Property prices in Sofia. Are they tall or low?

2020 has brought a lot of worries to the real estate market all over the world. Property prices in Sofia are significantly lower than other cities and capitals in Europe. Often people think that prices in Sofia are high... compared to what, however? As the capital of a European Union country with prices comparable to those in Skopje, for example, and feeling significantly lower than those in Belgrade (the EU), Sofia becomes a promising place to live and invest. In the medium and long term, property prices in Sofia will rise and properties will become even more expensive and less accessible, as has already happened in all the capitals of the developed and developing countries around the world.

The world is becoming more global and we are yet to see a migration of foreigners to our home capital, as well as returning Bulgarians, simply because living conditions are good, there is demand for people with labour skills, and property prices and the cost of living are generally the most advantageous in the EU.

Before the pandemic emerged, real estate development forecasts around the world in 2020 were promising. However, the ongoing pandemic has created unprecedented uncertainty in almost every economy in the world. Therefore, it seems somewhat natural to appear the following question:

What is expected to happen to property prices in Sofia in the near future? 

The pandemic has been on the rise for a year now (January 2021) and yet property prices have not "collapsed" as many people expected. Production of new housing units has declined as some investors wait for a more stable and predictable period. But at the same time, many people with savings have turned to property as a way to protect themselves from the risks of high inflation, due to the large "printing" of trillions of dollars and euros to help icons around the world. And so prices held up, somewhere went up, and now the end of the pandemic is visible and the optimism will return. All this is a prerequisite to expect a new era for the property market in Sofia and this new era does not include falling, collapsing, bursting and any similar epithets.

Despite the overall pessimistic forecast of the economic consequences after the coronavirus pandemic, from the point of view of the real estate market this crisis differs from the previous one in 2008. The Coronavirus crisis is expected to hurt much less in the real estate market than the crisis in 2008. 

If we abstain from the pandemic, it is very often commented on how prices in Sofia are too high and how for a certain amount a person instead of buying an apartment in Sofia can buy a house in Germany, England, Italy, etc. In this article, we will show you how things actually happen and compare residential property prices across Europe.

As for the development of residential property prices, many would argue that apartments in Sofia are too expensive and in some cases can be even more expensive than a house in Germany, England, France or another developed European country. Yes, in some cases this is true, but it all depends on the location, the environment, the type of property and a host of other factors. To talk about property prices, we need to look at things objectively – that is, to compare the capital with the capital, a large city with a large city, a village with a village.

Neutrally speaking, Sofia is a European capital, which is why it needs to becompared with another European capital in order to draw a parallel between property prices. Yes, it has its own minor disadvantages, but it is the largest and most developed city in Bulgaria and in some ways does not give way to other European capitals. Therefore, it is in no way correct to compare property prices in a European capital with those in any village, be it in the most developed European country, and to make incorrect arguments such as, "I in Germany will buy a house for €80,000, and a three-bedroom apartment in Sofia is €100,000". There are places in Bulgaria where you can buy a house for € 5,000.

However, what would be the price of properties in Berlin, Milan, Barcelona and other major cities and capitals in Europe compared to those in Sofia?

In the table you can see average prices in euro/sq.m. for the purchase of new residential construction in Sofia and Europe for 2019

Property prices in Sofia compared to Europe

Compared to other European capitals, Sofia has the lowest prices for new housing construction in Europe, even after Belgrade, by about 60%. However, someone would say that it is likely that the Serbs have higher incomes than those of the Bulgarians. Then let's compare them:

Serbia Bulgaria
GDP (PPPS, 2020) $137.126 billion 

(75th place)

GDP (PPPS, 2020) $164 billion 

(74th place)

GDP per person (PPPs) $ 19 767 

(67th place)

GDP per person (PPPs) $ 23 741 

(60th place)

GDP (No., 2020) $55.437 billion

(81th place)

GDP (No., 2020) $67 billion 

(72nd place)

GDP per person (No.) $7 992 

(76th place)

GDP per person (No.) $ 9 826 

(68th place)

 

If we move from Sofia and Belgrade, it turns out that Bulgaria is one of the countries where it is easiest for a person to own his own dwelling of about 70 sq.m. According to the average salary for Serbia and Bulgaria, to own a dwelling of 70 sq.m. in Bulgaria is almost 2 times easier than in Serbia. An idea is easier in Portugal, Belgium and Norway, and the most difficult it turns out to be in the Czech Republic, Austria and Slovakia.

Another major factor that is very important to mention is mortgage rates. In 2019, the average mortgage rate in Bulgaria was 2.9%, which displaces us slightly after the European average and ranks us between Norway by 2.8% and Croatia by 3%. The best conditions can be obtained in Portugal – 1.1%, and the worst turn out in Hungary – 4.6%.

According to statistics, Sofia reports the lowest house rental prices in Europe. With a price of 4,1 €/sq.m. we line up next to Sarajevo. The highest rent ranking is led by Luxembourg with 30 €/sq.m., followed by Paris with 28.3 €/sq.m. and Oslo with 25,8 €/sq.m.

In order to assess the affordability of own homes, it is necessary to calculate the number of average gross annual salaries required for the purchase of a standardised new dwelling. In this respect, Bulgaria was one of the countries with relatively affordable own dwellings (5 times the average gross annual salary).

Moreover, Bulgaria reports a relatively large housing stock per 1 000 citizens (566.2 dwellings per 1 000 citizens), which shows that the intensity of development, both in terms of started and completed dwellings, is at a good level.

If prices in Sofia currently seem too high, then there is no evidence to suggest that they will fall in the long term. Over the next few years, loan interest rates are expected to persist or fall, which will at least maintain the slight trend of price rises.

In case you are willing to buy a property in Sofia and have decided that you have to wait some year or another for the prices to fall, we will disappoint you, because in the long run this is not expected. There is always the possibility of momental declines in certain situations, but realistically, Sofia is developing besides infrastructure and in many other directions, so it is perfectly normal to become a more expensive and expensive city.

For this purpose, we used data from our experience, from the NSI, as well as from deloitte's international report – Property Index, where Bulgaria was first included.

Here you can see an upcoming residential complex next to a metro station with prices from 780€ per sq. m. M.

TAGS: property prices in Sofia, house prices in Sofia, will property prices fall, will there be a drop in property prices.
TAGS: property prices in Sofia, house prices in Sofia, will property prices fall, will there be a drop in property prices.

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