Bulgaria's property market prepares for an excellent 2018
Bulgaria's real estate market had a wonderful year and expects an even better 2018.
The past year proved the prognoses for post-crisis recovery right. According to preliminary data by the Bulgaria's National Statistical Institute, in October construction in the country increased with 15 percent in comparison with the same period of 2016. According to Eurostat, in October 2017 Bulgaria was 5th in the EU in growth of construction production. Colliers International measured in the country an increase of 213 percent in property investments for the first half of 2017. The office property market in Sofia marked a 10-year record, with rented spaces reaching 131,000 sq.m according to Cushman & Wakefield Forton consultancy company, and deals increasing by 25 percent. In 2017, a new type of property, skyscrapers, became a hot talking topic, after several such projects were started or announced in Sofia. The upper middle class's interest in quality residential properties in gated communities in the outskirts of the cities, with guaranteed security and environment, remained high.
The property prices in 2017 rose by 14 percent, and calmed down only at the end of the year, when newly finished projects entered the market.
The reasons behind the market's positive development are complex. The standard of living and the incomes in Sofia and the big cities continue to increase. Bank loans are getting more affordable by the day. In 2017, the mortgage interest rates went bellow 4 percent, with projection for the trend to continue in 2018. Combined with the low deposit interest rates, which are almost 0 percent, cheap credit preserves its importance as one of the main driving forces on the market.
The feel of economic stability and increased financial potential stimulate young families to decide to move into their own home, or to a larger one. The growth of foreign tourists in Bulgaria put on focus properties for short-term rental. The development of the IT and outsourcing industry, as well as other types of businesses, continue to preserve the interest in business properties, with even more prominent demand for high-quality Class A offices.
The clients' exactingness is another trend that will remain in 2018. Buyers increasingly and insistently seek quality, preferably in new buildings that match the contemporary requirements for comfort, energy efficiency, luxury. That is why sales of new residential property dominate the market – in Sofia for the past year they consisted 60 percent of all deals. The new construction's advantages are hard to dispute. It completely lacks the flaws of old one, like wear and tear, lack of maintenance, bad urban infrastructure and planning, low level of comfort, high energy requirements, even construction problems.
On this background, the optimistic mood on the property market for 2018, particularly in residential real estate, looks justifiable.
"The demand for residential properties is increasing, resulting in increased supply that was felt stronger in the last trimester of 2017," says Vyara Apostolova, manager in the real estate company Martin's Realtors (www.martins.bg). "The balance between demand and supply slowed the prices growth that are now at the average of 1,000 euro per sq.m. The demand is now stable, there is a choice of new projects and an increased number of quality and well-priced properties on the secondary market. This harmony, however, won't last for long. Our expectations are for the upward trend to resume in the beginning of 2018."
According to Vyara Apostolova, several factors will influence the future price growth. "The bank loans are the main one. The banks offer even lower interest rates and attractive conditions, the volume of mortgages continues to grow and it seems that it will continue. The average salary in Sofia is on the rise, the unemployment is decreasing, the economic growth is speeding up and as a whole, all the micro factors point towards upward trend on the property market," says she. At the moment on the market there are stable demand, present supply, well-prepared buyers and easy bank funding. "The only thing still missing, but as demand for it is present we are expecting to see it in the coming months, are properties in finished buildings," adds Vyara Apostolova. "The presence of such product on the market will stimulate the buyers who are now waiting for something ready."
Before the crisis, foreigners were one of the leading powers on Bulgaria's property market. Today the situation is different. "The current equilibrium on the real estate market is a result mainly of local demand," explains Vyara Apostolova. "Due to the lack of ready properties and the specifics of Sofia's urban market, we are yet to attract significant number of foreign investors, so there is a large potential for development in this direction," says she.