It might sound unbelievable, but homes in Bulgaria have become twice more affordable since the start of the crisis. This means that the number of years needed for an average Bulgarian household to pay off completely a mortgage loan has gone down twice. According to latest data from the Bulgarian National Bank and the National Statistical Institute and to estimates of experts of MKB Unionbank, if people needed 7 years to pay off their loan, now it happens for just over 3 years.

The analyses were made according to international standards used in the USA and Europe, where a home is viewed as affordable if it could be paid off for less then 3 years with the incomes from salaries in a certain household. The analyses made by experts also show that the share of the mortgage loans in the family budget has also been going down. For instance, if in 2009 43% of the total income of a household was used for payments of mortgage loans, in 2012 only 28% of this total budget was used for mortgage installments. This is due to the decrease in the home prices, which led to lower amounts of mortgage loans taken and lower interest rates on bank loans. According to data from the national statistics, the Bulgarian homes are now 38% cheaper than in 2008. 

What are the trends on the real estate market in 2013? According to analysts and home brokers this year is not expected to bring any disruptions in the house market. The prices will remain at the current levels. There will not be any significant increase or decrease in the number of home deals and it will still be difficult for people to receive bank loans. Another trend is related to the lack of good-quality properties. At the same time, all risks related to this market will remain. On one hand this is linked to the continuing growth of unemployment, which restricts the family budget and make people to refrain from purchasing of new homes. On another hand the slow recovery of the European economy reflects negatively on the Bulgarian economy. Most real estate agencies forecast that in 2013 this market will continue to depend on the development of the European economy because the crisis in Bulgaria and Europe is very unlikely to be overcome for one year only. This is why experts in this field believe that the house prices will remain stable.

In 2013, the biggest demand will be registered in properties that fall in the low and the medium price segments. Most deals will be executed at prices ranging from EUR 30 000 to EUR 60 000. Most of the cheap flats are one bedroom ones and are situated in the suburbs of the big cities. According to analyses from several estate agencies, people started to show bigger interest in the 3 bedroom flats as well. This is relevant especially for young families with kids. The house market will be dominated by deals where most of the funds are personal savings rather than loans. It turns out that the Bulgarian households will continue to rely on their personal finance and that mortgage loans will be only a supplement to the home payment. This is due to the economic uncertainty in Bulgaria.

The shrinking foreign direct investments, which were the leading motor of the property market in Bulgaria, have also had a negative impact over these new trends. This is relevant mainly for the vacation and the business property deals where foreigners used to pay huge amounts of money until recently. However, experts believe that the stable growth of the average salary in Bulgaria as well as the lower home prices will bring this market back to life. This is so because people with stable incomes have already adapted to the new market reality and they will increase their purchases little by little.

English version: Kostadin Atanasov