Real estate prices will continue to rise this year, financial analysts warn. Demand continues to grow. Is there already a bubble in the real estate market and what are the risks – answers Svetozar Kostadinov from BNT.
Spas Georgiev is looking to buy a one-bedroom apartment and give it for rent. According to him, this is a good measure against rising inflation, and he will use a bank loan to finance it. Does he see a risk to his investment?
“If there is a time when there are no tenants or no income in the property, it will simply delay its payment, but in any case it will pay off, because properties are always in demand,” Spas Georgiev commented.
About 40% of buyers are looking for housing for investment purposes, according to brokers. Properties announced for sale 2-3 years ago are also being bought. And in some districts of the big cities, there is an increase in prices of over 10%.
“It is approaching the market, which was between 2005-2008, at the moment there is a lot of interest in buying and selling. There are many motivated buyers, there are far fewer sellers, there are far fewer good offers,” commented Ivan Peev, real estate agent.
Increased interest in buying homes and taking out mortgages has prompted the Bulgarian National Bank to increase its countercyclical capital buffer.
The purpose of the mechanism is to protect the banking system from potential losses in periods of excessive credit growth. Whether the BNB will announce a new increase to 2% will largely depend on the movement of mortgage loans.
“If there is a property bubble, and prices fall, and people stop paying their mortgages to the banks because they took an investment and expected to sell the property or rent it out to get their money back, and this is not possible, in fact, the risk will be borne by the banks,” said Nikola Yankov, an investment consultant.
Negative interest rates on deposits also make people look for more profitable assets in which to invest their savings.
“In 3/4 of the real estate transactions now in Sofia should be cash, not credit. That is, it is clear that people simply transfer their money from zero-interest deposits to real assets, fearing inflation,” said Tsvetoslav Tsachev, investment consultant.
Despite the BNB measure, brokers expect the demand for housing to continue in the coming months, and the growth of prices to continue, but at a slower pace.