Bulgaria’s house prices continue to rise, despite falling demand
After eight years of uninterrupted house price growth, Bulgaria’s house prices continue to increase strongly, despite falling demand. The nationwide house price index rose sharply by 10.69% during the year to Q2 2023, following y-o-y increases of 9.48% in Q1 2023, 13.37% in Q4 2022, 15.59% in Q3 2022, 14.6% in Q2 2022 and 11.53% in Q1 2022, according to the National Statistical Institute (NSI).
However, in real terms, house prices actually increased by just 1.8% y-o-y in Q2 2023, amidst high inflation.
Quarter-on-quarter, nationwide house prices rose by 4.25% in Q2 2023 (4.5% inflation-adjusted).
By property type:
- Prices of new dwellings rose by 9.5% during the year to Q2 2023, up from the previous quarter’s 4.9% increase but lower than the prior year’s 12.3% growth. However, when adjusted for inflation, prices only increased slightly by 0.7%. During the latest quarter, prices of new dwellings were up 6.8% (7.1% inflation-adjusted).
- Prices of existing dwellings rose strongly by 11.4% (2.5% inflation-adjusted) in Q2 2023 from a year earlier, its seventh consecutive quarter of y-o-y growth. Quarter-on-quarter, existing house prices increased by 2.7% (3% inflation-adjusted).
Bulgaria’s house price annual change
After rising strongly from 2021 to the third quarter of 2022, property demand started to slow by end-2022, amidst high inflation and gradually rising interest rates. Homebuyers have become more prudent in recent months, and often negotiate discounts from sellers. In the second quarter of 2023, the number and value of residential property transactions in Bulgaria fell by 15.5% and 6.2%, respectively, as compared to the same period last year, according to figures from the NSI.
Bulgarian Properties noted that transactions are rising again. “Although in the summer there was a certain decline in the volume of transactions and interest, this was logical in view of the summer season. Since the beginning of September, demand in the capital has strengthened and deals are being actively concluded,” said Bulgarian Properties.
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.
Residential construction activity continues to grow, albeit at a much slower pace. In the first three quarters of 2023, dwelling completions in Bulgaria increased slightly by 0.8% y-o-y to 14,710 units, according to NSI figures.
Bulgaria’s overall economy is expected to continue growing, albeit at a slower pace. In Q3 2023, the economy expanded by 1.7% from a year earlier, following y-o-y growth of 1.9% in Q2 and 2.2% in Q1, based on figures from the NSI. It marked the slowest pace of expansion since the economic contraction in 2020, mainly due to falling exports and a decline in public expenditure. On a quarterly basis, the economy expanded by a meager 0.4% in Q3 2023, at par with the previous quarter.
The European Commission expects the Bulgarian economy to cool, with projected real GDP growth rates of 2% this year and 1.8% in 2024, mainly due to a slowdown in household consumption and exports. This is a deceleration from expansions of 7.6% in 2021 and 3.8% in 2022.
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 2022, nationwide house prices soared by 83.1% (34.1% 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.
| HOUSE PRICE INDEX, ANNUAL CHANGE (%) | ||
| Year | Nominal | Inflation-adjusted |
| 2009 | -25.72 | -26.14 |
| 2010 | -4.96 | -9.08 |
| 2011 | -5.81 | -8.33 |
| 2012 | -1.30 | -5.33 |
| 2013 | -1.20 | 0.40 |
| 2014 | 2.78 | 3.69 |
| 2015 | 3.98 | 4.37 |
| 2016 | 8.11 | 8.01 |
| 2017 | 8.15 | 5.24 |
| 2018 | 5.54 | 2.79 |
| 2019 | 6.21 | 2.31 |
| 2020 | 5.40 | 5.25 |
| 2021 | 9.38 | 1.51 |
| 2022 | 13.37 | -3.00 |
| Sources: National Statistical Institute, Global Property Guide | ||
Local house price variations
Most of Bulgaria’s major cities continue to register house price rises during the year to Q2 2023.
- Sofia, Bulgaria’s capital, saw a y-o-y house price increase of 8.8%, a slowdown from the prior year’s 17.3% growth. Prices for new dwellings rose by 5.4% while existing dwellings recorded a price increase of 11.2%.
- Plovdiv, the second largest city in Bulgaria, saw one of the biggest house price growth during the year to Q2 2023, at 17.6% - up from the previous year’s 8.6% increase. Prices of new dwellings surged by 23.3% while existing dwelling prices also rose strongly by 13.1%.
- Varna, the largest city and seaside resort on the Black Sea Coast, registered the biggest y-o-y house price increase of 20.3% in Q2 2023, a sharp acceleration from a growth of 7.9% in Q2 2022. Over the same period, prices of new dwellings rose by a huge 25.2% while existing dwelling prices increased by 17.9%.
- In Burgas, overall house prices rose by 12.7% during the year to Q2 2023, following a 14.9% y-o-y increase a year earlier. New dwelling prices were down by 2.4% while existing dwelling prices increased by 19.4%.
- In Ruse, overall house prices rose by a modest 2.1% in Q2 2023 from a year earlier, a sharp deceleration from a huge 23.3% increase in Q2 2022. New dwelling prices plunged while existing dwelling prices rose by 12%.
- In Stara Zagora, overall house prices increased by 7.2%, following a y-o-y growth of 12.6% in Q2 2022. New dwelling prices rose by 14.6% while existing dwelling prices were up by a modest 4.1%.
Most sought-after locations in Sofia
Sofia, Bulgaria’s capital city, remains one of the most preferred locations in the country. In H1 2023, the average sales price for two-bedroom apartments ranged from €180,000 to €230,000, at par with the same period last year, according to Colliers International. For three-bedroom apartments in the capital city, prices were stable at €240,000 to €300,000 in H1 2023. Prices of row houses ranged from €320,000 to €450,000 while single houses were priced over €486,000.
