2017 is set to be the best year for the Bulgarian property market in all its segments for the whole decade up till the present. This applies in particular to 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 EUR 1,000/sqm and reached EUR 1,060/sqm. 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 to property price growth. This year’s growth in lending is even accelerating with interest rates which are already below 4 percent, 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 percent annually, which can hardly be achieved through other assets. More and more people are looking for a rental purchases, including by buying a property with a mortgage.
Bulgarian Properties data shows that for the second quarter of 2017, the average property price in Sofia reached EUR 1060/sqm compared to EUR 985/sqm at the beginning of the year. This represents quarter-on-quarter price growth of 7.6 percent, while annual growth remains the same as in the first quarter, marking a growth of 18 percent. The average purchase price is EUR 91,000.
Currently, property prices in Sofia are at levels similar to those at the end of 2007. The peak values from the third quarter of 2008, in the pre-crisis boom, have not yet been reached. Then the average house price in Sofia was EUR 1,260/sqm. The accelerated rate of increase in prices in Sofia started in the second quarter of 2016 and since then, for one year, increases have been between 15 and 18 percent.
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