15.11.2016 The Residential Property Market in Sofia - Q3, 2016
‘Low interest rates on deposits and excellent rates on mortgages, combined with an active property market, rising prices in Sofia and very strong rental market are all incentives for investments in real estate in Sofia‘, commented Polina Stoykova MRICS, Managing Director & Head of Research of BULGARIAN PROPERTIES.
‘The results of the positive impact of this combination of factors are already visible - a steady increase in sales volume of properties in the capital and a notable upsurge of new development projects which should meet the rapidly growing demand.’
‘Only half a year after the first time since 2011 the average price passed the 800 Euro/sq.m. barrier, it reached the next psychological one - 900 Euro/sq.m. in the second quarter. The pace of growth continued in Q3 when it started to balance and slow down’, adds Stoykova.
Based on data of BULGARIAN PROPERTIES in Q3 of 2016 the average price of sold apartments in Sofia is 930 euro/sq.m. compared to 900 euro/sq.m. in the previous quarter. The price increase in the third quarter is by 3.3% on a quarterly basis and 17% compared to last year.
Data of BULGARIAN PROPERTIES also shows that the average closing price of the purchased apartments in Sofia for the period July-September was 94,400 Euro compared to 87,100 Euro in Q2 and 79,800 Euro at the beginning of 2016. This shows that the budgets of the buyers continue growing and there is also a growing demand for large and luxurious apartments.
Number of sales
Calculations of BULGARIAN PROPERTIES based on data of the Registry Agency show that in Q3 of 2016 the growth rate of sales in the capital has picked up. Registered property sales have risen by 9,5% on an annual basis compared to 5,3% increase during the second quarter.
The number of registered sales was 6073 compared to 5063 for the same period in 2015. For the first nine months, the increase of the number of sales in Sofia is 7.2% annually.
It should be noted that the actual sales growth is much bigger because many of the purchases were made in buildings under construction and thus, the transfer of ownership and the registration of the sale in the Registry Agency will happen at a later stage.
New construction in Sofia
The number of purchases of new construction comprise around 50% of the overall number of sales in Sofia, and the offer prices for them are higher than the ones on the secondary market on average with 80-100 euro/sq.m.
Buyers are strongly oriented towards new buildings, a large proportion of the purchases are made off-plan or in the early stages of construction.
New construction in Sofia is experiencing a rapid growth with sales of many of the projects in their early stages of construction. Increased supply is expected to gradually balance the market.
View our top residential developments in Sofia
Characteristics of the purchased apartments
1-bedroom and 2-bedroom apartments comprise 37% and 34% respectively of the completed sales during the last months. The share of apartments with 3 and more bedrooms increased to 20% of the total sales which represents the desire of the buyers for bigger and more modern apartments. Most of them are in newly constructed buildings that are still in an early stage of development and provide buyers with the opportunity to combine smaller apartments and get bigger residential space with more rooms designed according to their needs.
The average area of the purchased homes is 85 sq.m. The most preferred apartment is from the second to the sixth floor in brick buildings with central heating. Discounts from listing prices are small - up to 1-2%.
Demand by residential areas
District "Krastova Vada" and the areas along Cherni Vrah Boulevard and around mall Paradise Center continue attracting great interest, which is further supported by the opening of a new metro station. The development of this area is visible and it has already established as one of the most popular areas in Sofia due to a combination of the presence of a metro station and the close proximity of South Park and a shopping mall with shops and amenities for residents in the area.
Another district around South Park, which is extremely attractive to buyers, is Gotse Delchev - the presence of high demand and limited supply in this area has led to sales of higher than average prices in Sofia - over 1,000 euro/sq.m.
District Manasirski Livadi is also attracting great interest from buyers over the past few months. The previous wave of new construction in the area has already been completely absorbed, infrastructure and overall appearance is gradually improving and a new wave of construction has started. A large share of the new developments in the area are already at advanced stage of construction and is priced from 800 Euro/sq.m. which is attractive and affordable for buyers, especially for those looking for more spacious apartments.
Vitosha is another neighborhood with predominantly new construction, which in recent months has began to attract more and more interest. Property prices (around 750 euro/sq.m. for new construction) and the proximity to main roads and relatively fast access to the inner parts of the city are the main reasons for this. In Studentski Grad the same trends are also visible as in it there are distinct areas of developing new construction at bargain prices, which is also of interest to buyers, especially for young families.
Lozenets and the Center continue being leaders for high property prices – the average purchase price in recent months there was between 1200 and 1500 euro/sq.m. To them we can add the traditionally expensive and preferred quarters Ivan Vazov and Iztok where property prices are at similar levels.
Summary and perspectives
We expect the property market in Sofia to remain dynamic and the number of sales to keep growing till the end of the year. These are the strongest months for the real estate market.
Next year the supply of completed buildings will increase as most of the started projects are already near completion, but the available apartments in them are very few and usually compromises have to be done since the best apartments had already been purchased off-plan.
In 2016 we have witnessed a quick deployment of positive trends in the property market in Sofia that we had not seen since the previous upturn of the property market. The market was under pressure in the period 2010-2015, which did not allow the positive processes to occur in a visible way. Even though prices and sales volumes had begun to rise in 2014 there were always doubts till 2016 whether those trends were sustainable.
2016 showed that not only they are resilient, but that they are also largely undervalued and that there is a great power in the market that can no longer be detained and the processes develop much faster than anticipated in order to compensate the years of stagnation.
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