Bulgarian Property Investments - Why Are Prices Still Rising
Author: K Damian Qualter BA MBA
Why Bulgarian Residential Property Prices are Still Rising?
The increase in residential Bulgarian property prices in the recent months has brought a disgusting amount of media coverage of the market these days. You can actually read articles about their property investment in almost all daily and weekly newspapers and magazines. Property investment has become an attractive topic even to government officials, whose public statements have caused even more increased hustle around residential property investment prices.
The Bulgarian property investment market is just another free, unregulated market, where the mechanisms of supply and demand command the movement of prices up- or down. At the same time, their unique property investment market has some specific characteristics all its own, which make it an extremely unique market. Some of these characteristics include: their lack of sufficient information; a reaction lag when it is compared to the other sectors of the economy; non-standard product; lack of a mobility of properties, in addition to, buyers and sellers; and a limited number of transactions that are available in one persons lifetime.
What this means is that the smooth mechanisms of their free market economy would be influenced by all of these factors and should be seriously considered when you are analysing the property market for your investment. Any economics student these days would tell you that prices rise when either supply shrinks or the demand for something increases. What has happened on the Bulgarian property investment market this year in particular is that both supply and demand have grown significantly with demand outweighing supply and therefore leading to higher sales prices.
What is more interesting than this is what has actually caused this demand to grow at such a pace in the first place. The size of the population, their combined disposable income, availability of mortgage credits and government actions can influence demand for residential properties is directly responsible for this.
The population of Bulgaria has been decreasing slowly in recent years, but at the same time the poor economic conditions in the countryside have forced many Bulgarians to move to the bigger cities for in search of cheaper establishments. This has led to an increase in the number of potential buyers of property investment in Sofia and the bigger cities. Thanks to this the property investment market has been its most active in these markets and is expected to continue to be in the short and semi-long term.
The number of people is not a sufficient reason in itself for the increased demand for properties; the disposable income of households is an extremely important factor as well. The steady economic growth of the Bulgarian economy over the past few years has allowed some portions of Bulgarian society to be able to earn and save more money.
Disposable income of Bulgarians is even more enhanced by the availability of mortgage loans where there wasnt any before. Although interest rates are still high at 8.5 to 12.5 per cent a year, many Bulgarians have taken this opportunity to be able to enjoy a new home now rather than wait for the right amount of money to be accumulated in 10 to 15 years. The increased competition between all of the commercial banks will cause even more interest rate drops and stimulate the demand for residential properties in the future.
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