“Average prices remain stable, with only prime properties seeing a slight increase,” said Colliers International. “In most cases, sellers are not willing to make discounts, or if they do they are in the minimum amount up to 3%.”
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 in 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 soaring 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.
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.
Rental yields are moderately good and rent prices are stable
Bulgaria has moderate gross rental yields - i.e., the rental return on a property if fully rented out, before all expenses. Yields in the country were almost unchanged in the past few years, at an average of 4.56% in Q2 2023, based on recent research conducted by the Global Property Guide in August 2023.
In Sofia, gross rental yields averaged 4.04% in Q2 2023. 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 7% for the smaller sizes. But for larger apartments, yields also mirror the city average of about 4%.
Outside Sofia, gross rental yields are a bit higher – Varna (4.73%), Plovdiv (4.45%), Stara Zagora (4.2%), Burgas (5.2%), Shumen (4.53%), and Yambol (5.3%).
Transaction costs in Bulgaria are moderate, and more or less evenly split between buyer and seller.
In Sofia, rental prices are stabilizing. In the first half of 2023:
- Two-bedroom apartments: the average monthly rent ranged from €1,000 to €1,300, unchanged from a year earlier, according to Collier International’s H1 2023 Residential Market report.
- Three-bedroom apartments: rents averaged €1,600 to €1,800 per month, up from €1,400 to €1,700 per month in H1 2022.
- Houses: monthly rental rates start at €2,150, at par with the previous year.
Property transactions temporarily falling
After rising strongly from 2021 to the third quarter of 2022, property demand started to slow by end-2022, amidst high inflation and gradually rising interest rates. Homebuyers have become more prudent, and often negotiate discounts from sellers.
In the second quarter of 2023, the number and value of residential property transactions in Bulgaria fell by 15.5% and 6.2%, respectively, as compared to the same period last year, according to figures from the NSI.
Over the same period:
- New dwellings: the number of transactions fell by 23.6% y-o-y and transaction value dropped 12.1%.
- Existing dwellings: the number and value of transactions declined by 12.1% and 2.4%, respectively.
Figures from the Registry Agency showed a similar pattern, with property transactions in Sofia falling by 5% in Q3 2023 – the fifth consecutive quarter of decline in transaction volumes. Based on official figures, there were 7,001 transactions registered in the capital in Q3, down from 7,402 transactions a year earlier and 8,732 transactions two years ago. But it was higher than those in the same periods of 2019 and 2020.
This slowdown was partly due to limited supply.
Bulgarian Properties noted that transactions are rising again. “Although in the summer there was a certain decline in the volume of transactions and interest, this was logical in view of the summer season. Since the beginning of September, demand in the capital has strengthened and deals are being actively concluded,” said Bulgarian Properties.
Construction activity stabilizing
Residential construction activity continues to grow, albeit at a much slower pace. In the first three quarters of 2023, dwelling completions in Bulgaria increased slightly by 0.8% y-o-y to 14,710 units, according to NSI figures.
Though the national figure conceals wide regional variations. In the first three quarters of 2023:
- North-West region: 230 dwelling completions, down 6.9% from a year earlier
- North Central region: 412 completions, down sharply by 43.3% from a year ago
- North-East region: 2,386 completions, down by 23% from the same period last year
- South-East region: 3,577 units completed, up by a huge 52% from the previous year
- South-West region: 5,738 completions, up slightly by 1.4% from the previous year
- South Central region: 2,367 units completed, down by 5.8% from a year earlier
From 2005 to 2011, 16,700 dwelling units were completed every year. Construction peaked in 2009 when 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 15.9% y-o-y to 17,868 units in 2021, following a 27.3% growth in 2020. During 2022, the number of dwellings completed increased again by 11.1% to 19,847 units, the highest level since 2009.
The total dwelling stock rose by 7% y-o-y to 4,282,656 units in 2022, according to the NSI. The South-West region accounts for more than 30% share of the total stock.
Interest rates increasing gradually
The overall level of interest rates in Bulgaria is now increasing. The average mortgage interest rate for BGN-denominated loans stood at 2.61% in September 2023, up from 2.47% a year earlier, but nearly at par with the 2.67% recorded two years ago, according to figures from the Bulgarian National Bank.
Likewise, the average mortgage rate for euro-denominated loans rose to 3.51% in September 2023, from 3.05% in September 2022 and 3.42% in September 2021. This is not surprising given the recent moves of the European Central Bank (ECB) to raise its key rate multiple times to rein in inflationary pressures in the region. In September 2023, the ECB raised its repo rate further by 25 basis points to 4.50%, its tenth consecutive rate hike since July 2022, when the repo rate was at a record low of 0%.
For BGN-denominated loans, in September 2023:
- Interest rate fixation (IRF) of up to 1 year: 2.60%, up from 2.45% a year earlier but slightly down from 2.67% two years ago
- IRF over 1 and up to 5 years: 3.27%, up from 2.68% a year ago and 2.43% two years earlier
- IRF over 5 and up to 10 years: 3.45%, up from 3.04% in the same period last year
- IRF over 10 years: 3.1%, up from 2.5% a year earlier but still lower than the 4.07% seen two years ago
For Euro-denominated loans, in September 2023:
- IRF of up to 1 year: 3.51%, down from 3.05% in September 2022 and 3.43% in September 2021
- IRF over 1 and up to 5 years: 2.53% in June 2023 (latest figure), down from 3.57% a year earlier and 2.59% two years ago
- IRF over 5 and up to 10 years: 3.56%, up from 3.04% a year earlier
- IRF over 10 years: 4.07%, sharply up from 2.63% in the previous year and 3.5% two years ago