Challenges for Bulgarian Residential Construction
A rise in profit margin is said to be increasingly attracting investors to the Bulgarian residential construction sector, as increases in employment and income, combined with low interest rates on both deposits and housing loans, are pushing residential construction and the property market upwards.
A report from EPI (Economic Policy Institute), however, said that ageing multi-family buildings and a growing number of uninhabited properties remained as major challenges ahead for the housing stock in the country.
EPI is the Bulgarian member of EECFA (Eastern European Construction Forecasting Association) – the forecasting association conducting research on the construction markets of eight Eastern European countries.
Yasen Georgiev and Dragomir Belchev at EPI reported that residential construction and the real estate market in Bulgaria continued to be a focus for investors and developers. They said the turning point was in 2016 when the sector registered growth of 31.1%, and they added that it was expected to increase in double-digit terms in the period up to 2019.
These developments were said to have had a direct correlation with improved living conditions, as in 2017 Bulgarian GDP grew by 3.6%. Georgiev and Belchev added that according to European Commission forecasts, there were no signs for pessimism as they suggested further growth of 3.8% in 2018 and 3.7% in 2019.
The economic development is accompanied by low rates of unemployment and an increase in disposable income. The report’s authors said that major cities in Bulgaria such as Sofia, Plovdiv, Varna and Burgas were becoming more and more attractive, which was leading to a concentration of the population, creating a strong demand in the residential sector.
Consumer preferences were also said to be changing in favour of quality properties –larger ones and in better locations – that were lacking in the market.
At the moment, supply is still said to be lagging behind, unable to catch up with demand. In the first half of 2018, completed residential newbuilds were 9.1% more than in the same period in 2017. In terms of dwellings, there was a drop of 10.3%, which was said to be proof of the completion of bigger-scale projects.
As a result, more than 50% of the deals are currently being made while dwellings are still under construction.
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