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Smaller houses are being built

The tendency is for the distribution to be close to that of the large apartments, as well as to have no garage in the building

Aug 15, 2024 21:25 578

Smaller houses are being built  - 1

By the first half of 2024, the number of houses in complexes will reach 1,700 count. They are distributed in 112 housing projects. A decrease in their average square footage from about 435 sq.m. in 2020 to 375 sq.m. by the middle of the current year. This is due, on the one hand, to the tendency to move the parking spaces outside the built-up area of the house, and on the other hand – of the increasingly common concept “vertical apartment“ - with more compact rooms, reduced in size corridors and courtyards. Over 1,200 houses in more than 90 projects are under active construction, with a third of them concentrated in the five largest ones. The locations chosen by the investors are the southern arc of the Ring Road, Bistrica, Pancharevo and Lozen, according to data from an analysis by the consulting company Colliers.

Almost all existing complexes are located along the southern arc of the Ring Road. Builders are increasingly focusing on the detached house as a product to meet the available demand. This type of property remains the most popular, followed by a terraced house with a small yard.

The number of house transactions during the period under review (2020 – H1 2024) is around 1,200 per year. The most transactions took place in 2021, which can be explained by the COVID-19 pandemic and the increased desire of people to secure a home with additional space that can be set aside for work/office, as well as a yard or garden to the property .

The majority of all transactions were realized without the use of bank financing, despite the continued availability of favorable credit conditions and low interest rates. The level of affordability (salary to price per sq.m.) of houses in complexes, calculated on the basis of average price per sq.m. and official gross wage statistics are improving. This is mainly due to the increased wages. By the middle of 2024, the indicator is at the level of 0.90 (sq.m. with one salary).

The gross rate of return on a house in a complex for rent is about 3.8% per annum. Purchase “on the green“ and subsequent speculative resale at a higher price after completion is the preferred investment option.

The prices of houses in complexes have risen by more than 45% since the beginning of 2020. At the same time, construction costs have risen by almost 64%. If this trend continues, it is likely that the focus of developers will shift to locations with cheaper land for construction. Prices are expected to continue to rise as a result of the primary supply in this segment (from an investor) not being able to meet the available demand, as well as in view of increased construction costs and appreciation of landed property.

The construction of large projects will continue to be realized in more remote locations, due to the lack of suitable land for construction or its high cost. Despite the serious development of the southern part of the capital, the short-term outlook for the development of residential projects with houses continues to be focused there. This is due to the built road and public infrastructure and easy access by car and public transport. In recent years, increased activity has also been observed in Southeast Sofia – around the villages of German and Lozen, due to their communicative locations and the lower prices of landed properties.

There is an increased demand for houses with sustainable design and technological solutions that, in addition to energy efficiency, also create a more pleasant living environment. This trend is expected to continue as more developers integrate green technologies into their projects to meet increased demand from buyers.

According to the forecast of Colliers, investment house purchases will continue to lose their share, as buying a house for the purpose of living prevails as a reason for purchase. In contrast to the significantly rising interest rates in Western Europe in recent years, the price of mortgage loans in Bulgaria remains close to its lowest level so far. Banks are in a situation of over-liquidity and buyers can get an interest rate below 3.0%, with the deductible amounting to at least 20% of the property price.

You can see detailed statistics on average property prices in Bulgaria by cities and neighborhoods HERE