Eight Reasons Why Property Prices in Bulgaria Won’t Fall (much) More

1. Clear signs of “unfreezing” of bank lending
It is not by chance that we are starting with this factor. It is exactly the difficult bank lending conditions that led to the decrease of property prices (which were unreasonably high anyway).

The banks got a considerable and expensive resource which must justify its price. Of course, we will not witness another lending frenzy which is another factor that led to the property price balloon.

Lending will also help normalize the business, including the building sector, it will decrease the lay-offs and the unemployment rate, and will increase consumption.

2. Decrease of interest rates
The decrease of the interest rates of mortgage loans is a natural process of bank “unfreezing”. We should mention that currently interest rates of mortgage loans are at levels similar to those in 2006, before the property boom. The decrease of interest rates is another stimulus for potential property buyers.

3. Many new projects are frozen
The big supply and the fact that it is much higher than the demand in the last two years are also among the factors that exerted strong pressure on prices to decrease. However, the crisis is about to change the trend to some extent.

Many projects which had to be offered on the market in the next two years were stopped. This led to some balance between the supply and demand. We should also note the fact that there used to be a number of speculators on the market who a year or two ago sold almost at any cost. So it can be said that to a large extent the market did away with the “weak players” and the people who just wanted fast profit.

4. Cooling down of the property sector
The crisis also got rid of those developers whose main activity wasn’t construction. Those offering low quality at low prices are no longer on the market. “The overheating of the property market” connected to developers and big profits are history.

There are many projects and products on the market offering “bargain prices”. If we take into consideration the decreased profit margin of the developers there is not a big possibility for a further property price decrease, which can happen only with a serious compromise regarding the quality on the part of buyers.

5. Gradual return of speculative capital
The global economy is showing the first signs of recovery. Therefore it is only logical that the investors’ attention will focus on developing markets. And although Bulgaria is in Europe we are one of these markets. According to Global Property Guide’s statistics residential property prices in Bulgaria have decreased by 19% year-on-year. At the same time there are indicators that the other markets where property prices plummeted year after year have now reached the bottom, GPG reports reads. Some of these countries include Spain (6% decrease y-o-y), Iceland (14% decrease y-o-y), Lithuania (22 % decrease y-o-y) and Latvia (32% decrease y-o-y).

What must be taken into consideration is that Bulgaria’s economy is more stable than those of the other developing countries in Europe, which foreign investors will notice sooner or later.

6. The inflation
The risk of inflation can have a favorable effect on the decision-making process for buying a property among potential buyers.

High inflation leads to a decrease in the people’s actual income. And the purchase of a home, especially one to live in, is one of the best ways for protection against inflation. This way you insure your future income.

7. The experts’ advice
More and more property and banking experts state that now is a very good time for purchasing a home. The big property price discounts, as well as the buyer’s stronger position are the main motives.

Many of the participants on the property market think that now they can buy a property of high quality and at a low price. However, many of them warn that there is a possibility for the prices to fall some more but it is not clear if then the selection would be so big. One should also bear in mind that properties offered at bargain prices sell fast.

8. Clear signs of property prices stabilization
The decrease of property prices slows down with every passing quarter. The signs of higher activity in the sector are obvious as sales agents note higher interest and more viewings by potential buyers.

Of course, one should have in mind that summer is the most active season on the property market so it is possible that we witness not only a stop to the falling of property prices but even a slight increase. Even if this doesn’t happen the buyers’ position would not be as good as they won’t be able to bargain with the sellers and receive the discounts that were valid in winter and spring.

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