There are indications of a number of new challenges that could dampen the property market in Bulgaria.
On the domestic front, one is the increased cost of credit, as banks respond to measures to curb credit growth. All banks of any significance have increased the cost of borrowing in recent weeks. In addition, recent reports suggest that this year’s final inflation figure may emerge as higher than initial projections. Even had this suggestion not been made, it is well known that the rising cost of living is certain to have an impact on the disposable income of those within the domestic market who may be contemplating a purchase. Further, new statistics from the construction industry appear to show a slowing down of activity in new residential building. This is said to be linked to a reduction in the number of buildable plots of land, and a shrinkage in the already limited number of Bulgarians who can afford to build a new home.
On its own, these factors would be a matter for concern. However, it must be added to the picture that the cost of foreign-sourced finance, to which foreigners are most likely to have resort, is increasing. Given the significant role played by foreigners in the development of Bulgaria’s property market, this is a matter of some importance.
Banks must behave as banks do, with prudence and caution and with an eye on key factors such as the risk of a loan, the expected yield and the rules of the game as imposed by the central bank. Potential buyers, too, must proceed with caution purely on financial grounds. Before even considering the likelihood or otherwise of making a reasonable profit through selling on a property, a person contemplating borrowing to invest in property has to consider the affordability of the loan. With these factors having finite parameters, the real challenge now is to the property market, which must find the most appropriate way to respond. Further, it is up to the state to establish what, if anything, it could do to assist the property market, given the market’s strategic importance to the Bulgarian economy.
The market’s best response on its own would be to take account of trends and adapt to the realities of demand, both in terms of price and in terms of supply, in the latter case meaning what kind and how many new building projects are embarked on. Second, it is in the interests of the market to work together to ensure that all involved in it operate according to a highly professional and ethical level so as to ensure confidence in Bulgaria’s property market.
The state, in turn, should take a serious look at considering what it could do at a legislative and regulatory framework level to ensure that transactions proceed in a way that is efficient, swift, transparent and that ensures that the interests of buyers and sellers are protected. Most importantly, it needs to unfetter access of all foreigners to all aspects of the market, thus accepting an economic and commercial reality that has enabled the development of property markets in many other countries.
