Bulgaria's Residential Property Market Analysis 2024

After nine years of uninterrupted house price growth, Bulgaria's housing market boom continues, on the back of increasing property demand and limited supply.

Table of Contents

• Housing Market Snapshot
• Historic Perspective
• Demand Highlights
• Supply Highlights
• Rental Market
• Mortgage Market
• Socio-Economic Context

Housing Market Snapshot

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The nationwide house price index soared by 15.11% during the year to Q2 2024, following year-on-year increases of 16.01% in Q1 2024, 10.07% in Q4 2023, 9.2% in Q3 2023, 10.69% in Q2 2023, and 9.48% in Q1 2023, according to the National Statistical Institute (NSI). In fact, it was the third-highest growth recorded since Q3 2008.

In real terms, house prices were up by an average of 12.3% y-o-y in Q2 2024.

Quarter-on-quarter, nationwide house prices rose by 3.44% in Q2 2024 (4.23% inflation-adjusted).

"The upward trend has remained steady throughout the year, with no indications of a slowdown in the market or an imminent correction," said Polina Stoykova MRICS, Managing Director of Bulgarian Properties.

By property type:

• Prices of new dwellings rose by a huge 15.6% during the year to Q2 2024, an acceleration from the previous year's 9.45% increase and one of the highest growth seen in recent history. When adjusted for inflation, prices were up by 12.78%. During the latest quarter, prices of new dwellings increased by 3.52% (4.3% inflation-adjusted).
• Prices of existing dwellings also rose strongly by 14.81% (12.01% inflation-adjusted) in Q2 2024 from a year earlier, up from the previous year's 11.43% increase. Quarter-on-quarter, existing house prices were up by 3.4% (4.18% inflation-adjusted).

Bulgaria's house price annual change

After rising strongly from 2021 to the third quarter of 2022, property demand slowed from Q4 2022 until Q3 2023, amidst high inflation and gradually rising interest rates. During that time, homebuyers became more prudent and often negotiated discounts from sellers.

Yet demand is picking up again in recent months. In the second quarter of 2024, the number and value of residential property transactions in Bulgaria rose by 9.9% and 30.2%, respectively, as compared to the same period last year, according to figures from the NSI.

Aside from strong domestic demand, foreign homebuyers are also increasing. European Union citizens can purchase properties in Bulgaria, including land. Before January 2012 foreigners could purchase land only in the name of a legal entity and were not allowed to own a property.

"The growth in prices and demand has provoked many sellers to be more active on the market, and according to the data of the Registry Agency there is also an increase in the number of completed property transactions," said Bulgarian Properties in its July 2024 market report.

"A strong driver of the housing market in Bulgaria is mortgage lending, where interest rates remain among the lowest in the EU. The limited supply of properties for sale is also boosting prices on the market and creating the ideal environment for home sellers," added Bulgarian Properties.

But there are some indications that construction activity is now slowing. In the first three quarters of 2024, residential building completions fell sharply by 17.8% to 3,242 as compared to a year earlier. Likewise, the number of newly built dwellings plummeted by 21.4% y-o-y to 12,963.

During 2023, Bulgaria's economy expanded by 1.8% from a year ago, a slowdown from annual growth of 3.9% in 2022 and 7.7% in 2021, amidst declining exports and reduced accumulation of inventories.

Economic growth this year is projected to remain modest, after the country registered real GDP growth rates of 1.9% in Q1 and 2.1% in Q2 2024, based on figures from the NSI.

"GDP growth is forecast at 1.9% in 2024 and 2.9% in 2025. Short-term indicators suggest that at the beginning of 2024, exports continued to contract and private consumption growth decelerated," said the European Commission. "Beyond 2024-Q1, exports are projected to rebound, driven by the recovery of external demand. Consumption growth is assumed to recover in the remainder of 2024 and in 2025, supported by the expected still favorable labor market situation, while private saving rates continue to increase."

Local house price variations

Most of Bulgaria's major cities continue to register strong house price rises during the year to Q2 2024.

