For several years in a row, house prices in Bulgaria have been growing at a double-digit pace. Significant growth is observed both in large cities of the country and on the coast. However, over the past two months, there has been a trend towards an equalization of supply and demand, on the basis of which experts predict stabilization of prices in the housing market by the end of 2022 - the beginning of 2023. Let's consider the reasons for such forecasts.
Demand for housing is gradually slowing down
According to Bulgarian real estate agencies, the demand for Bulgarian property is gradually declining. So, if a few years ago, an average of 3 buyers applied for one object, last year this number dropped to 2, then in the summer of 2022 only 1 buyer applied for one object. If this trend continues, supply will soon overtake demand, and prices will stop rising.
The decrease in demand occurs for the following reasons:
- Real estate prices are growing faster than people's incomes
Due to high inflation over the past 3 years, house prices in Bulgaria have increased by 40%. Especially strong growth was recorded in 2021 against the backdrop of a sharp rise in the price of building materials. The growth in household incomes is much less than the rate of growth in housing prices, which naturally leads to a gradual decrease in demand.
- Many are hesitant to buy real estate amid uncertainty due to the war in Ukraine and the prospect of an upcoming crisis
With the start of the war in Ukraine, some sellers left the real estate market to watch the developments. Many buyers also decided to "wait out" the situation. In addition, the indecision of the latter is connected with the current economic situation. The COVID-19 crisis, events in Ukraine, rising prices for gas, fuel, electricity, a record rise in the price of building materials (by 30-60%) - all this increases the costs of buyers and reduces their interest in buying "new squares".
- The prospect of higher mortgage rates scares buyers who were planning to take out mortgages
As a result of record inflation in the EU due to a sharp rise in the cost of energy and food, 27 October European Central Bank raised the base rate on loans to 2%, which is the highest level since the global financial crisis. The purpose of this decision is to make loans more expensive, thereby reducing the money supply and stopping inflation.
This leads to a logical conclusion: following the growth of interest on loans, the monthly payment on them will also rise, which means that some buyers will simply be unable to pay them.
What should real estate buyers and sellers do?
The real estate market is approaching a state of equilibrium between supply and demand. This means that real estate prices will soon stop rising, but in the long term, the price trend is likely to be upward.
Therefore, buyers may already be thinking about buying a home at the best price, and for sellers, perhaps now is the best time to sell their property.
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