Sofia- Bulgaria topped the European Union countries in the rate of increase in real estate prices during the year 2024, recording a jump of 16.5%, according to data from the EU’s official statistical survey tool (Europa Romitter).
It is expected that the country will maintain its leading position during the current year, with the emergence of new residential neighborhoods in the capital, Sofia, and major cities, in light of the continuing internal political crisis for 5 years.
Real estate boom factors
Financial expert Tikhomir Toshev explained – in an interview with Al Jazeera Net – that the trend towards joining the Eurozone, the decline in interest rates on real estate loans, in addition to the increase in income and savings, and the Bulgarians’ attempts to protect their money from inflation in recent years “are all factors that contributed to the rise in demand for real estate and the increase in their prices.”
Toshev added, “The current year is expected to be record-breaking in terms of the volume of real estate deals,” noting that the average growth of deals since the beginning of the year at the national level ranges between 8 and 10 percent compared to last year, and it is expected that the price increase in 2025 will range between 16 and 18 percent, despite initial indications that the market has begun to stabilize.
The fear factor that prices will continue to rise, after joining the euro zone on January 1, 2026, plays an important role in stimulating the market and pushing buyers to speed up the completion of deals.
In this context, Toshev said, “Next year, we will first need to adapt to the new currency, understand the conversion mechanism between the lev (Bulgaria’s currency) and the euro, and follow the prices of goods and services. I expect the real estate market to witness a slowdown in the pace of activity, with a decrease in the number of deals, but with prices remaining stable at current levels.”
The financial expert stressed that the Bulgarians themselves constitute the main driver of the real estate market in the country, explaining that “deals concluded by foreigners do not exceed 1% of the total deals, and are not considered to influence general market trends.”
Low interest
In 2022, the US Federal Reserve and the European Central Bank began raising interest rates until they reached about 5.5% in the United States and 4% in the Eurozone, in an attempt to reduce the inflation that followed the Corona pandemic and the energy crisis.
During 2024, central banks began to gradually reduce this interest rate, but Bulgaria was the only country within the European Union that did not have to go through this cycle of increases and reductions, and the banking sector continued to enjoy excess liquidity and high levels of savings.
This situation allowed interest rates on real estate loans to be maintained at an average of about 2.5%. According to Bulgarian Central Bank data, family savings last September amounted to more than 48 billion euros ($55.8 billion), equivalent to 43% of the gross domestic product.
Record high in loans
For his part, financial expert Ivan Stoykov from the MoitePari.bg platform highlighted Al Jazeera Net with an analysis showing that the volume of housing loans in the Bulgarian banking system has doubled more than 4 times over the past 17 years, that is, from the global financial crisis until today.
In numbers, the total housing loans in 2008 amounted to about 3.8 billion euros ($4.4 billion), and today they have reached 16.5 billion euros ($19.18 billion). The Moet Paris.org platform has been following the financial market in Bulgaria for 20 years, analyzing data on banking and credit offers.
Stoykov told Al Jazeera Net that the number of new loans increased over the past year by more than 20%, “which are the same trends that we witnessed the previous year. Currently, loans worth between 400 and 600 million euros are granted monthly.”
This growth in loans comes despite the measures taken by the Bulgarian Central Bank in October 2024 with the aim of calming the pace of lending. “Banks are currently obligated to finance no more than 85% of the property value, for a period not exceeding 30 years, with the maximum monthly installment set at 50% of the client’s income,” Stoykov commented.
Although Bulgarian banks still have high levels of deposits, a new source of liquidity is expected as the country approaches the eurozone. Toshev explained, “Joining the eurozone will free up about 8 billion euros ($9.3 billion) additional, because banks will no longer be obligated to maintain a mandatory reserve of 12%, but only 1%, which will lead to the injection of this money into the Bulgarian banking system.”
The impact of the parallel economy
The parallel economy in Bulgaria represents about 25% of the size of the national economy, according to what was recently announced by Minister of Labor and Social Policy Borislav Gotsanov, a figure that does not come as a surprise to many.
Various studies indicate that Bulgaria leads the European Union in terms of the size of the informal economy, and it is believed that this factor also contributes to the great boom witnessed in the country’s real estate market.
Many Bulgarians seek to legitimize their money by directing it towards the real estate market, in light of the strict rules within the eurozone regarding the source and movement of funds.
In this context, Stoykov stressed that a large portion of this money was most likely directed during the past two years towards the real estate market, “which represents an opportunity for this money to come to light, and this had a noticeable impact on the real estate market.”
The financial expert added that this reality led to an increase in purchasing activity in the real estate market, which helped stabilize prices at their current levels, even if no additional increases were recorded.
Toshev said, “Over the past years, large sums of unofficial money have accumulated in Bulgaria. Some analyzes estimate it at about 10 billion euros, others put it at 15 billion, and there are those who believe it is more than that. It is unofficial money whose size no one can accurately determine.”
Bulgaria is distinguished from the rest of the eurozone countries in that it has so far operated within the Currency Board system, which will be abolished when it enters the European Monetary Union. At the same time, inflation rates are rising rapidly, reaching 5.6% last September, compared to 2.2% in the euro zone.
This phenomenon is described as unusual, and inflation rates often rise for a limited period after joining the eurozone, rather than before. These data are among the factors that make the Bulgarian case somewhat exceptional, as it is difficult to predict the future of real estate prices, whether they will continue to rise at the same pace or move towards stability. However, most analysts agree on one thing, which is that real estate prices in Bulgaria will not decline in the foreseeable future.
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