Summary of a television interview · Based on the recording of the conversation
In brief
Kliment Robev analyses the Bulgarian housing market against trends in Europe and the US. In his view, high inflation and the Bulgarian mindset that property is the safest investment created euphoria on the market, but the falling number of transactions suggests a peak has been reached. He also looks at real estate investment trusts (REITs) as an alternative to owning property directly.
Key points
- He notes that homes in Bulgaria’s big cities have been rising in price for more than a decade and that the mortgage market has reached around 20 billion leva after growing by 20% in the past year alone, yet the falling number of transactions is the first sign of a change in sentiment.
- By way of comparison, he points to falling transaction numbers in Denmark and the Netherlands, followed by lower house prices there, and to the US, where mortgage rates of around 7% have pushed existing-home sales to a 13-year low, though a shortage of supply keeps prices high; in Bulgaria, mortgage rates are around 2.8%.
- In his view, the main driver of the price rises was fear of inflation: two years ago there were three buyers for every seller, whereas now the ratio is one to one, and since sellers are the more motivated side, he considers a short-term correction plausible.
- Over the longer term he highlights two opposing factors: around 78 billion leva in household deposits that may flow back into property, and the “dark windows” phenomenon – about a third of homes stand empty because property taxes are low, which, combined with possible future rule changes, strong construction activity and demographic decline, could sharply increase supply.
- Comparing direct ownership with shares in REITs, he emphasises the greater liquidity, lower transaction costs and easier diversification of REITs and their obligation to distribute 90% of taxable income as dividends, while average rental yields in Sofia are between 3% and 4%; he acknowledges control as the advantage of physical property and warns that some REITs are caught in the trap of high debt.
- Stressing explicitly that this is not investment advice, he mentions as examples the US company Realty Income, which pays dividends monthly, and Germany’s Vonovia, which owns more than 400,000 apartments, and notes that Bulgarian special-purpose investment companies follow a similar model but suffer from low liquidity.
Context
The conversation looks at whether house price growth in Bulgaria can continue after high inflation and low mortgage rates fuelled demand, while the sector struggles in Europe and the US, and whether investors should look beyond owning property directly.
Views reflect his position at the date of publication and are not investment advice. Regulatory information
