Episode 78 - Entering the Future: Opportunities for the Real Estate Market in 2024

Financial Outlook: Currently, the average mortgage rate is holding steady at 2.8%. Even one bank is touting a promotional rate of 2.18%, highlighting the opportunity for lower home loan costs. Bankers' medium-term forecasts point to a potential imminent 0.5% rise in the average rate, as well as a tighter assessment of customers' ability to pay. It is important to note that higher income customers continue to be at an advantage for mortgage approvals.

Environmental Trends:

In the coming years, energy transformation in the construction sector is becoming a must-have part of the industry, not just a fashionable trend. It's no longer a surprise that from 2030, new buildings will be required to deliver zero carbon performance. This will undoubtedly have an impact on the cost of construction as investors and buyers adapt to the new sustainability standards. On the other hand, the quality of the end product will be seriously enhanced and consumers will enjoy exceptional buildings for living in.

Professional Environmental Infrastructure: Buildings considered "green" are no longer just an exclusive luxury, but the standard, especially for buyers born after 1995 who actively support the cause of preserving the planet. Requirements such as the installation of heat pumps, central heating, SMART house preparation and solar panels are no longer considered additional "extras" but are expected as minimum standards for any home. Water facilities in buildings are also becoming an important factor in reducing carbon emissions as an additional element for sustainability.

Energy Certificates: certifying buildings as energy efficient is becoming a key practice. There are now three types of certificates that certify the energy efficiency of buildings. Some banks provide preferential mortgage rates if the property has such a certificate. In the future, this may even become standard practice, where the lack of an energy certificate may lead to a refusal of credit.

All of these factors highlight not just modern trends in construction, but rather the urgent need for change in industry standards and practices. Such innovations not only improve the everyday comfort of occupants, but also have long-term benefits for the environment and the sustainability of urban environments.

Property Trading: At the current time, sellers are not actively expressing a desire to sell their properties, especially those purchased for investment purposes for future resale. However, foreclosure filings with the Registry Office have increased by 50%. This rapid upward trend highlights the changing dynamics of the market, where the first signs of potential pressure and challenges are emerging for people facing difficulties in repaying mortgages.

With an increased number of foreclosure filings, there is growing interest and concern about the financial sustainability of some sellers. It appears that there are sellers who have overestimated their capabilities and are now having difficulty managing their mortgage obligations. This turnaround in market dynamics may create new dynamics and opportunities for buyers ready to take action at the right time.

Growing Influence of Shared Offices: Flex offices, also known as shared offices, are becoming a growing factor in business. Every business center is expected to provide such workspaces, making them an important element for the future work environment and an opportunity for new investment in the office real estate sector. New office occupiers are expected to expect a 'home-like' experience, i.e. new offices will increasingly become more of a place to entertain and meet than simply a place to work.

Impact of Construction Material and Labour Prices: Despite construction material prices holding steady, challenges arise from rising labour costs. This factor is expected to affect the final cost of new construction, which may affect housing affordability for consumers.

Continued Demand for Housing and Urbanization: The steady growth in demand for housing is further underlined by increasing levels of urbanization, with the number of urban residents expected to grow from the current 60% to 70% by 2030.

Inflation's Impact on the Property Market: At a macroeconomic level, inflation has a significant impact on the property market, surpassing even the impact of interest rates. Developments in economic policy and inflation control strategies have the potential to change the dynamics of the property market.

Tax Changes and Investment: the widely discussed topic of possible tax increases leads to the assumption that the methodology for their assessment will undergo significant changes. Historically, the last time this happened was in 2009. Changing the methodology every 15 years becomes a focal point, highlighting the possibility of new tax assessments and, therefore, tax and transfer fee increases. This aspect of the tax change debate offers a view on the evolution of tax policy and its impact on the property market.

International Investment and Bulgaria as a Destination Bulgaria continues to emerge as a high-risk destination in the eyes of institutional investors. However, the entry into Schengen and the Eurozone may change the dynamics and attract new players, especially in the real estate market for buy-to-rent of entire buildings.

Vision for the Future: in conclusion, the future of the real estate market in Bulgaria is shaped by innovation, sustainability and reaction to global trends. The sector continues to provide opportunities for diversity and growth as one of the key pillars of the country's economy.

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