The first three months of 2021 were marked by a very brisk activity in the real estate market in Bulgaria, with the number of contracts signed for the purchase and sale of property exceeding the level reached in the same period of both 2020 and 2019.
According to Registry Agency data, transactions topped 43,000 in the period of January-March which is a 15% increase on an annualized basis from the pandemic-hit 2020 and 8.4% higher than the number recorded in same period of the pre-crisis year of 2019.
The increase comes mostly from the residential segment, and plots of land for single-family houses were also in demand.
There is a general feeling of growth in demand and the number of deals made among realtors. Mladen Mitov, manager at real estate agency Yavlena, even speaks of a "euphoric market". "The market has been active since the beginning of the year and we are seeing an increase in customers," said Lyubomira Atanasova, executive director of Sofia-based real estate firm Imoteka.
According to Imoteka's data, the number of buyers and sellers in Sofia was up 11% year-on-year in the first quarter. In Varna, buyers increased by 12% while sellers decreased by 8%. In Plovdiv, the data shows an 18% rise in the number of buyers and a 16% increase in sellers. "During the quarter, the activity of buyers (i.e. the number of enquiries) was almost identical to that of early 2019," said Gergana Tenekedzhieva, CEO of real estate agency Address.
Another Sofia-based real estate agency - Bulgarian Properties, reports a rise of about 20% year-on-year in new deals made in Sofia in the first quarter of 2021. Compared to 2019, the increase is about 8%. Polina Stoykova, the executive director of the company, notes that the statistical growth rate might be higher than the real one. "At the beginning of the year, whole new buildings were put into operation. Currently, existing deals are being made official for pre-construction apartments," says Stoykova.
Mladen Mitov points out that the the first-quarter data should be read with the April 4 election taken into account. Political cycles traditionally affect the market, albeit in different ways. Some customers postpone purchases until after the election whereas others prefer to make them in a familiar environment before them, he comments.
Low interest rates
Agencies outline three big factors for the liveliness of the real estate market in the first months of the year: the rising volume of savings and zero or negative deposit interest rates; the feeling that low interest rates' time is running out; people's growing desire to improve their living conditions combined with favorable market conditions to do so.
"People are looking for security for their funds which increased by at least 10% during the pandemic. In the absence of other alternatives, people are investing in housing," explains Gergana Tenekedzhieva.
However, according to Mladen Mitov, investors have withdrawn, and currently, people are buying homes mainly to live in. "If five or six years ago people bought mainly to rent, now they are much more inclined to consider changing their home for a new one - a bigger, more comfortable, in a more prestigious location," confirms Tenekedzhieva.
According to her observations, the idea that a home is bought once in a lifetime is changing. People are already willing to consider the option of changing their homes according to their current needs. However, a house stays in one family for at least five years, according to Yavlena.
Many people are currently selling their property, taking advantage of the availability of mortgage lending to take out additional loans to afford better housing. "Against the background of the United States beginning to increase mortgage interest rates, many are realizing that the current favorable situation will not last forever, and are rushing to take advantage of it," says Gergana Tenekedzhieva. "Banks are gradually starting to tighten financing conditions and add additional requirements to valuations to sift through prospective buyers," says Mitov.
The agencies are unanimous that as a result of the active market, bank financing, and low interest rates, prices have been gradually rising since the beginning of the year. "The growth is not great so far, but the great interest may increase it," Mladen Mitov commented, mentioning price hikes around and above 5%. "Prices continue to rise at the rate we have since the end of last year - between 2% and 5% for different cities," said Polina Stoykova. "There has been a slight increase in prices since the beginning of the year. It is higher in some districts of Sofia, and in one or two there is a slight downward correction," confirmed Lyubomira Atanasova.
Instead of failure - shortage
Although economic crises are usually accompanied by shocks in the real estate market following a collapse in demand, realtors outline supply as a problem. "I do not rule out that at some point there could be a vacuum on the supply side. It can raise prices, but it can also push buyers to withdraw if they consider that they don't have to buy at any cost," said Mladen Mitov.
"People will also look for new homes on the secondary market but given that a family's stay in a property is of at least five years, and an average of 10 years, I do not rule out a shortage of supply," Mitov added.
Gergana Tenekedzhieva points to another trend, which portends an accumulation of supply of unattractive properties. "Buyers are mainly interested in new offers on the market, be they new or old construction. Ads that stay on the internet for some time become unattractive even if their prices are interesting. Traditionally, when buyers are interested in a property, they ask how long it has been up for sale. And if it's been a long time, there are suspicions that something is wrong - either with the price or other circumstances," Tenekedzhieva explains.
This specificity has become more pronounced, with buyers lately being much more observant, knowledgeable, and aware of themselves and the compromises they are willing to make. Tenekedzhieva attributes it to the pandemic. Through it, the market began to digitalize, and people became more active online, watching videos, portals, and offers for months. When they switch to active search, they are far more familiar with the topic than before.