1. The Bulgarian Property Market during the Socialism
At that time building and construction, property prices, housing finance and rentals were all state-controlled. The property rights were arranged through a special Law for Ownership of the Citizens. According to this law, the members of a family or a single person could possess only 1 residential property and 1 holiday property (a villa). Even the housing types allowed for purchase by individuals were arranged through the law, e.g. for a single person – a studio, for a family with no children – 1-bedroom apartment and so on. The property sales and rental prices were estimated by the State and presented as fixed values. People needed to wait for their turn in long waiting lists in order to become eligible to purchase a property. Usually, the properties that were purchased were apartments in the typical for the socialism buildings of prefabricated panel constructions, which are presently the main group of properties in the big cities.
This explains the lack of a property market and the inadequate pricing of housing in Bulgaria until the early 90’s, which resulted in an excessive demand, insufficient supply, very low and undervalued residential properties in this country.
2. The Transition to a Market Economy
During this period the State transferred the ownership rights to the private owners whose properties had been nationalized previously. Thus, the supply of properties increased but in the same time construction of new properties was very limited. Apartment prices at that time started from as low as 2-3 Euros per sq.m. and rose dramatically due to high levels of inflation and even hyperinflation in the period 1996-1997. Falling incomes, rising unemployment, high uncertainty (political and economic) and lack of financing or very high interest rates (reaching and even exceeding 1000%) were all holding the development of the property market.
In the end of the 90’s the housing privatization finished, the hyperinflation was overwhelmed and reforms were being carried. Furthermore, the country had applied for membership in NATO (now already a member since 2004) and the EU (officially already a member since 2007), which contributed to the increased attractiveness of the country for domestic and foreign investments.
3. The Modern Bulgarian Property Market
Over the past decade the Bulgarian property market first appeared on the international investment maps, creating external demand for properties. During this very short period the property market went through a double-digit annual growth, leading to a property boom cycle and then a huge drop in property prices with the start of the world economic crisis.
Between 2003 and 2008 there was a 5-year period of a double-digit annual price growth, followed by a 30-40% drop in housing prices afterwards.
In nominal terms the average property prices in Bulgaria have increased with 201% for the period 2000-2010, and after inflation deduction (through HCPI), the real average property price growth for the same period sums up to 68.76%. This is an average growth of 11.65% per year, even after the huge drop in prices from 2008 onwards.
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