• Sofia, Bulgaria's capital, saw a strong house price growth of 16% y-o-y in Q2 2024, almost twice the prior year's 8.8% growth. Prices for new dwellings soared by 20.1% while existing dwellings recorded a price increase of 13.1%.
• Plovdiv, the second largest city in Bulgaria, registered a more moderate house price growth of 6.2% during the year to Q2 2024, a sharp slowdown from the 17.6% increase in Q2 2023. Prices of new dwellings increased slightly by 1.4% while existing dwelling prices rose by 10.6%.
• Varna, the largest city and seaside resort on the Black Sea Coast, continued to register a robust y-o-y house price increase of 15.9% in Q2 2024, following an annual growth of 20.3% in Q2 2023. Over the same period, prices of new dwellings rose by 9.4% while existing dwelling prices skyrocketed by 19.3%.
• In Burgas, overall house prices rose by 16.7% during the year to Q2 2024, following a 12.7% y-o-y increase a year earlier. New dwelling prices were up by 16.5% while existing dwelling prices increased by 16.7%.
• Ruse recorded the biggest house price growth of 22.1% y-o-y in Q2 2024, an acceleration from an increase of just 2.1% in the same period last year. Existing dwelling prices rose by 14.1%.
• In Stara Zagora, overall house prices increased by 11%, following a y-o-y growth of 7.2% in Q2 2023. New dwelling prices rose strongly by 14.8% while existing dwelling prices were up by 9.5%.

Historic Perspective:

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Bulgaria's housing cycle

In the past decade, almost zero interest rates on bank deposits have encouraged people to invest in real estate. That's why the housing market started to rise in 2014 and has been accelerating ever since. From 2014 to 2023, nationwide house prices soared by 101.5% (41% inflation-adjusted).

This fully offset the massive crash in 2009-13 caused by the global financial crisis and the eurozone debt crisis.

During the global financial crisis, Bulgarian house prices plunged by a cumulative 35.2% (-41.5% inflation-adjusted).

But prior to the said global crisis, Bulgaria experienced a massive boom, with residential property prices surging around 300% from 2000 to 2008.

Demand Highlights:

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Property transactions rising again

After rising strongly from 2021 to the third quarter of 2022, property demand slowed from Q4 2022 until Q3 2023, amidst high inflation and gradually rising interest rates. During that time, homebuyers became more prudent and often negotiated discounts from sellers.

But demand is noticeably picking up again in recent months. In the second quarter of 2024, the number of residential property transactions in Bulgaria rose by 9.9% from a year earlier, following y-o-y growth of 8.7% in Q1 2024 and 19.1% in Q4 2023, according to figures from the NSI. Likewise, transaction value also soared by 30.2% y-o-y in Q2 2024, after increasing by 41% and 26.6% in the previous two quarters.

Over the same period:

• New dwellings: the number of transactions rose by 20.4% y-o-y in Q2 2024, in contrast to a 23.6% fall in the prior year. Similarly, transaction value soared by a whopping 43.2% in Q2 2024 from a year earlier, a strong turnaround from an annual decline of 12.1% in Q2 2023.
• Existing dwellings: the number of transactions rose by 6% y-o-y in Q2 2024, following a decline of 12.1% in the previous year. Likewise, transaction value also increased strongly by 22.7%, in contrast to a 2.4% drop a year earlier.

Most sought-after locations in Sofia

Sofia, Bulgaria's capital city, remains one of the most preferred locations in the country. In Q3 2024, the average price of residential properties in the city reached €1,837 per square meter (sq. m), based on figures from Bulgarian Properties.

According to an earlier report published by Colliers International:

• For two-bedroom apartments, the average sales price ranged from €180,000 to €230,000 in H2 2023, at par with the previous period.
• For three-bedroom apartments in the capital city, prices increased from €280,000 to €340,000 in H2 2023, up from a range of €240,000 to €300,000 in H1 2023.
• For row houses, prices ranged from €320,000 to €450,000 in H2 2023, nearly unchanged from the previous period.
• For single houses, prices were also stable at over €486,000.

Historically, the most expensive area in Sofia is Doctor's Garden, with an average price of €3,691 per sq. m. It was followed by the districts of Yavorov and Ivan Vazov, with prices over €3,000 per sq. m in Q3 2024. Residential property prices are also high in the Medical Academy, Izgrev, and Iztok, at an average of about €2,770 per sq. m.

Sofia's Southern districts are currently experiencing strong interest from both locals and foreign buyers. In Lozenets and the city center, demand remains high despite the fact that these locations have the highest property prices in the country, currently at an average of €2,100 per sq. m.

Strelbishte and Gotse Delchev are also preferred neighborhoods with property prices between €1,300 and €1,700 per sq. m.

The Krastova Vada and Hladilnika districts, particularly along Cherni Vrah Boulevard and around the Paradise Center shopping mall, are also popular because of their amenities, trade centers, improved infrastructure, proximity to Vitosha Mountain and the future opening of metro stations. The average residential property price in Kraskova Vada currently stands at about €1,400 per sq. m.

