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Is there a decline in the demand and sales of luxury properties in Bulgaria? – Analysis for the last 5 years (2020–2025)

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Luxury Real Estate Market: Trends (2020 –2024) During the period 2020-2024 , the luxury real estate market in Bulgaria went through exceptional dynamics and several distinct phases. At the beginning of the COVID-19 pandemic in 2020, there was a momentary slowdown – physical inspections stopped for a short time, and forecasts were for a general decline in the economy and the real estate market. However, reality refuted these expectations. By the end of 2020, interest in real estate, including luxury, began to recover. Buyers with high financial capabilities remained active – the luxury segment is traditionally less susceptible to crises, as wealthy clients view it as a reliable investment and a way to preserve capital value. Luxury home prices not only did not fall, but maintained their levels, and in some cases even recorded a slight increase in 2020. The boom in 2021 In 2021, the housing market – and especially luxury properties – has sharply intensified. The accumulated demand from the pandemic, record low interest rates on loans and increased household savings have created conditions for a “ seller’s market”. The number of transactions in the high-end segment has jumped significantly compared to 2020 – consultants report over 70% more sales of luxury properties in 2021 compared to 2020. Many of these transactions are for spacious high-end apartments and houses in prestigious areas. Prices have also started to rise noticeably – for luxury apartments, the growth reached around 15% on an annual basis in 2021. Many buyers have reconsidered their priorities under the influence of the pandemic: interest in houses with a yard on the outskirts and in multi-room apartments offering more space for a home office and comfort has increased. Thus, 2021 became a record for the segment - activity and price levels surpassed even the pre-crisis peaks of 2008. Peak levels in early 2022. The growth trends continued in 2022, at least in the first half of the year. Market activity reached historically high levels – in the second quarter of 2022, the number of transactions in the luxury segment even surpassed the peak volumes of 2008. Prices for prestigious properties continued to grow, albeit somewhat slower than the mass market. As of November 2022, the cumulative appreciation of luxury homes was about 23% on an annual basis. This appreciation lags slightly behind the average market (where prices for more mass housing jumped by over 20% in just one year), but is still significant. External factors such as the beginning of the war in Ukraine in February 2022 and the sharp increase in global inflation did not immediately cool the luxury segment – on the contrary, many people with capital saw real estate as a salvation from the depreciation of money. The previously low mortgage interest rates, combined with the galloping prices of construction materials, prompted buyers to quickly conclude deals for fear that prices would outpace their capabilities. Cooling in the second half of 2022 After mid-2022, the market began to show signs of slowing down. Uncertainty gradually began to set in – buyers and sellers were waiting for the economic situation to develop. Some investors and builders froze new projects and even stopped green sales in the summer of 2022, trying to escape the peak of expensive construction materials. This led to a paradoxical situation: supply contracted sharply precisely when some buyers also withdrew in anticipation. The limited supply to some extent compensated for the decline in demand by preventing the accumulation of unsold properties. Instead of a decline in prices, the market rather entered a period of balance. By the end of 2022, the number of buyers had actually decreased compared to the peaks of 2021, but only the more motivated and solvent customers remained. Many of them were primarily looking for housing for personal needs (not for investment purposes) and had high requirements for quality in return for the money invested. Thus, the end of 2022 can be described as a period of market consolidation – the luxury segment passed the stress test of inflation and the beginning of interest rate hikes without leading to a price collapse or panic. On the contrary, the market “ normalized” to high levels. 2023 – decline in volumes, but not in prices In 2023, the trend of a slight cooling became more visible, especially in the number of completed transactions. The overall property market in the country recorded a significant decline in transactions – with about 23% fewer transactions in 2023 compared to 2022 (and -28% compared to the record 2021). However, the luxury segment suffered less: the number of sales of high-end properties decreased, but only by about 24% on an annual basis, according to data from the Registry Agency and leading agencies. That is, there is a decline, but it is weaker than the average for the market, which confirms the resilience of this class of properties. Buyers of luxury homes in 2023 are fewer in number, but more serious – inclined to conclude a deal, as long as the property meets their requirements. At the same time, sellers of quality properties are in no hurry to reduce prices. The data show that in about every second transaction with a luxury property in Sofia in 2023 there was no discount on the asking price – the properties were sold at the full initial price. This is a clear signal that price levels remain stable. In some cases, there are even deals above the asking price – about 14% of the deals of one large agency were concluded at a higher than the asking price, with an average +9% increase. The reason – these properties were offered a year ago+ and the new market reality allows for a higher price. Overall, in 2023, the prices of luxury apartments in Sofia increased by a moderate 5-10 % compared to the previous year, while the increase in prices for mass housing was greater (over 20% per year in places). This shows that the luxury sector has moved into a mode of slow but sustainable growth, instead of explosive jumps. Deals have decreased to more normal volumes, which experts even define as a “ healthy” development after overheating – the market is avoiding a bubble, adjusting smoothly. The situation at the beginning of 2024 In 2024, the luxury real estate market is already showing signs of stabilization and a new upswing. According to preliminary data in large cities, the number of transactions is starting to increase slightly again compared to the decline in 2023. In Sofia, for example, about 12-13 % more transactions are reported in 2024 compared to the previous year, 2023. This recovery in activity is due to the adaptation of participants to the new conditions - buyers have become accustomed to higher inflation and interest rates, and sellers - to the slightly smaller circle of buyers. Luxury real estate prices continue to grow moderately. In the capital, for example, there is about a 10% increase in realized prices in 2024, according to agency data. The average price of a luxury apartment in Sofia reaches approximately €2,500/ sq m in 2023-2024 . (at ~ €2200/ sq.m a year earlier), and for the most prestigious high-end homes – around €3500/ sq.m. In emblematic locations such as Doctor's Garden and around the temple-monument " Al. Nevsky", elite properties are being sold for €7000/ sq.m – absolute records for the country. These extreme values emphasize that the supply of truly unique properties is scarce, and when such a property comes on the market, buyers are ready to pay a fabulous price. Trend Summary: Looking at the last 5 years as a whole, has there been a decline in demand and sales of luxury properties? The answer is “yes, but temporary and relative”. After a strong upswing in 2020-2022 , the market in 2023 saw a decline in transaction volumes, but without a collapse in prices or a permanent withdrawal of interest. Rather, the sector has moved to more normal levels after the exceptional boom. Demand has not disappeared – on the contrary, the high interest continues, buyers have simply become more careful and selective. Sales have decreased compared to the peak of 2021, but in 2024 there is already a stabilization and new growth in activity. Luxury properties have solidified their reputation as a sustainable asset, less affected by economic shocks and which quickly recovers from temporary downturns. Luxury apartments vs. luxury houses In the high-end property segment, there are differences in the dynamics between apartments and houses. Both types have seen strong growth in demand since 2020, but buyer motivation and market conditions for them have their own characteristics. Luxury apartments: Urban luxury apartments (especially in the capital) have traditionally formed the backbone of the prestigious real estate market. After the initial pandemic shock, the demand for modern, spacious apartments in prestigious neighborhoods increased significantly. In 2021-2022, buyers of this type of property were driven by the desire to invest their savings in a stable asset protected from inflation. As a result, large urban apartments – with 3 or more bedrooms, in new buildings or completely renovated aristocratic cooperatives – became the most sought-after. Their prices skyrocketed by double-digit percentages in 2021 and 2022. In Sofia, for example, the prices of “ high-end” apartments for 2023 are already ~5-10 % above 2022 levels, and compared to 2019, the increase is nearly 50% cumulative. Similar increases are observed in other major cities. Luxury apartments attract interest not only from local buyers, but also from Bulgarians living abroad and foreigners who are looking for a property with a representative location and a high quality of life. Renting out these homes also brings good income - although the yield is traditionally below ~5% per year, in 2022 the number of luxury rental transactions increased by 30%, which also began to improve the return for investors. It is the combination of prestige and yield that makes luxury apartments attractive to wealthy buyers. Another thing is noticeable: by 2023, some of the clients who were initially considering buying a house are shifting to a large modern apartment. The reason is practical - a luxury apartment (for example, a penthouse on the top floor with a spacious terrace) offers similar space and comfort, but requires less care than a house and is often easier to resell in the future. This trend has led to the fact that in 2023 In Sofia, a luxurious furnished 3-bedroom apartment is easier to sell than a house at a similar price. Luxury houses: The segment of elite houses experienced a particular boom during the pandemic. The lockdown and working from home gave rise to an “ escape” to the periphery – many wealthy families wanted to have a house with a yard, away from the city bustle. In 2020-2021 , the demand for houses near big cities literally exploded. In Sofia, this was expressed in huge interest in the villa areas around Vitosha – Boyana, Dragalevtsi, Simeonovo, as well as in more distant but well-connected areas such as Pancharevo, Bistritsa, Lozen. However, the supply of nice houses has traditionally been limited – firstly, because the construction of gated housing complexes requires a lot of land and resources, and secondly, because owners of quality old houses rarely sell. This disparity between demand and supply led to a significant increase in house prices. In 2021-2022, many houses at the foot of Vitosha rose in price by 20-30 % and more. Properties that had been on the market for a long time at unrealistically high prices suddenly found a buyer – simply because there was no alternative, and the clients were determined to buy a “ safe haven” for their families. In 2022, the tension reached a peak – only 10% of the demand for luxury houses for rent in Sofia could be met by the available supply. This meant a serious deficit, which in turn prompted many to buy a house instead of looking to rent, with the aim of a long-term investment. In 2023, with some calming down of the market, interest in houses remained high, although not so massive. The main areas at the foot of Vitosha (Boyana, Dragalevtsi, Simeonovo) had practically no vacant houses for sale that met modern standards. This forced buyers to expand the perimeter of their search: Pancharevo, Kambanite, Malinova Dolina, Lozen, even the Bozhurishte area are now being established as top locations for houses – places that were not so much in the spotlight before. At the national level, a similar trend is observed around other large cities – for example, the surroundings of Plovdiv and Varna are attracting interest with recently built luxury single-family houses and villas (in some cases also intended for second homes/vacation properties). The volume of house sales is naturally much smaller than that of apartments – simply because elite houses are rarer and more expensive. For example, according to data from a leading company in Sofia in 2024, about 50 houses were sold against nearly 250 apartments in the luxury segment. That is, the ratio is ~5 to 1 in favor of apartments. But the importance of house deals far exceeds their number – these deals are often worth over €1 million and set new price records. In 2024, for example, the most expensive house sold in Sofia was an iconic historical property next to the Doctor's Garden, which changed ownership for €8 million. Another record was a house in Boyana (modern, furnished with all the extras), sold for €2.7 million. These amounts show that a market over €1–2 million . exists in our country, albeit narrow. Overall, the prices of luxury houses in 2023–2024 . are holding up and even rising slightly – the most actively traded properties are in the range of €800 thousand – €1.5 million, where about 10% annual price growth is expected for 2024. These are mainly quality houses in the aforementioned areas around the capital, as well as some holiday homes in top locations (for example, seaside villas around Varna). Chart 1 below illustrates the sales dynamics of both types of properties – apartments and houses – in recent years. It shows a sharp increase in activity in 2021-2022 and a subsequent temporary decrease in 2023, more pronounced for houses. By 2024, the trend is again upward for both segments, albeit at a slower pace. <img src="/pic/tinymceup/files/Untitled.png" alt="""" />

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