Bulgaria is among the European countries with an alarming overvalued real estate market. House prices in our country are growing at the fastest pace in Europe over the past two years, which is alarming against the backdrop of the high indebtedness of businesses and households. This warns the European Commission in its latest report on countries with excessive macroeconomic imbalances.
For the first time, the European Commission warns of an alarming increase in property prices in Bulgaria. A new property bubble has recently been alarmed by our experts. According to Eurostat figures in the second half of 2016, house prices have jumped by 12% and in the first and second quarters of this year by more than 8%.
Similar two-digit growths were reported 10 years ago, after which the real estate market collapsed from 2008 to 2009. For the time being, brokers do not realize that there will be a calming market this year.
The most striking trend is the rise in house prices in Sofia, but the properties also increase in Plovdiv, Burgas, Varna. In the capital, the average level is about 1000 euros per square meter, and in the center and some southern neighborhoods prices reach 1500 - 3000 euros. Even for new projects that are in the excavation phase, there are already offers for 1000 - 1500 euros per square meter in certain areas.
Such prices are extremely risky because the reasonable time to pay off the investment goes beyond, say financiers. And the information on a large number of transactions and, at the same time, a large number of empty dwellings shows that many properties are bought for investment purposes - for rent or subsequent sale. The reason for this behavior is the record low interest rates on new mortgage loans, which already reach an average of 4.2 - 4.5%.
At the same time, due to the almost zero interest rates on deposits and the acceleration of inflation, it is logical to consider the purchase of a home as a protection of savings. Recently, real estate agencies reported, for example, that Bulgarians are already successfully competing with the Russians to acquire holiday properties, with the most demanding ones being 60-70m2 for prices of 600-700euro per square.