The housing market in Sofia in 2023 - active demand due to favourable market conditions

In 2023, there was no major change in the housing market in Bulgaria. The year was relatively calm and balancing and will end with excellent market activity.

The rate of price growth slowed and in Q3 was just under 6%, a trend that was predicted by us at the end of last year.

In addition to prices stabilising and holding at the levels reached, the market was supported by still low mortgage interest rates. They have remained unchanged this year, which has encouraged home buyers.

Active buyers on the market are both those looking to invest and protect against inflation and those looking for their new home. They are encouraged by the fact that home loan rates are still at very low levels and bank financing is available.

Bulgarian National Bank's (BNB) data shows that the average interest rate on new home loans in BGN is around 2.6%, compared to 2.5% in 2022. As a result, new lending volumes continue to grow and this is one of the most important factors driving the market. BNB data also show that lending growth for the nine-month period was around 14% year-on-year.

Average prices and price growth in Sofia

According to BULGARIAN PROPERTIES, the average price of homes purchased in Q3 2023 in Sofia is EUR 1,550/sqm - very similar to the levels at the end of 2022. Thus, growth slows to just under 6% year-on-year and prices remain almost unchanged across the different periods of 2023.

The average total price of apartments purchased in Q3 rose to € 137,700.

Sales volume

BULGARIAN PROPERTIES' calculations based on the data of the Registry Agency show that property transactions in Sofia marked a 5% decline in Q3. This is the fifth consecutive quarter in which the Registry Agency reports a decline in transaction volumes in the capital.

According to official data, 7,001 transactions were registered in Q3, compared to 7,402 in 2022 and 8,732 in 2021. The number is higher than those in the same periods of 2019 and 2020.

BULGARIAN PROPERTIES' data, which also includes new construction transactions, shows a retention and even a small year-on-year growth in sales volumes in Sofia.

Although in the summer there was a certain decline in the volume of transactions and interest, this was logical in view of the summer season. Since the beginning of September, demand in the capital has strengthened and deals are being actively concluded.

Affordability of housing in Sofia

BULGARIAN PROPERTIES' mid-2023 affordability ratio value dropped to 1.1. This indicates that there is greater affordability of housing in the Bulgarian capital as incomes are rising faster than prices and this is improving the price to income ratio.

The average wage in Sofia reached BGN 2,697 in the second quarter of 2023 and so it would have taken around 1.1 average monthly Sofia wages to buy 1 sq.m. of living space in Sofia in the middle of this year. For comparison, in 2008 (at the previous peak of the market) it took 3.4 wages for the same area.

Preferred neighbourhoods and property prices in them

New construction continues to be the most preferred by buyers, with most often being bought while construction is still underway and there is still choice available.

Quite naturally, the demand in Sofia prevails precisely in neighborhoods that offer supply of new development projects. These are the broad centre of the capital, as well as the districts of Banishora and Malinova Dolina, where serious construction activity is boiling.

With the development of infrastructure, especially the metro lines, the districts of Ovcha Kupel and Karpuzitsa (Knyazhevo) are gaining popularity. Mladost and Poligona districts remain top in demand by young families, especially for those working in the office centres along Tsarigradsko Shosse and Business Park Sofia.

BULGARIAN PROPERTIES data shows that the average prices in the most popular districts in the 3rd quarter of 2023 based on actual transactions are:

- Banishora - 1,512 Euro/sq.m.
- Malinova Dolina - 1,360 Euro/sq.m.
- Ovcha Kupel 2 - 1,310 Euro/sq.m.

The most expensive were sold in the center, Ivan Vazov and Lozenets areas - about 3,000 Euro/sq.m. on average, and the cheapest were in Ovcha Kupel and Malinova Dolina.

Parameters of the purchased homes

One- and two-bedroom apartments are the most in demand. The share of one-bedroom apartments purchased is 54% and of two-bedroom apartments - 37%. 7% are 3-bedroom dwellings. The average area of the purchased apartments is 90 sq.m.

This data confirms the trend since the beginning of the year for a return of home buyers looking for more spacious apartments.

Conclusions and perspectives

Factors influencing the housing market continued to have a favourable impact in 2023. Positive economic growth, low unemployment, income growth, low mortgage interest rates have all provided excellent conditions for real estate investment in Bulgaria

The slowdown in inflation has also weakened its effect on the market, but it is still significant as inflation is expected to persist over the next few years. Alongside this, Bulgaria's imminent entry into the Eurozone and the change of national currency is stimulating interest in property investment.

The combination of all these factors will drive the market in the coming year and we expect it to be another dynamic year for the residential market in Sofia.

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