Will changes in interest rates affect real estate prices?

Yordan Yordanov: “The market is stable, a potential increase in interest rates will not reflect on prices.” Why?

Interest rates on loans have never been as low as in 2023 and have reached levels of 2.1% for clients with an excellent financial profile and 2.5% for clients with a standard profile. By January of this year, banks are lowering interest rates by 2.57. It is known that mortgage loans are directly related to the real estate market. Will the lower interest rates have an impact on property prices in our country? Will there be an increase in interest rates again? This concerns the Bulgarian investor, although the real estate market in Bulgaria has stabilized since the end of the year and the trend is for prices to remain at this level.

Interest rates parallel to property prices

There are many factors that influence property prices. Among them, first comes the periodic inflation, followed by competition and demand. However, Yordan Yordanov, managing director of the real estate agency “Nov dom 1”, is categorical that interest rates are not among the factors. In case of a potential increase, there will be no parallel rise in property prices. “We do not expect an increase in interest rates at all, considering the increase in the deposit base in banks, it should even drop a bit more. This is a very interesting topic for politicians, analysts, and the media, which is currently not covered,” says Yordanov. Loans do affect the market in our country, but not as much as in Western Europe, according to the expert. At the beginning of the new year, the lowest interest rates were recorded so far, and after the decision of the BNB, no increase is expected.

Buyers rely on their own funds when acquiring real estate

Given that the majority of Bulgarians own their own homes, they rely more on resale than on credit flow. According to BNB data, the growth rates of housing loans on an annual basis as of June 2023 remain close to those reported at the end of the previous year, reaching 18% (17.9% as of December 2022). This shows that despite the increase in market prices at that time last year, there is no increase in credit uptake. According to Yordan Yordanov, by mid-2023, less than 30% of transactions are concluded on a credit basis, and over 70% of properties are purchased with personal savings. He adds that the situation in the capital is slightly different in favor of credit transactions. In Sofia, 32-33% of clients use credit to purchase real estate.

The stability of the real estate market will be maintained. These are the forecasts for this year, and interest rates will not affect prices, i.e. both in case of increase and decrease in interest rates, we will rely on stable transactions for now. However, buyers need to be well-informed and prepared for the real estate market. It is vital for investors to explore the various opportunities to find a suitable property, such as turning to professional real estate agencies that have a rich experience and portfolio of secure properties to find a balance in payments.

One of the established real estate agencies in Bulgaria is “Nov Dom 1”, which has been operating in the property market for 12 years and offers excellent deals for apartments, houses, villas, offices, shops, hotels, agricultural lands, and more across the country. “Nov Dom 1” has a qualified team of brokers, lawyers, appraisers, and consultants who can help buyers find the property that meets their requirements and budget.