The Housing Market: No Speculators, Cautious Buyers and Interest from Foreign Funds

The euphoria in the housing market is giving way to a healthy cooling-off. However the sector faces a new risk – increased interest from foreign funds in buying entire buildings for rental purposes. Although transactions are still slow Bulgarians’ fear of becoming perpetual renters is sparking a debate over a limit on the number of homes one can own. Against this backdrop and combined with chronic administrative hurdles today’s interest rate hike by the ECB is putting home affordability to a serious test.

This is the summary of the real estate market, outlined during the panel discussion “The Housing Market in Bulgaria: Bubble, Distortion or New Normal?” at the 5th annual conference on construction and investment organized by Manager magazine.

The End of Speculation?

The panic over a bursting real estate bubble and a collapse in transactions is greatly exaggerated. According to Ralitsa Tsenova, CEO of Home2U, comparing flawed statistics over the past few months has created unnecessary fear among consumers. She noted that 2025 was a “market on steroids,” driven by the euphoria surrounding the euro, and if these anomalies are excluded, the market is actually showing healthy growth compared to previous years.

The euphoria has subsided but that does not mean the market is falling. It remains stable. Speculators chasing short-term profits are dropping out, which brings a healthy tone,” commented Tsenova.

This view was strongly supported by Eng. Georgi Shopov, Chairman of the Board of the National Association of Construction Entrepreneurs (NACE), who emphasized that housing should not be viewed simply as a commodity.

“For us the housing market is eternal. It is a basic necessity. How much the price goes up is not as important to the buyer as the comfort of their life. The moment they own a property, they want a bigger one, then a house with a yard. That is why the market is eternal,” Engineer Shopov stated emphatically.

Foreign Funds and Rentals

While individual buyers are becoming more cautious, the market is attracting the attention of large institutional capital. Shopov and Tsenova spoke about inquiries from funds in Asia, Scandinavia and Western Europe. Despite the negotiations the fragmentation of the domestic market is delaying the finalization of deals.

According to Shopov the business model of such funds is clear – purchasing entire complexes of small apartments at low prices to generate rental income. This trend has caused serious concern in the industry regarding the future affordability of housing.

For us as developers this is very profitable – a fund comes along and buys the entire building from us.

Yes, but I do not want my classmates, friends and relatives to be unable to live a normal life and to be like tenant laborers their whole lives,” warned Eng. Shopov, citing Western Europe as an example, where fewer than 20% of people in major cities can afford to own a home.

As a precautionary measure he proposed the idea of a limit on the number of homes a single entity can own. Assoc. Prof. Dr. Krasen Stanchev (IME) however countered that such a restriction is ineffective and that capital will always find straw men or accounting loopholes to circumvent it.

Administrative terror and “vertical ghettos”

The main driver of high prices remains not market forces, but state and municipal absurdities. Assoc. Prof. Stanchev gave the example of a brand-new luxury building that has been blocked for over two years because “Toplofikatsiya” cannot move a single pipe by two meters. He also pointed out the absurdity of Article 87 of the Tax and Social Security Procedure Code, which blocks transactions even when one of the parties has unpaid taxes.

For his part Eng. Shopov raised the issue of the systematic neglect of infrastructure, for which buyers pay multiple times over.

Residential construction contributes €280 per m² to the treasury. Not a single cent of that money goes toward infrastructure. As citizens, you pay for the infrastructure three times and receive it in a medieval state.”

The lack of an adequate environment also poses another long-term risk. Levon Hampartzoumian warned that compromises on the quality of life around new projects will lead to segmentation. In his words if a percentage of people in a luxury building stop paying maintenance fees it quickly deteriorates and the wealthier owners leave turning it into a “vertical ghetto.”

The Credit Compass

Against the backdrop of these internal debates the breaking news about the ECB’s interest rate hike adds a new variable to the global equation. According to experts, however, the market in Bulgaria is developing according to its own, significantly smoother and more predictable scenario, far from any sense of shock.

Silvia Tomova, founder of Privilege Consulting Services, brings a dose of realism regarding the banking sector in Bulgaria. She commented to Economic.bg that lenders remain exceptionally liquid and loan pricing depends entirely on the country’s domestic deposit base rather than on direct movements in the Euribor (Euribor).

Tomova, however, draws attention to the already established framework and the need for prudent planning, which buyers must take into account based on current regulations.

There is no exodus of buyers; customers are simply much more demanding regarding quality and location. As for financing banks require a minimum of 10 – 15% down payment, insisting on verifying that the buyer actually possesses these funds rather than securing them through consumer loans. Regulations clearly limit the debt-to-income ratio to a maximum of 50%. However our habits call for even greater caution and we advise clients not to exceed a 30 – 35% mortgage burden to maintain their standard of living and have a buffer in case interest rates ever change.”

According to her the increased financial literacy of Bulgarian buyers is a sure sign that the market will navigate the upcoming economic processes smoothly, without leading to a crisis or a wave of delinquent loans.

Translated with DeepL.