in very few population centres (Vratsa by 1%, Pleven 2% and Stara Zagora 1%). By contrast, transactions in Varna increased by some 20% in the first half of 2022, year-on-year. In Sofia, there was a 4% increase in that period, while average growth in Bulgaria was 7%.

European Central Bank’s policy on interest rates and actions to reduce inflation is most likely to affect the property market. There is already a trend for a slight rise in the interest rates of the commercial banks in Bulgaria, Ganev said, adding that it will affect the activity of mortgage consumers.

Buyers’ decisions depend mostly on macroeconomic indicators and what effect the energy crisis will have on them during the winter.

Rising deposit rates have not yet made people take their savings to banks rather than to the real estate market, the expert also noted.

A significantly greater threat for the Bulgarian property market would arise if the increase in housing prices starts outpacing income growth. If that happens, there is a chance for most Bulgarians to be locked out of their country’s property market as has already happened in Vienna, Amsterdam, London, Paris, and some other European markets.

In the first quarter of 2022, housing prices in Bulgaria increased by 8 to 9%, according to National Statistical Institute data, which has not yet outpaced the income growth in the country.

In the last couple of years, more larger apartments were built, given the buyers’ continued interest in purchasing larger homes due to the pandemic and the need to work and study from home. Over that period, the biggest share of newly built dwellings were three-room apartments (35.4%), followed by two-room apartments (34.9%), Ganev said.

The heightened interest in bigger living spaces also explains the growth in newly built houses and villas in the second half compared to this time last year.