The first quarter of 2005 showed further the tendency towards slowing down of the Bulgarian property market – especially in the major cities. The property prices growth registered for Q1 2005 was 10.6% compared with 11.3% for Q4 2004, 12.0% for Q3 2004 and 12.3% for Q2 2004. Property prices growth in Sofia has been even smaller – 5.9%.
This is due to a number of factors. The end of 2004 and beginning of 2005 has seen attempts of the International Monetary Fund to restrict to hyper expansion of bank crediting during 2004. Some regions have experienced much higher supply of newly build properties than the existing demand – mainly areas along the Black Sea coast, as well as the capital Sofia. Some major investors have found other businesses to be a more attractive option for their investments – during the last 5 months oil prices registered a 34.7% growth, whilst the Sofia stock exchange SOFIX had a growth of 34% for the same period. Compared to these, the property market with its 10.6% growth seemed as not necessarily the most attractive option.
The expectations for the next 6-12 months are for sustainable price growth of 6-10% in Sofia and along the coast and higher growth for the smaller regional centers. Some overpriced, overdeveloped areas might register negative price growth during the next 6 months. Compared to Central European property prices, the Bulgarian property market still has a long way of “catching up”. Compared to Bratislava and Budapest, property prices in Sofia and Varna are still 40% to 100% cheaper.
During 2005 and 2006 the significance of Bulgarians living abroad and foreigners on the property market will slowly weaken. The convergence of the Bulgarian economy to that of the EU will feed the internal pressure on property prices and will stabilise them above the average growth for the economy (5-6%).