Other districts experiencing strong demand include Studentski Grad and Vitosha because of the availability of newly built homes at affordable prices. The average price of dwellings in Vitosha is currently at €1,200 per sq. m. while it is €1,100 per sq. m. in Studentski Grad. Manastirski Livadi, Mladost and Vrabnitsa districts are also popular with average house prices ranging from €1,000 to €1,400 per sq. m.

Seaside resorts are thriving

Bulgaria's sea and mountain resorts remain healthy. Some of the reasons, according to Bulgarian Properties.

• Increased need for a private place to retreat outside the big, crowded cities;
• Ability to work remotely, which turned some vacation properties into long-term residences, and;
• An increasing number of people are investing in safe assets like real estate due to high, fluctuating inflation.

As a result, transaction volumes in Bulgarian resorts are rising strongly. "Bulgarians are the main buyers on the holiday property market in Bulgaria. There is a year-round revival in the seaside settlements, and the great interest in holiday resorts in Nessebar municipality makes it the fourth largest property market," said Polina Stoykova of Bulgarian Properties.

Stoykova also stated that Bulgaria's holiday property market recovered quickly during the pandemic years. Bulgarians remain the main buyers but the country is witnessing an increasing number of foreign homebuyers in seaside resorts, particularly in Bansko and Sunny Beach.

"There is a huge interest in properties in Nessebar and other resorts in the municipality (Sunny Beach, Sveti Vlas, Ravda, Elenite), with it becoming the fourth largest property market in the country. This year it is expected to be one of the leading places in terms of the number of transactions," Stoykova added.

In Sunny Beach, the country's largest resort, the average residential property price stood at around €1,000 per sq. m. Bansko's property prices are not far, ranging from €700 to €1,000 per sq. m.

In the neighboring Sveti Vlas, which offers many seaside properties, prices were typically more than €1,000 per sq. m.

South of Bourgas, apartments with sea views in Sozopol, Chernomorets, and Lozenets remain some of the most popular. Top complexes offer properties at €2,000 to €2,500 per sq. m. but one can still fetch properties at €1,000 to €1,500 in other locations.

In Borovets, a well-known ski resort located at the heart of the stunning Rila Mountains, apartments are sold for €1,200 to €1,400 per sq. m.

Pomorie is also gaining popularity among investors, especially from Bulgarians and Russian buyers. Also, the regions of Kayarna, Byala, and Blachik near the Northern Black Sea coast, have recently seen an increase in buyer interest.

Investors are looking for investments that provide capital gains and rental returns. Holiday homes in seaside and ski resorts are now considered attractive as rental income investments. Most properties are purchased for cash.

Supply Highlights:

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Construction activity slowing

After registering a record-breaking number of completions last year, residential construction activity is now slowing. In the first three quarters of 2024, dwelling completions in Bulgaria fell by a huge 21.4% y-o-y to 12,963 units, according to NSI figures.

Though the national figure conceals wide regional variations. In the first three quarters of 2024:

• North-West region: 313 dwelling completions, up by 15.9% from a year earlier
• North Central region: 483 completions, down by 7.6% from the same period last year
• North-East region: 2,229 completions, down by 6.2% from the same period last year
• South-East region: 3,368 units completed, down sharply by 17.5% from the previous year
• South-West region: 4,019 completions, down by a huge 36.5% from the previous year
• South Central region: 2,551 units completed, down by 12.1% from a year earlier

From 2005 to 2011, 16,700 dwelling units were completed every year. Construction peaked in 2009 when the number of dwellings completed exceeded 22,000 units. However completions then fell sharply, and in 2018 only 8,136 units were built - a similar low level to previous years since 2010. Construction activity bounced back strongly in 2019, with the total number of newly built dwellings surging almost 49% y-o-y to 12,105 units, according to the NSI.

Despite the Covid-19 pandemic, residential construction activity continued to surge. Dwelling completions rose by 27.3% to 15,415 units in 2020, by 15.9% to 17,868 units in 2021, and by another 11.1% to 19,847 units in 2022.

During 2023, the number of dwellings completed increased further by 14.1% to 22,649 units - surpassing the previous peak of 22,058 units seen in 2009.

The total dwelling stock rose slightly by 0.5% y-o-y to 4,304,231 units in 2023, according to the NSI. The South-West region accounts for more than 30% share of the total stock.

