27.12.2013 Overview of the Bulgarian real estate market in 2013 and forecast for 2014

Polina Stoykova MRICS, Managing Director & Head of Research

Year 2013 was a special year - it marked 5 years since the beginning of the crisis, and also in my opinion - completion of a full cycle of 5 years boom, followed by 5 years of a slump phase on the property market and the beginning of a new stage of the development of the real estate market in Bulgaria.

The year was different from the preceding years mainly because the data from the property market was more often positive, which showed that there are signs of a recovery. The property sales have increased, the property prices have stopped falling, the number of granted mortgage loans has increased, which gives us a reason to confidently say that the market bottom has been reached and the process of a slowly but steady recovery has started.

Sofia was one of the most dynamic markets, while the number of transactions has increased by 10% on a year-on-year basis. Many buyers who have been putting off buying a property for years have returned to the market.

The seaside holiday homes came out of the crisis and continued steadily to attract interest in 2013. The sales increased by approximately 20%. By contrast, the ski resorts remained under pressure of a relatively weak demand and as a result the prices have not managed to stabilize there. It seems that the properties in the ski resorts will recover more slowly from the crisis, which in turn gives opportunities for bargain purchases as the prices are currently at their absolute minimum.

Buyers and sellers have more and more similar expectations, their approaches become the same, which is one of the main reasons for the market to be able to move on. It is noteworthy that in the past year the buyers are increasingly listening to the market trends and allow to be consulted about the actual price at which a property can be sold, because they have realized that the market determines the prices and the selling of a property at an inflated price is a waste of time.

As far as buyers are concerned, in the recent years 2 major factors affected their choice of a property - the bargain price and the exact characteristics of property. At the same time compromises have been made with the characteristics, but not with the price. Recently, there is an opposite trend – the buyers are more willing to compromise with the price, to pay a little more per square meter, but buying the right property according to their requirements, because many of them already know how difficult is to find a property that meet all their requirements.

Forecast for 2014

Perhaps for the first time since the beginning of the crisis we enter the new year with certainly optimistic expectations. Our forecast for 2014 is for the recovery of the property market to continue, which will result in a further increase in the sales of residential and holiday properties. Many buyers who have been putting off buying a property for several years will return to the market in Sofia and other major cities of the country and good deals will be concluded in 2014. This process will be stimulated by better conditions on mortgage loans and bank policies that will offer the buyers an easy access to financing.

In the segment of luxury properties we expect the pace of recovery to be faster than in the other segments of the property market. Indications for this were given by the increased activity in the sales of luxury properties in the second half of 2013.

The market will continue to be driven by Bulgarian and Russian buyers and we expect them to be joined by buyers from other countries, which gives signs of growing interest in buying a property in Bulgaria.

We do not expect any significant change in property prices. My forecast is that the prices will keep stability and will show unequivocally that the price falls are in the past, which will give confidence to all clients who so far still have doubts that the bottom has been reached and that the property market is entering a new stage of its development.
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