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The housing market in Sofia in 2022: Accelerated price growth and slowdown in sales volume

2022-07-15   |  Polina Stoykova MRICS, Managing Director and Head of Research of BULGARIAN PROPERTIES


In the first half of the year, we observed a real estate market in the Bulgarian capital, characterized by very high demand and insufficient supply. This explains both the accelerated price growth and the slowdown in sales growth.

New construction projects got off to a slower start due to rising material prices and supply difficulties, and those that were on the market were actively selling "off-plan". In addition, many property owners pulled out of the market due to high inflation, and this reduced the supply further.

At the same time, demand continued to be supported by favorable bank lending and rising incomes. Interest rates on mortgage loans continued to fall, and the volume of newly granted loans - to grow, maintaining the pace of 40% growth from 2021.

The other factors that influence the housing market also continued to have a positive impact - unemployment remained at low levels - around and below 5%, and incomes continued to grow - by around 10% on average for the country and 12% for Sofia in the first quarter according to NSI data.

The war and inflation gave an additional stimulus to the demand for investment in a safe asset, such as real estate, and the market felt a housing shortage not only in Sofia, but also throughout Bulgaria. The supply that existed on the secondary market, even in holiday resorts and in the countryside, has greatly diminished and the offers that do come to market now often sell out in a matter of days.

All this has led to an accelerating price growth, which according to BULGARIAN PROPERTIES data reached 21% in Sofia in Q2 of 2022. This represents the fastest increase since 2008.

Sales volume

BULGARIAN PROPERTIES' calculations based on data from the Registry Agency show that property transactions in Bulgaria in Q2 grew by only 4.3% compared to the same period in 2021. This comes after a growth of around 30% in 2021 and by about 10% in the first quarter of 2022.


There is also a slowdown in the growth rate of transaction volume in Sofia, where a growth of only 0.28% on an annual basis was registered after a 30 percent increase in 2021.

These figures reflect both the slight cooling of interest due to rising prices and - to a much greater extent - the main trend we outline for the period and which we consider to be leading - insufficient supply to meet the available demand.

Average prices and preferred housing in Sofia

According to BULGARIAN PROPERTIES data, the average price of apartments purchased in Sofia in Q2 is 1,425 Euros/sq.m. – a rise from 1,345 Euros/sq.m. in the first quarter and 1,175 euros/sq.m. a year earlier – in Q2 of 2021.


This represents a record 21% year-over-year growth – well above the expected levels for this year and a pace which we have not seen since 2008. In one year, the price of a square meter in the Bulgarian capital increased by 250 Euros, and only in the second quarter the growth was 80 Euros/sq.m.


The largest price increases were recorded at the end of 2021 and in 2022, and already from the first quarter of 2022, growth accelerated from 10% at the end of 2021 to 17% in the first quarter and 21% in the second.
At the end of 2021 the price levels from the peak in 2008 were reached, and at the moment apartments in Sofia are being sold for around 160 Euros/sq.m. above these levels.

The average total price of apartments purchased in the 2nd quarter rose to € 115,400, up from € 108,100 in the first quarter and € 100,500 a year earlier.

The share of 1-bedroom apartments purchased rose to 63% from around 50% in previous periods. This happens at the expense of a reduction in the number of 2- and 3-bed apartments. The explanation lies in the higher prices and smaller budgets required when buying a 1-bedroom dwelling, as well as the increased number of investment purchases, where the demand is mainly for 1-bedroom flats.

Affordability of housing in Sofia

The affordability coefficient of BULGARIAN PROPERTIES in Q1 2022 is 1.19. Due to the faster growth of property prices than that of incomes in Sofia, which according to NSI data are growing by 12% on an annual basis, there is a certain increase in the value of the affordability coefficient.


This means a decreasing housing affordability. However, it remains at good levels compared to previous periods and especially compared to the peak in 2008 (coeff. = 3.4), with which period we currently have comparable prices and growth. Currently for the purchase of 1 sq.m. housing area in Sofia requires about 1.2 average monthly Sofia salaries, while in 2008, 3.4 monthly salaries were needed to buy the same area.

Expectations for the housing market

The outlook in the coming months is for the rate of price growth to slow down as some wavering and cooling of buyer interest above certain price levels is already being felt.

In addition, it should be noted the stabilization of the prices of materials and activation of sales of new construction projects. We expect that as the market balances out, better supply will emerge in the secondary market as well, as now is an excellent time to sell and more owners are starting to realize this.

In the coming months, we will have to carefully monitor the changes in interest rates on loans, which, although expected to increase, will hardly feel this change this year.

Inflation will clearly be difficult to control and with interest rates remaining low, it will continue to affect the housing market in a positive direction - keeping demand at high levels.

More and more economic analysts are predicting a slowdown in economic growth and entering a period of recession, and these concerns are gradually shifting the focus away from inflation. If these predictions turn out to be true, there will inevitably be an impact on the activity of the real estate market.

However, this will come with a delay in Bulgaria. At the moment we are still in a period of growth. GDP data in the first quarter indicated 5% real growth in the economy, and positive growth is expected to continue, albeit at a slower pace. Therefore, we can conclude that the housing market remains positive, at least in the short term.

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