The real estate market in big cities is getting stable, no drop in prices

Mrs. Bozhilova, judging by the data of the Registration Agency, the housing market has seen a decline in activity this year. How does this affect real estate valuations?

 - I can state that there is no drastic drop in the volume of appraisals that we prepare, and that it is usually not directly proportional to the volume of real estate sales. Expert property appraisals are not always tied to a sale, we prepare appraisals for restructuring, annual revaluation and other needs. We hope for a stable market and even if there are dips, they will not affect the general upward trend in property prices. 

The decrease in transactions has not yet led to a decrease in housing prices in large cities, judging by NSI data. What does your data show? Which are the neighborhoods in Sofia with the greatest growth in market values, are there also those with declines? 

- There is no drop in real estate prices in the big cities, rather there is a stabilization of the market and a decrease in supply, but not a decrease in price levels. On the other hand, demand has not decreased, and thus a deficit is formed, which holds down prices and allows even smooth growth for attractive areas and projects. The secondary market is the tightest right now, while new construction continues to hold high prices. According to the data from the Registration Agency, there is a decrease in the volume of concluded transactions by 5% for Sofia, and in other parts of the country by 10% to 20%, but this is acceptable, since the comparison is with last year, which was a peak for the market . We expect this year to be weaker in terms of volume, but still comparable to last year. The most attractive neighborhoods in the capital and with stable and growing prices traditionally remain the southern ones. Recently, the main factor for buyers of new property is the possibility of finding one, and this is in the neighborhoods with new construction - Malinova Dolina, Krastova vada, Zone B-18 and Zone B-5, Banishora. New construction offers better quality and more amenities compatible with modern lifestyles. In the districts where there is not enough new construction, there is a lack of supply in the secondary market as well, and this trend limits the general supply and thus the prices rise - this is for the central areas, Lozenets, Iztok. 

How would the proposal to update tax assessments affect the housing market and prices if passed by Parliament? 

Here it is very important to comment on what will be the basis for updating the tax assessments. A methodology should be chosen that takes into account the specifics of the real estate market by region, rather than applying a general statistical principle. I want to share what is the practice in neighboring Romania - every 3 years a licensed appraiser makes an expert appraisal of the property to determine its value and tax assessment. There they also have specially developed Standards for the preparation of valuations for tax purposes, as is the practice in the European Valuation Standards. In this sense, it is better to delay the update of tax assessments and to refine the methodology, but not to allow a strategic mistake and mass discontent. 

- Outside of residential, what types of properties are you appraising the most this year?

 We also prepare assessments of a wide range of business properties - commercial, office space and hotels. After the temporary lull towards 2019 and the Covid impact on certain segments of the market, offices and hotels are once again within the reach of investors and corporate clients. New brands are entering the Bulgarian hotel market, new hotels are being built in both the business and spa segments. The tendency to develop concepts in the direction of all-season hotels is emerging. For offices, in addition to the large class A and B buildings, the flexible solutions offered by the new shared spaces and flex offices are also becoming popular recently. Commercial sites, on the other hand, are developing quite dynamically - especially the recently established model of retail parks, which find scope for realization in cities outside the capital as well. 

- What are your expectations for the housing market and prices in 2024? 

I hope and expect that 2024 will be relatively calm and stable while preserving the created economic and political environment. For cities with a developed housing market, I expect minimal smooth price growth, and in places with a less developed market, I assume that there may be stagnation and a slight decline. I believe this will be more of a positive year, but mortgage interest rates need to be watched closely to forecast the market correctly, as well as secondary market supply being watched more closely as many people who bought with investment purpose, it is possible to enter the market because of the increase in taxes.