Rental Market:

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Moderate rental yields, stable rent prices

Bulgaria has moderate gross rental yields - i.e., the rental return on a property if fully rented out, before all expenses. In Q2 2024, the nationwide gross rental yields averaged 4.65%, slightly up from 4.56% in the same period last year, based on recent research conducted by the Global Property Guide. Yields in the country were almost unchanged in the past few years.

In Sofia, gross rental yields averaged 4% in Q2 2024. Doctor's Garden, Ivan Vazov, Iztok, and Lozenets are among the most sought-after addresses in the center. Embassies, museums, and universities are located here. These areas also have many parks and green spaces, making them popular with expats.

In the southern part of Sofia in Vitosha Mountain (or in the vicinity) are prestigious suburban neighborhoods like Boyana and Dragalevtsi.

For those who are really chasing yields, Studentski Grad apartments may be worth considering, with gross rental yields of about 5% or higher for the smaller sizes. However, for larger apartments, yields also mirror the city average of about 4%.

Outside Sofia:

• In Varna, apartments offer gross rental yields ranging from 4.35% to 5.98%, with a city average of 5.78% in Q2 2024.
• In Plovdiv, rental yields ranged from 2.94% to 5.86%, with a city average of 4.61%.
• In Stara Zagora, rental yields ranged from 3.93% to 4.9%, with a city average of 4.46%.
• In Haskovo, apartments offer rental yields between 4% and 4.79%, with an average of 4.32%.
• In Burgas, yields are higher than the national figures, ranging from 4.2% to 6.2%, with a city average of 5.29% in Q2 2024.
• In Shumen, apartments offer returns from 3.79% to 4.84%, with a city average of 4.17%.
• In Yambol, rental yields ranged from 4.32% to 4.99%, with a city average of 4.57%.

Transaction costs in Bulgaria are moderate, and more or less evenly split between buyer and seller.

In Sofia, rental prices are stabilizing. In the second half of 2023:

• Two-bedroom apartments: the average monthly rent ranged from €1,000 to €1,300, nearly unchanged from the past two years, according to Colliers International's H2 2023 Residential Market report.
• Three-bedroom apartments: rents averaged €1,600 to €1,800 per month in H2 2023, unchanged from the previous period but up from €1,400 to €1,700 per month in H1 2022.
• Houses: monthly rental rates start at €2,150 in H2 2023, at par with the previous year.

Mortgage Market:

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Interest rates stabilizing

The overall level of interest rates in Bulgaria is now gradually stabilizing. In September 2024, the average mortgage interest rate for BGN-denominated loans stood at 2.53%, slightly down from 2.61% in September 2023 but still up from 2.47% two years ago, according to figures from the Bulgarian National Bank.

Likewise, the average mortgage rate for euro-denominated loans fell to 3.09% in September 2024, down from 3.51% in the previous year and at par with the 3.05% in September 2022.

This is not surprising given the recent monetary policy shift implemented by the European Central Bank (ECB), as inflationary pressures ease in the region. In October 2024, the ECB lowered its key interest rates by 25 basis points, following similar moves in September and June 2024.

"The Governing Council today decided to lower the three key ECB interest rates by 25 basis points. Accordingly, the interest rates on the deposit facility, the main refinancing operations, and the marginal lending facility will be decreased to 3.25%, 3.40,%, and 3.65% respectively, with effect from 23 October 2024," said the ECB.

For BGN-denominated loans, in September 2024:

• Interest rate fixation (IRF) of up to 1 year: 2.52%, slightly down from 2.60% in September 2023 but still up from 2.45% two years ago
• IRF over 1 and up to 5 years: 3.27%, unchanged from the previous year but still far higher than the 2.68% recorded two years earlier
• IRF over 5 and up to 10 years: 3.56%, up from 3.45% a year earlier and 3.04% two years ago
• IRF over 10 years: 3.49% at the beginning of this year, down from 4.33% a year earlier and 4.03% two years ago

For Euro-denominated loans, in September 2024:

• IRF of up to 1 year: 3.06%, down from 3.51% in September 2023 and at par with the 3.05% registered two years earlier
• IRF over 1 and up to 5 years: 3.71%, slightly down from 3.76% in the previous year but still up from 2.84% two years ago
• IRF over 5 and up to 10 years: 4.07%, up from 3.56% in the same period last year and 3.04% two years earlier
• IRF over 10 years: 4.07% by end-2023, unchanged from the previous year, as well as two years ago