According to data from the Registry Agency, formalities for 20 185 new real estate deals were performed in Sofia for the first nine months of 2019, being 6% growth as compared to the same period of the previous year. The number of mortgages is 10 683, forming 1/3 of the total number of real estate deals in Bulgaria, also confirmed by data of United Bulgarian Bank (UBB). It was stated at a meeting on Trends in the Property and Mortgage Markets, organized by UBB.

300 guests attended the event, including owners and managers of credit intermediaries, real estate agencies and construction companies, and the data was presented by Borislav Gostev - Head of Trade Partners Management Department at UBB. “It was our most successful year with a stable market and high affordability of residential properties and loans”, said Mr. Gostev. This is due to increased income, historically lowest interest rate levels on the loans, low unemployment and inflation, as well as numerous construction projects, implemented in the last 2 years.

According to UBB data the average loan amount this year in Sofia is BGN 140 000, which represents 73% financing of the properties’ price. With regard to loan types - 78% are for real estate purchase, 7% - for current needs, 15% - for refinancing. Sofia residents prefer longer tenors, as half of the loan tenors are between 21-30 years. Most often real estates are purchased with a mortgage loan by clients aged 30-39, which represent 48% of all Borrowers of the Bank. Another positive fact is that for the first time this year the highest income category (exceeding BGN 3000) marks the largest share - 26% of the capital city residents.

At the meeting Mr. Gostev made an interesting comparison between the interest rates on mortgage loans in 10 large countries. It is once again a proof that the interest rates in Bulgaria are at record-low levels, even compared with countries which economic development and gross domestic product are significantly higher than those of Bulgaria.

 It was discussed that last year’s expectations of a number of financial analysts and bankers about a rise in the interest rates did not happen and that it would be postponed for one or two more years. This is due to various factors, including the consistent policy of low interest rates and the asset purchase programme of the European Central Bank, high indebtedness of many euro-zone countries as compared to their GDP, the macroeconomic risks, related to the trade war between the USA and China, Brexit, the excess liquidity of Bulgarian banks and the intense competition between them.

 Nevertheless, clients should be prepared that sooner or later interest rates will rise and the loan installment should not be on the verge of their repayment capacity. Prudent amounts of all loan installments should not exceed 30%-40% of their income either. “Based on the average loan amount for Sofia, in case of 3-4 times of interest rate increase, most probably by 0.25% each, the monthly installment change would be in the range of BGN 75 – BGN 100”, gave an example Mr. Gostev.