UniCredit Group: Bulgarian property market past peak

The Bulgarian property market scaled its peak in 2007 and is transitioning towards a more sustainable growth pattern in terms of both prices and number of transactions, UniCredit Group said in its latest overview of Bulgaria and the region. According to the banking group, some 15% of Bulgarian intend to buy a real estate property over the next decade. Demand is highest among the younger demographic and is driven by mortgage availability and expert Bulgarians. At the same time, the number of Bulgarians that can afford a new home remains limited. The acquisition costs per 1 sq m of housing space had doubled to 2.6 average monthly pays by the end of 2007. In an UniCredit Group poll, most of the potential home buyers said they will take out a mortgage loan. Intense competition between mortgage lenders has loosened the screening standards with the repayment period stretching out to 35 years. Some mortgage products on the market cover 100% of the market value of the transacted property. Mortgage loans added up to 2.9 bln euro by the end of 2007, accounting for 40% of household debt and 10% of the nation's GDP, said UniCredit Group. The Bulgarian property market remains stable on the backdrop of the global financial crisis, said the analysis of the banking group. There are indications for a softening on the holiday apartments segment where foreign buyers have been pulling back and the cost of borrowing has been on the rise. The stagnation of the segment was further compounded by planning mistakes in the development of some coastal areas. UniCredit Group forecasts that the demand/supply dynamics suggest a gradual moderation in property price growth over the next couple of years. However, credit growth and the leveling-off of real income will continue to point housing prices upwards. The number of housing units in Bulgaria stood at 3.729 mln in 2006 with 99% privately-owned. Over 80 of homes are old and of poor built. Some 40% of all homes have two rooms.