Bulgaria is getting ready to accept the Euro and fights for Schengen. Will it impact property prices?
The entrance of Bulgaria to an area of euro and the Schengen Agreement has been discussed for a long time. In 2007 the country joined the EU, but did not become a member of the single currency and visa area, so many people, jokingly, call it “half Europe”. Some changes were outlined in 2020 when the country joined the exchange rate mechanism; this can be considered as preparation for the transition to a new currency. The fact caused a lot of debates and fears, including among real estate buyers who are worried about whether they should buy an apartment in Bulgaria today or it is better to wait. The specialists of the Apart Estate agency analyzed all aspects of the problem and are ready to answer the question.
Bulgaria’s entry to the Schengen agreement and the Eurozone – when to expect?
In July 2020, it was officially announced that Republic Bulgaria (RB) joined a European mechanism of a rate exchange. It means that subject to certain terms, the replacement of national currency shall start within 3 years. Meanwhile, the cooperation with other European countries should become closer.
Within 3 years, Bulgarians must fulfill additional obligations:
- Within 2 years before the transition to the euro, the national currency should not be evaluated, i.e. the currency rate should stay more or less the same, i.e. 1.95583 per 1 euro.
- More than 15 laws should be changed and be in line with the European norms.
- To adapt financial and state institutions to the European standards.
In the current situation, all these conditions look quite realistic, so the probability that RB will join the euro area is high.
There is no encouraging data on the entry to Schengen. Currently, the issue is not a subject of discussion. Neither are there clear requirements that must be met. Several states, however, keep to a position that due to the high corruption level, Bulgaria can become a new gateway for refugees who may eventually come to the Netherlands, Germany, and other states with a stable economy.
Meanwhile, the Bulgarians are not particularly worried about being a part of Schengen. Since 2007, they have been able to move freely throughout Europe, travel, study, and work. From another side, not being in the Schengen area is a huge obstacle to the development of tourism as well as business.
How will property prices change when Bulgaria enters the Eurozone?
Changes in the RB status have sparked a wave of disputes about what happens to the real estate prices. Someone is waiting for them to grow. Others are preparing for the economic collapse followed by such negative consequences as demand and prices drop.
Let’s see in details why there are no reasons to be afraid of a significant drop in the real estate market:
- Property in Sofia, Plovdiv, Burgas, Varna, and many downhill ski and sea resorts have always been in demand. These cities, like a magnet, always attracted residents of towns and villages, as well as citizens of other European countries, Russia, and Israel. Industry and private business are quickly developing here; there are many hobby opportunities. Resorts attract investment possibilities; this is a nice place where one can spend a nice sea vacation or a pleasant retirement. Financial attractiveness contributes to stable demand and price growth.
- Transition to the euro, bringing Bulgarian laws and the banking system in line with the EU standards, leads to a higher interest from international companies. This means the arrival of highly qualified specialists in the country, and local people’s salaries increase. According to analysts, Sofia, Varna, Burgas, Stara Zagora, Plovdiv, and Veliko Tarnovo are attractive for business.
- For several years now, prices of property have been quoted in euros. Despite the fixed currency rate, the participants of the deal insure themselves against possible currency fluctuations.
- There are many foreigners among the people who buy apartments, cottages. They love the local climate and good food.
Having analyzed the trends and expectations of the market, we can confidently say that with the admission to the Eurozone, we can expect a slight increase in property prices. Several factors contribute to this:
- The country will be accepted into the system of a single European currency. This means a stable economy, compliance with legislation with the EU laws, solvation or progress in solvation of financial issues. These facts increase the country’s image and investment attractiveness, and, therefore, contribute to the arrival of new businesses, increase in the number of solvent buyers.
- It is assumed that unification with European standards leads to a mortgage rate reduction. As a result, the property demand from people with a low but stable income must increase.
- Currency changes may lead to rounding of prices and their increase. It is expected to affect construction materials, transportation costs, and will eventually make real estate from developers more expensive.
How does the entrance into the Schengen agreement affect real estate prices in Bulgaria? Most likely we should expect their increase. For people living outside the EU, it is a great chance to live, work and travel in Europe.
Despite such optimistic forecasts, there is a risk that joining Eurozone and Schengen will lead to a fall in the real estate market. This might happen due to world financial crises as their consequences are unpredictable.
But let’s return to a question asked at the beginning of the article – is it worth buying a property in Bulgaria now or it is better to wait a few years when the country becomes a full member of the eurozone? According to the Apart Estate experts, it is profitable to buy an apartment now. Most likely, the demand will gradually increase.