Bulgarian properties prices – factors

Bulgarian properties 47% nationwide average growth in 2004 (highest in the world) has made Bulgaria one of the hottest investment destinations worldwide. Even though in the short-term a significant capital growth is still expected, the big question is how will the market perform in the mid- to long-term. Several are the factors that will shape the Bulgarian property market in the next several years.

Bulgaria mortgages have become widely available and accessible only after 2001. The Bulgarian bank system privatisation by German, Austrian and Italian banks was complete by 2001, which resulted in a total credit expansion of all banks including various mortgages tailored for the Bulgarian properties market. Bulgarian mortgages underwritten at the end of 2004 have reached BGL1 billion (€0.5 billion), which is a 140% growth in one single year. As part of the GDP though these mortgage and credit levels are still significantly behind those in the US and EU. Only 0.5% of all credits have become overdue which makes mortgages a very low risk venture. During 2004 interest rates have been reduced by 1.6% and are about 7.5% in Q3 2005.

Foreign investments in Bulgaria. These are investments in Bulgarian properties by foreigners and Bulgarians living abroad (20%/80%). Bulgaria is increasingly becoming a popular destination both for a holidaymakers and Bulgarian property investments. A drastic increase has also been registered of foreigners planning to settle down in Bulgaria on a permanent basis. Even though statistics are not reliable it is believed that in 2004 investments in Bulgarian properties by foreigners and Bulgarians living abroad have reached €1,050m.

Changes in Bulgarian GDP and the increased earning capacity of Bulgarians is still not a direct factor affecting the Bulgarian property market. During the 1997 – 2004 period, the GDP has more than doubled, with relatively the same pace every year. Bulgaria properties prices growth however, has been registered only after 2002, therefore increased GDP accumulated for 5 years to explode in 2002 and result in unprecedented Bulgarian properties capital growth during 2002 – 2004.

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