Investment in Bulgarian Property More Profitable Than Financial Assets

Investment in Bulgarian real estate, though with low liquidity, yields significantly higher profits when sold compared to investment in financial assets. These conclusions based on official statistics are pointed out in the 3Q report of the Industry Watch Analytical Division.

The prices of real estates have gone up by 32% in one year while the investment in shares or in mutual funds brings negative profitability and the effective interest rate on the newly-opened time deposits reaches 6%.

According to preliminary data the flow of direct foreign investments in real estate is slowing down, Industry Watch points. Even in case of a more negative scenario and a significant decrease in the investment flow to the country the residential sector is not likely to be affected much.

On the background of a weaker interest from foreign buyers the importance of the Bulgarian emigrants as property investors increases, the report writes. In the last 12 months the money transfers of emigrants to their relatives in Bulgaria reached 2,7 billion euro which is more than the foreign investments in real estate made for the same period. That is why, according to Industry Watch, any change in the preferences of the emigrants would have great impact on property demand and at one point could even exert pressure on real estate prices.

Industry Watch also forecasts a stabilization of the mortgage loans growth at levels around 20-25 percent per year in the next couple of years. The penetration of the mortgage loans in the Bulgarian economy is still low – 12% compared to the 39% in the Eurozone though the total amount of this type of loan exceeds 7 billion BGN.

The slowing down of mortgage lending and the lower demand on the part of foreigners have a more tangible effect on the planned construction in the resorts. The total built-up area of the new construction permits has decreased by 55% in the area of Black Sea city of Bourgas and the growth in the city of Varna is relatively small compared to that in the other large regions – 12 percent per annum.
The trend in Sofia is the opposite – the permits have increased by 82 percent and in the region of Plovdiv - by 43 percent.

With the market’s entering a more mature phase the real estate prices will gradually become more stable, Industry Watch analysts say. They do not expect any abrupt changes in the residential segment which is the most significant asset of the Bulgarian households’ wealth.

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