NEWSLETTER

2017-04-27

28.04.2017 The housing market in Sofia in Q1 of 2017 - Prices Increase by 18%

Active first quarter for the housing market in Sofia and preservation of the growth trend in the property prices in Sofia – that’s how the first months of the year for the real estate market in the Bulgarian capital can be summarized.

‘2017 started with an acceleration of the previous year’s dynamics, especially strong since the beginning of March. Price growth is now approaching 20% on an annual basis. This is a significant increase but it must be kept in mind that growth has accelerated since spring last year and we are currently comparing with the lower prices at the beginning of 2016’, commented the market trends Polina Stoykova MRICS, Managing Director of BULGARIAN PROPERTIES.

‘There is no doubt anymore that the market is in an upturn. The main challenge will now be to predict how long this growth will continue and where will be the breakpoint, which is the most difficult to forecast. Surely we can say that we are still at the beginning of the upward curve, with expectations that this trend will continue for at least 2 years. The economic factors contributing to the market upturn are very different from those of the previous booming cycle when foreign demand was the main driver. The market picture looks very good, there are no concerns and this time we can say we have a sustainable growth.’

‘The average property price in Sofia is now approaching 1000 Euro/sq.m. and has reached the levels from the end of 2007. It took 10 years for the market to regain the positions of the previous boom, but this time with much better economic indicators and the tendency for these levels to remain stable’, Stoykova adds.

Average Prices

The data of BULGARIAN PROPERTIES shows that in Q1 the average price of the sold apartments in Sofia is 985 Euro/sq.m. at 960 Euro/sq.m. in the last quarter of 2016. Thus, quarter-on-quarter basis, the price increase is 2.6% and 18% annually. The average purchase price of the dwellings is around 90,000 Euro.

In early 2016, homes in Sofia were sold at an average of 835 Euro/sq.m.

At present, property prices in Sofia are at levels similar to those from the end of 2007. The peak values in the third quarter of 2008 have not yet been reached in the pre-crisis boom when the average house price in Sofia reached 1260 Euro/sq.m.

New Construction

The sales of new build homes continue to account for more than 50% of the total sales in Sofia and the interest remains high.

Both buildings in the initial stage of construction and already completed buildings are available for sale. Property prices are rising steadily as construction progresses, and the available homes are running out quickly, so off-plan purchases are very common.

Parameters of the purchased properties


The one-bedroom apartments have regained their attractiveness, which can be explained by their greater liquidity and easy rental, as well as by the rising prices which limit the budgets of the buyers. They account for about 55% of the purchased homes in the first quarter. Immediately after them with a share of 32% of the purchases come the two-bedroom apartments. Multi-family homes and maisonettes are about 10%.

The average area of the purchased apartments is 90 sq.m. Most often apartments on the 2nd to the 6th floor (70% of the sales) are bought. Discounts from the offer prices are minimal - up to 1%.

Average stay of properties on the market

For the first three months of the year the average stay is 92 days which is a normal term. In 2016, there were periods of extended property stays on the market for up to 4 months, as the properties on the secondary market had listing prices higher that what the buyers would pay. At the end of the year this period dropped to 84 days, indicating that the market was catching up with the prices demanded by the vendors, and sales had begun to happen in shorter terms.

Demand by neighborhoods

The main interest continues to be to the southern and eastern districts of Sofia, with the access to the underground playing an increasingly important role in the interest to a given area.

There is also interest to the center of the capital city, where old construction is predominant, however there are also boutique buildings with 1-2 apartments per floor which enjoy a great interest.

It is noteworthy that the area of Zone B-5 around Mall of Sofia also attracts interest due to the lower prices and its central location. In the wider central neighborhoods there are areas with a lot of new construction, and in which there is access to the underground. These areas are becoming more and more attractive for the buyers.

The interest in Krastova Vada remains high and the trend is this neighborhood to become one of the most preferred areas of Sofia. Beginning new projects and visibly improved infrastructure contribute to the turning of the area in one of the most modern areas. The prices of new homes there start at around 850 Euro/sq.m. and reach 1,200 Euro/sq.m.

Mladost and the area around Business Park Sofia is another attraction zone for both those working there and the many buyers who want to live in one of the most modern quarters of Sofia - Mladost. The average price there is already around 1000 Euro/sq.m.

The areas around the South Park remain highly sought-after and low in supply, which is driven by the higher prices - between 1100 and 1400 Euro/sq.m.

Manastirski Livadi, Vitosha and Studentski Grad are among the regions that offer new construction at favorable prices and to which the interest is constantly increasing.

Some of the best prices for new construction are currently in Ovcha Kupel - an apartment with Act 16 starts from 750 Euro/sq.m. This is one of the undervalued neighborhoods with excellent prospects for development.

In the different parts of Lyulin you can also find a profitable new construction at prices from 650 Euro/sq.m.

The most expensive quarters remain Lozenets, Ivan Vazov, the city centre where prices are between 1500 and 2000 Euro/sq.m., with offers for more than 2000 Euro/sq.m. on the market already.


Economic analysis and comparison with the previous ascending cycle

At the beginning of 2017, we have a very different market reality than the previous ascending cycle, and this is conditioned by the economic factors that drive the market. Local demand is currently the main driver and it is stimulated as a result of the beneficial effects of the following factors:

1. Incomes and housing affordability

The economy is growing and incomes are rising - these are some of the most important factors for growth in property prices. In Sofia, the average monthly salary is already over BGN 1,300 at the end of last year, according to NSI data. The housing affordability (property price to average salary in Sofia) is at levels 1.3-1.4, which has remained at these levels since 2012. It was lowest in the first quarter of 2015 (1.29) which means that the properties in Sofia were most affordable at the beginning of 2015, but so far the coefficient has not changed much.

At the peak of the previous boom at the end of 2008, this ratio reached 3.4, which means that property in Sofia was 2.5 times less affordable than it is now. In addition, unemployment is below 7%, which is the lowest level since the beginning of the crisis. This gives people security of their income and stimulates consumption and investment activity.

2. Bank lending

Bank lending and its affordability are among the most significant factors for the property market. Interest rates on housing loans are at a record low - an average of about 4.5%. The volume of bank lending for housing purchases has risen by about 20% over three consecutive years, reaching in 2016 the volumes of 2006 and a share of the country's GDP of about 2.5%.

In the previous peak, housing lending reached 6% of GDP, and interest rates reached the lowest level of around 7%. This shows that at the moment bank loans are much more affordable, and as volume they are within more sustainable and reasonable frames.


3. New issued building permits

Building permits issued for new buildings are one of the indicators that show the direction of supply and are an important indicator of the moods and prospects for the market as a whole. For the year 2016, about 700 construction permits were issued in Sofia, increasing by about 5% compared to a year earlier. This is about 60% of the peak levels at the previous boom when about 1,100-1,200 permits were issued for the construction of new residential buildings in Sofia per year.

Finding plots for construction is becoming more and more difficult and this limits the rapid increase in supply and construction of new buildings. At present, there are entire neighborhoods in attractive parts of Sofia, where there is almost no supply of new construction. As a result, the bidding continues to lag behind demand and this explains the rapid sale of the new projects in an initial phase - a trend that will continue in 2017.

In summary of the data presented, it can be concluded that the real estate market in Sofia is balanced, the demand absorbs the newly started projects and the market is healthy in the medium term.

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