When it comes to home sale negotiations during the pandemic real estate agents quote different price reductions. Some say homes get sold for 5% of asking price, others go down as much as 15%. What they agree on is that quality homes with good location and “trophy” homes get sold with no reduction in price and in matter of days even during the lockdown.
Rental prices have dropped, affected by the coronavirus
Rents have seen a faster and sharper decline in prices compared to sales, as they are more liquid. According to our data in the first month of quarantine rents have declined by 9% nationwide. Rents have suffered the largest decline in Burgas by -6%, followed by Sofia -4%. In Plovdiv, rental prices have fallen by only 1%, and in Varna by half a percent.
Many landlords made special offers for the period of the lockdown. Asking prices got reduced by 15% during negotiations, according to some agencies.
When it comes to the higher segment, not all landlords are ready to reduce prices. Many Bulgarians who’ve worked abroad have returned to the country and are looking for such homes.
When comparing longer periods, our data shows that accommodation in Bulgaria is advertised at similar prices as before Covid-19.
An interesting trend is the entry of Airbnb homes into the long-term rental market. These homes are usually more luxurious. Some Airbnb hosts in the capital are even selling their apartments due to the unpredictability of the tourist season. On the sea coast owners aren’t selling yet in hopes of a strong summer season.
Mid-term impact depends on the economy in general
The mid-term impact depends on how the world economy handles the next few months. According to Eurostat forecasts, Bulgaria’s GDP in 2020 will decrease by 7.2% year-on-year.
The restaurant and hotel industry are two of the engines of the Bulgarian economy. As they were severely hit by the pandemic this will inevitably affect overall consumption.
Bulgaria is a big importer and the country is taking advantage of lower prices of raw materials, according to Georgi Angelov, senior economist at the Open Society Institute. Energy prices have dropped dramatically and this is helping production.
In general, most experts give the same forecast – if there is no strong secondary wave of the disease, the economy is likely to recover at a reasonable pace.
Health and housing uncertainty
The initial COVID-19 shock seems to have cooled down the real estate market a bit but without seriously affecting prices. Supply and demand are also recovering quickly. For the past 3 months the market has shifted from a seller’s market to a buyer’s market.
With the removal of measures related to COVID-19, the real estate market in Bulgaria is expected to return to normal, and some even predict a boom in deferred transactions. Real estate agents remain optimistic and hopeful for a busy summer, but June has been marked by an even greater number of new cases and the threat of reestablishing restrictions.
Prolonged quarantine measures risk permanent business closures and higher unemployment, which will have serious consequences for housing.
Banks are becoming more cautious
Georgi Zamanov, CEO of Allianz Bank Bulgaria has expressed his relative optimism about the economic forecast. According to him unlike the 2008 crisis, the health crisis will first turn into a crisis of the real sector and only then into a crisis of the financial sector. The Bulgarian banking system is very liquid and well capitalized. The loan to deposit ratio currently is below 80% in Bulgaria, unlike 2008-2010 when it was about 110%.
A few banks have become more cautious in lending and issue smaller LTV loans in recent months. Allianz Bank for example has increased the minimum self-participation value for mortgage borrowers with 5% for all types of homes for Sofia and the countryside. Interest rates however remain low.
Buyers profile has changed
Active buyers haven’t only decreased in numbers, but their profile has changed significantly.
Buyers now want to buy with cash. They live primarily in the countryside where they can afford to do so. In Sofia 36% of transactions during the emergency were financed by banks, according to Address real estate. Before the pandemic 60% of buyers in Sofia were using loans to finance their home purchase.
Last year the biggest part of home-buyers were millennials, but this new trend has quickly reversed. Active buyers today are around 50 or older. They’ve seen their assets depreciated in previous recessions and are currently looking to invest in the perceived safety of brick and mortar.
Buyers also expect a higher-quality service from their agents. The National Real Estate Association gave an example with home valuations that need to become more precise making buyers feel safer during a transaction.
Ocenime.bg is a property analytics company based in Bulgaria and founded in 2018. The company’s flagship product is the eponymous listings website, which provides sellers and buyers with vrious information to help them make better real estate choices – price data, market dynamics, neighbourhood demographics, crime rates, data on nearby schools etc. Ocenime.bg also offers a suite of analytics products aimed at banks. The company’s B2B offerings help banks utilize the power of data to make more informed decisions throughout the lifetime of a mortgage – from origination, through approval and subsequent collateral appraisals. Currently the company is in the process of expanding the coverage of its products to several markets within the EU.