What lies ahead for the property market in Bulgaria in 2023

The housing market in Bulgaria in 2022 has heated up to such an extent that experts in the field even said that they have never seen such a thing. But despite record high prices, the industry continues to deny there is a bubble. With or without artificially inflated prices, however, this is coming to an end. In 2023 we are looking at a decline in buyer activity, but also in prices. This is clear from a forecast for next year by one of the largest real estate agencies "Address".

Up/down?

The activity on the market will be of a wave-like nature and we will witness frequent alternation of downs and ups. There is a strong possibility that buyers will become fewer than sellers, which will inevitably reduce the number of transactions.

"The general direction of the real estate market will be highly dependent on inflation, the labour market, household bills, the state of small and medium-sized businesses, and political stability," said Gergana Tenekedjieva, CEO of Address.

Active in 2023 will be people looking for a home for their own use. Those with more significant savings will also be among the market participants.

"I think that owners of properties in unpreferred areas and in unmaintained buildings will be the first to feel that they need to lower their prices," Tenekedjieva adds.

She says what will happen to price levels in the coming 2023 will depend on the number of transactions. And that, in turn, will be the result of how well the expectations of the two sides meet. So sellers would do well to listen to buyers and, when asked for a discount, consider carefully why and whether it is reasonable.

What is happening in the rental market?

"In the rental market there is currently an understanding that rates should rise in line with inflation, similar to goods and services. But this is not economically logical or justifiable unless landlords are renting their property at below-market levels," Tenekedjieva says.

She clarifies that rental income is not indexed to the rate of inflation of goods and services, as rents are demand-based and are not labor income in times of low unemployment.

She said what landlords should pay attention to is what tenants' expectations are, how good a tenant they can find, and how good a product they themselves offer.

According to Address, 2022 has brought a number of transformations to the market and set the stage for others. Rising inflation, political instability and the expectation of rising lending rates have caused people without savings to withdraw from the market. Buyers with minimal down payments and with credit covering most of the property's value were left waiting, the company said. At the same time, people with more savings emerged. They put their money into a property to save it from inflation, as keeping it on deposit stopped being a viable option. The past 12 months have stimulated people to rethink their decisions and previous behaviour.

"Consumers have started to prioritise their allocations more carefully and wait longer. They researched the options in the market better before proceeding with a transaction. In recent months, buyers and sellers began to even out their numbers. However, 2022 has seen a high level of activity, driven by still low interest rates and demand significantly outstripping supply," Tenekedjieva added.

Industry regulations

There is no law controlling the real estate market in Bulgaria. There are also no requirements for brokers. Many deals are done in the grey sector and fake listings on websites keep growing. In spite of all this, and in spite of the fact that these problems are known by both the industry and the authorities, no changes have yet been made to lighten the market.

In an attempt to change this and bring regulation in the market, the National Association of Real Estate Brokers (NARB) has prepared a draft law regulating the market. The association's plans are to submit it to parliament after the Christmas and New Year holidays, Iliana Rashkova, a member of the NCBI, told Economic.bg.

"The political situation is getting worse as the years go by, so we will not wait for the formation of a regular government to submit the bill," Rashkova said.

The main philosophy of the draft law is to introduce rules for the operation of the real estate market, to ensure professional training of working brokers and to regulate the establishment of a National Register of Brokers. It should be maintained by a State body and the sanctioning of unscrupulous brokers should be done by the courts and not by a private body (the Chamber). Such regulation could take place at national level - as in Denmark, Belgium, Poland, Portugal, Norway, Slovenia - or at regional/municipal level - as in France.

Through its draft law, the National Association of Estate Agents insists that the control of the industry should be exercised only by the Bulgarian courts and not by the bodies of a private legal entity (the Chamber), to which the Ethics Committee, the Disciplinary Board, etc. have been established. Entries to be made by public officials once it has been established that the applicants meet the legal requirements of education and experience set out in the future law, rather than depending on the subjective judgement of officials in a private body (the Chamber). Vocational training of brokers to be conducted under the Vocational Training and Education Act at an educational institution freely chosen by each broker, rather than at a single Vocational Training Centre attached to a formation of a limited number of real estate agencies.

The National Association of Estate Agents is strongly opposed to the establishment of a private Chamber regulating the industry, as ideas periodically appear. The reason is that in this way the control, sanctioning, issuing of permits, necessary training, would be in the hands of a few agency managers. This idea is lobbyist and serves the interests of a handful of private entities. It will monopolise the real estate market, the result of which will be the destruction of small and medium-sized businesses in the industry, the association wrote in a letter to the media.

Everyone wants changes

"Dobromir Ganev, chairman of the National Real Estate Association (NRA), is also in favour of creating a regulatory framework in the industry. He believes that consumers should be protected at least with a minimum quality of service. In his words, brokers should have a license and there should be requirements for this profession.

For years there have been attempts to establish the framework in question, with the latest attempt being by members of the 'There is such a nation' who were part of the 47th National Assembly. However, the texts remained an intention only, as in October Bulgaria again held early elections.