Sofia housing market in Q2 2017: The price growth continues

2017 is set to be the best year for the Bulgarian property market in all its segments for the whole decade up till present. This applies in particular for the capital of Sofia where we witnessed a very dynamic and strong first half of the year.

BULGARIAN PROPERTIES data shows that in the second quarter the average property price surpassed the threshold of 1000 Euro/sq.m. and reached 1060 Euro/sq.m. These are levels from the end of 2007 which shows that 10 years later the housing market in Sofia has almost reached its levels from before the crisis. What makes it different is that currently the market operates in much better economic conditions and the trends are to be more sustainable than 10 years ago.

While the expectations were that the price growth would slow down, there is no such trend yet and this is a consequence of many positive market factors.

Over the past four years bank lending has grown by about 20 percent annually, and it is the main factor that contributes for property price growth. This year's growth in lending is even accelerating with interest rates which are already below 4%, which shows that we cannot expect the price trend to reverse soon.

This time the upward cycle is mainly driven by domestic demand and market-friendly macro factors. With the current combination of low unemployment, accelerating GDP growth, higher incomes, almost zero interest rates on deposits, and record low interest rates on loans, it is natural that we see growth in property prices and sales volumes. People have returned back to housing as a form of investment.

Additional support comes from the rental market, which generates a yield of 5-6% annually, which can hardly be achieved through another asset. More and more people are looking for a rental purchase, including by buying a property with a mortgage.

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