Interest in real estate continues, and as the economy recovers from the shock caused by the coronavirus pandemic, prices are rising steadily. Data from the National Statistical Institute (NSI) show that housing prices in Sofia rose by a double-digit percentage on an annual basis in the first quarter of this year, a BGNES reporter reported.
The capital is the leader in the country in the fastest rise in the price of residential real estate by 11.6% on an annual basis, as prices of both new and old housing are rising sharply – 11.9% and 11.4%, respectively, national statistics. Compared to the end of last year, housing in Sofia also reported a steady increase of 4.6%.
The reasons for the increased interest can be sought in two directions. On the one hand, the coronavirus pandemic has led to a reorganization of work processes. Many companies have allowed their employees to work from home and this measure seems to be maintained over time. This also led to a change in demand. If before more often people were looking for housing near the workplace or with convenient communication, now the desire for distance from the noise of the urban environment and tranquility comes to the fore.
On the other hand, interest rates on deposits have remained consistently low in recent years. According to the current statistics of the Bulgarian National Bank (BNB) in May 2021 the average interest rates on deposits with agreed maturity in BGN and EUR are 0.09% each. The volume of new time deposits in BGN decreased by 12.6% (BGN 29.9 million) to BGN 208.2 million. Their volume in EUR also decreased by 30.2% (BGN 62.8 million) to BGN 145.2 million. and the fact that some banks have already introduced additional savings storage fees in the market, which logically leads customers to be willing to invest their funds for higher returns. As for investing, the Bulgarian is a traditionalist and prefers investing in real estate in order to obtain passive rental income.
Here we must also add the combination with the permanently low interest rates on housing loans. According to BNB statistics, in May 2021 the average interest rate on housing loans in BGN remained almost unchanged at 2.75%, and the annual interest rate (APR) on these loans was 2.99%.
Offers of banks with lower interest rates than the average for the offered housing loans can also be found on the market. For example, Fibank offers consumers an interest rate of 2.71%. The financing offered by the bank is in the unlimited amount of the loan and up to 90% of the market value of the property. Fibank (First Investment Bank) also has a special offer for refinancing a mortgage loan from another bank, and depending on the individual credit rating of the borrower, the bank may pay the due costs for notary and state fees related to the establishment of a mortgage, in the amount of up to BGN 1,200. And in the tense pandemic situation, anyone wishing to study the conditions for a housing loan can also take advantage of the video consultations that the bank offers to consumers.
At Raiffeisenbank, the interest rate on newly issued mortgage loans is slightly above the market average – 3%. As it is offered to consumers whose salary is transferred to the bank. The maximum repayment period is 30 years. Postbank offers a promotional fixed interest rate in EUR for the entire loan term from 2.99% to 4.99%, and customers can choose the loan term for 10, 15, 20, 25, 30 years. The bank also gives the opportunity to submit an online application. At DSK Bank, the interest rate on each loan agreement can vary between 2.6% to 3.99% (variable interest rate for the entire loan period) and is determined individually, taking into account factors such as individual client profile and type and parameters of credit.
These trends lead to an increase in demand for real estate, and hence to an increase in their prices. To all this we must also add the traditional fears of the Bulgarians that the forthcoming introduction of the euro will be followed by an increase in inflation, and investment in real estate is a natural protective measure to preserve the value of savings.