It has started humbly, but 2024 is expected to be a year of interesting political developments. At a global level, there will be elections for the President of the United States and for the European Parliament. At a local level, in Bulgaria, a rotation of the government is expected, which means that, according to the preliminary agreements between the governing parties, the position of the Prime Minister will be taken by Mariya Gabriel (of the GERB party; currently at the position of Deputy Prime Minister), who will replace the current Prime Minister – Nikolay Denkov (of the We Continue the Change party) – in March. For now, it is still questionable whether this switch will trigger the termination of the mandate of some of the ministers.
Although politics has an impact on the business environment, the development of the real estate market is stable. It seems to continue to enjoy high demand, driven by both local and foreign investors. Experts expect a decreasing inflation. This is a condition for Bulgaria’s acceptance into the Eurozone in 2025 and, therefore, the main political goal of the ruling parties
According to Eurostat, the annual inflation rate in Bulgaria for December 2023 is 5.0%, which is 1.6% higher than the general inflation rate in the EU (3.4%) but significantly lower than the inflation rates in the Czech Republic (7.6%), Romania (7%), and Austria (5.7%).
For 2023, the front interest rate is 2.54% (the average interest on mortgage loans for consumers is approximately 2.6%). For now, there is no information on significant changes in interest rates in 2024. The Bulgarian National Bank’s statistics from the end of 2023 demonstrate an 18.8% annual increase in housing loans. In fact, the positive development of the housing market in 2024 is an expected trend. This is also a consequence of the increase in the incomes of employed persons.
Foreign investors no longer see the country as a cheap labor destination. Especially after wages have skyrocketed over the past two years as employers compete to hire the scarce skilled labor available. This, for example, is one of the conclusions of the survey of Advantage Austria. As to the traditional concern for the long-term investments related to the negative demographic growth in the country, Bulgaria has adopted a financial policy whose goal is for the average incomes in the country to reach 65-70% of the average European incomes. The expectation is that such an income level will stimulate Bulgarians living abroad to return to the country. This is already happening in some economic sectors: energy, mechanical engineering, and the IT sector. We expect the tendency to continue since Bulgaria has secured its membership in the Schengen Area by air and sea as of March 2024.
After the decision of the EU Court of Justice which lifted local (Bulgarian) law restrictions EU citizens used to face when buying agricultural land in Bulgaria, we expect possible shifts in the agricultural land market and the entry of institutional investors into the sector.
The office space market in Bulgaria is dominated by the demands of IT companies. The IT sector is second in terms of added value in the country’s economy. The sector is still experiencing the consequences of the so-called “home office wave,” but the return of businesses to office buildings is already observed. It is expected to get more obvious, especially in light of the latest top news generated by the sector. Specifically, in December 2023, Amazon Web Services donated USD 1 million to INSAIT to launch a faculty position in automated thinking. The donation will be used to jump-start the field of automated reasoning by providing salaries for professors and scholarships for incoming students (Ph.D.s., masters, and undergraduates). At the same time, on January 15, 2024, INSAIT launched a Bulgarian AI tool designed to serve Bulgarian state institutions, businesses, and the general public. BgGPT is the first open-source AI model of the latest generation in Bulgarian. With its launch, Bulgaria became one of the few countries in the world with its own GPT system, taught in its own language.
By Elena Todorova, Co-Head of Real Estate, Schoenherr Bulgaria
This article was originally published in Issue 11.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
