Housing affordability in Sofia has improved since the pandemic, making it one of the few capitals in Central and Eastern Europe (CEE) to experience this positive trend, according to a report by Colliers International. The consultancy examined housing affordability from two key perspectives: the ability of an average salary earner to secure a loan from a bank based on monthly payments equaling 30% of their income, and the ratio between average apartment prices and annual incomes. In Sofia, strong wage growth has played a crucial role in enhancing affordability, with average wages nearly doubling compared to 2024.

In contrast, Bucharest has seen a slight improvement in the ratio of house prices to income, though high interest rates have diminished the favorable lending conditions available to borrowers. Meanwhile, the situation has worsened in other CEE capitals like Prague, where mortgage rates have risen significantly and housing prices have outpaced the improved household incomes. Other capitals, such as Bratislava, Warsaw, and Budapest, have also seen a deterioration in affordability. In these cities, higher mortgage rates, coupled with significant increases in home prices, have pushed affordability further out of reach.

Colliers notes that in most cases, homebuyers are two-person households with combined incomes, making it easier for them to manage mortgage repayments compared to single buyers. Additionally, those with higher incomes may find it easier to secure more favorable loan terms, with some banks allowing up to 40% to 50% of household income to be allocated to loan repayments.

In terms of prices, Sofia's housing market has experienced a 60% increase in home prices since 2019, with the average cost per square meter reaching €1,600 in 2024. By comparison, Bucharest’s average home price has risen by 48% to €2,150 per square meter. However, housing in Prague remains the most expensive in the region, with an average price of €6,295 per square meter, reflecting a 69% rise since 2019. Other cities like Warsaw, Bratislava, and Budapest have also seen substantial price increases.

Renting a home in Sofia is comparatively more affordable, with the average rent per square meter at €7, marking a 40% increase since 2019. Bucharest follows with €10 per square meter. Other CEE capitals, such as Warsaw and Prague, report significantly higher rental costs, with Warsaw leading at €19.60 per square meter. Despite these increases, Sofia still remains the most affordable rental market in the region.

The demand for residential properties in CEE countries remains high, driven by overcrowded housing situations in places like Romania, Bulgaria, Poland, and Slovakia. Economic stability and relatively lower interest rates have also contributed to this demand. In Poland, the housing market has reached near-historic peaks, while Romania, Bulgaria, and Hungary continue to see robust demand for homes.

Construction activity has surged across the region in response to the growing housing shortage. Traditional property transactions are slowing, but pre-financing deals and partnerships between construction companies and institutional investors have risen. These collaborations often involve profit-sharing or pre-financing models that may not always be fully captured in official market data, potentially underestimating actual market activity.

In the rental property sector, Poland and the Czech Republic are leading growth, particularly in student housing. Poland’s student housing market has expanded by nearly 70% year-on-year, and both Warsaw and Prague are seeing large increases in the number of rental units. Warsaw plans to almost double its rental stock in the near future, while Prague has 2,000 units currently under construction. Meanwhile, Bucharest is also experiencing strong rental market growth, with over 3,000 units in development.

Source: Colliers International