Strong Demand and Price Growth Characterize Bulgaria's Property Market

The Bulgarian real estate market has seen a notable increase in both prices and transaction volume in the past quarter, according to real estate broker Dimitar Kalajjiev in an interview with Radio "Focus." He highlighted that the current demand for properties surpasses the supply, maintaining strong interest in home purchases. Kalajjiev described this trend as a natural and expected occurrence rather than indicative of a "bubble" in the market, asserting that such dynamics are typical.

He compared the current situation to the period following the economic crisis of 2012-2013, when property prices were exceptionally low. For instance, in Sofia's Gotse Delchev district, prices dropped to around 350 euros per square meter, whereas they have now surged to between 1,700 and 1,900 euros per square meter. Kalajjiev considers this price level consistent with the average values seen in European capitals, branding them as "normal prices."

Kalajjiev noted that property affordability is at its highest in the past 15 years. He pointed out that while prices are currently 20-30% higher than in 2008, incomes at that time were three to four times lower, and mortgage rates were five times higher. The present-day lower mortgage rates are bolstering the strong demand for properties, attributed to increased competition among commercial banks. He explained that Bulgarian buyers tend to be conservative, with only about 40% of transactions being financed through credit, a relatively modest figure.

The broker observed that the majority of market offers, around 85%, fall within the middle segment. The most sought-after properties are two-room apartments ranging from 55 to 65 square meters and three-room apartments measuring between 90 and 100 square meters. These sizes are particularly appealing to young families, who form the largest group of buyers. Conversely, larger and more luxurious properties face greater challenges in selling as they often exceed the psychological price thresholds for buyers.

While there are no significant issues with property supply, Kalajjiev mentioned that the limited inventory in the secondary market poses a challenge. He pointed out that although the buyer profile is consistent across larger cities, market dynamics differ. In Sofia, the market is a trendsetter; if it experiences a downturn, the effects will ripple out to smaller towns more significantly. In the capital, around 70-80% of transactions involve credit, compared to smaller towns where this figure is lower.

Inflation is another factor that Kalajjiev believes supports real estate values. He remarked that property acts as a safeguard against money depreciation, allowing investors to preserve their wealth. Looking ahead to Bulgaria's potential accession to the Eurozone, Kalajjiev anticipates a possible rise in property prices and some speculative behavior from market participants. He noted that while some may attempt to speculate on prices, the market typically self-regulates.

Joining the Eurozone could also bring changes to interest rates, aligning them with those of other member states. However, Kalajjiev predicts that low interest rates will persist for at least the next three to four years, which should sustain strong market interest. He also expects an influx of interest from external investors with the country's Eurozone entry, but emphasizes that a market predominantly driven by Bulgarian buyers is more stable and predictable, mitigating the risk of excessive speculation.