Prices will peak this year

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There are several factors for the residential property price growth. First is the growing of the volume of transactions for new development. Expectations for the price surge after EU accession play their role too. Of course there are overpriced properties as well as cases when the prices of new construction are lower than the ones of existing old buildings.

Foreign investors have their share too for the price growth as well as Bulgarians living abroad, which are not a small number. Home loans grow too.

We have to take into account other two factors too. In the first two months since the start of the year building materials prices grew by 12-15%, which reflected on the new development, price rises. Land plots have much higher prices and compensations for the owners are between 28% and 30% and that plays its role for the construction business.

Real estate prices in the new EU member countries that joined in 2004 approached the values in the old ones. In the capital of the Czech Republic there is a stalemate or even a slow dip in prices of old prefab apartments. Prices there grew by 30-40% in 2001 only. The strong interest in the housing market especially in Prague and the other major cities was a result of the low interest rates. The psychological factor that prices will grow significantly after the EU accession played its role too. Until then most Czechs lived in state-owned housing with fixed rent. So came the nature desire to have their own places. The first news for the deceleration of the price rise rates came a few weeks before the country was officially admitted in the EU.

In Slovakia there is a trend for house price growth. In 2004 price growth in towns was 20%. A large part of the living space in Bratislava is already owned by foreigners, mostly from Germany, Ireland, Italy and Austria. The interest of local buyers also stimulated the development of the residential market. In Slovakia only 309 of 1,000 persons own their homes while for the European Union this figure is 450 per 1,000.

In Hungary small western investors that came in the accession years discovered that the country is not that cheap. The reason behind is that the real estate prices in the last years grow all the time at about 15-20% annually. Currently the rates there are significantly slower. Anyway in Budapest prices do not stop growing. In the different zones of the capital city residential real estate vary from EUR 900 to EUR 2,500 per sq m. For comparison prices in the end of 2003 were between EUR 800 and EUR 1,300 per sq m and in 2000 - from USD 500 to USD 1,000.

In Poland after the residential sector boom in the 90s between 2001 and 2003 the prices kept flat. This resulted in new construction plunge. From the beginning of 2004 the market situation is different. In the capital city Warsaw the prices are on the rise again.

The main speculative idea for the investors in Bulgaria was the expected EU accession in the beginning of 2007. The experience of the Czech Republic, Slovakia, Poland and Hungary shows that real estate prices reach their maximum a few months after the EU accession - usually within a year after that date. Under these circumstances we can conclude that the prices will peak in 2007.