This fall, the arrival of colder weather in Bulgaria can also be felt on a market that for years has been suffering from overheating: real estate. With cheap credit widely available for buyers in Bulgaria, the upward residential prices trend couldn’t be stopped even by the COVID-19 pandemic, largely expected to cool off the real estate market in the country.
That didn’t happen. The trend continued, and over the last year, residential prices in Bulgaria have gone up by 25% on average, according to industry experts who are cautious not to call the situation “a bubble.” Earlier this year, it was reported that Sofia, Bulgaria’s hottest market, saw deals at 3,000-3,500 EUR per sqm for flats in prefabricated buildings on the capital’s outskirts.
Bulgarian housing prices: 100,000 euro gets you nowwhere
“It’s safe to say that 100,000 EUR gets you nothing in this city,” says Iliyana Ivanova, a PR manager in Sofia. “And on top of that, the supply is barely trickling on a good day. Everything is expensive, but weirdly, there’s also nothing to buy.”
But despite that, like many other young Bulgarians, Iliyana continued her search for a dream apartment. It’s just what Bulgarians do. Owning a home, as every Bulgarian grandparent would tell you, is the goal and validation of success. But for how long?
“In our national psychology, there are two distinct values. One is to have one’s own home, and the other has to do with educating one’s children. Home is a symbol of family, togetherness, and protection. It provides the security we feel we need most in times of crisis and turmoil. Centuries back are the roots of this need for security and stability,” tells 3Seas Europe psychologist Sofia Shtereva. “It is no coincidence that one of our greatest fears is to be robbed of our home. We take care of the home, we protect it from curses, and when a house is built, an offering – a “curban” – is made. It was and still is a priority for Bulgarians to have their own home, regardless of whether they can afford it.”
Sofia’s empty flats
With Bulgaria still at the very bottom of the EU’s prosperity list and a minimal monthly salary not even reaching 400 EUR, owning a home seems to be out of reach for many. And yet, in the second quarter of 2022, 63,928 real estate transactions were registered throughout Bulgaria. For comparison, the first quarter of the year saw 48,875 such deals.
In our national psychology, there are two distinct values. One is to have one’s own home, and the other has to do with educating one’s children
Sofia Shtereva, psychologist
But with a global recession looming, the war in Ukraine, a short distance away from Bulgaria, continuing, and credit policies already getting stringent, markets like Bulgaria might be in for a rude awakening with buyers putting their plans on hold.
The latest numbers for Q3 show a small drop in transactions to 62,459. But a lot has been done prior to that. According to various estimates, as many as 20-30% of the flats in Sofia are empty, courtesy of buyers who bought them for investment purposes and then locked them up for a better day.
Housing prices and investment imagination
Despite increasing difficulties obtaining those keys to a dream apartment, social anthropologist Haralan Alexandrov doesn’t expect to see a major change in Bulgarians’ attitude towards home ownership. But that might not be because of what your grandma told you as a kid.
“Due to lack of investment imagination buying a home remains a top priority,” Alexandrov says in a conversation with 3Seas Europe. “Simply, a new home gives people psychological security. However, it can be illusory that something sensible is being done. When they feel themselves in a crisis, or one is approaching, our countrymen grasp for the home.”
Bulgaria, and other countries in the CEE region, are largely defined by the need to own one’s place, no matter the cost. While in Germany, some 80% of the population lives their whole lives in rented properties – with companies acting as landlords owning thousands of apartments – the situation is reversed in Bulgaria. Sociologist Yuri Aslanov of the social and market research company AFIS estimates that around 80% of Bulgarians currently own a home.
Renting culture to disrupt housing prices
And yet, Aslanov is starting to see changes. “It has not been demonstrated that housing provision is a top priority at this time. Over 80% of Bulgarians currently own a home. However, those who want to acquire a new home are not 20% of the rest. This part is either living in rented accommodation or planning emigration. For another very small part of that 20% share, acquiring a home is a priority now. These are mostly young families, people from the country who want to migrate from smaller to bigger cities,” observes Aslanov. The change from owning to renting is underway. However, as Aslanov notes, “it’s very, very slow.”
Over 80% of Bulgarians currently own a home. However, those who want to acquire a new home are not 20% of the rest
Yuri Aslanov, sociologist
Meanwhile, those who can afford to make the jump to homeownership are facing problems on their own. “The priorities of Bulgarians today are different. They are mainly related to the cost of living,” says Aslanov. “For example, you may have a home, but it is getting harder, meaning more costly, to maintain it. And then, one needs to put food on the table too.
The rank of priorities at this point are fear of getting poorer, fear of losing a job, and fear for health. And down the ranking, we see home ownership. At least, that’s what the people we survey say. And yet, let’s not forget that it is embedded in our national psychology to please our children with decent housing. It is because of this tradition carried over from history that we talk about having an atypical structure of home ownership in Bulgaria.”
After two years of waiting for that one apartment to appear and facing rapidly growing prices and fierce competition in her top choice district, Iliyana Ivanova changed her strategy but not her investment plan. Like thousands of other Bulgarians, she looked south of the border and acquired a small apartment in Greece for a price she was more than happy to pay. “I still got my safety net. Only in a different country.”
