What does Bulgaria’s euro adoption mean to the country’s residential construction?

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Written by Yasen Georgiev (EPI, EECFA Bulgaria)

“Can we already estimate what the immediate effects of Bulgaria’s euro adoption are on the residential construction of the country? This is one of the most frequently asked questions we try to answer almost on a daily basis in our talks to construction companies in Bulgaria. And the short answer is – probably yes. The longer one is – it depends on which data we look at and their latest availability” – says Yasen Georgiev, EECFA’s Bulgarian researcher at Economic Policy Institute.

Residential complex in Manastirski Livadi, East district, Sofia. Source: unsplash.com

After almost 30 years of having its currency pegged firstly to the Deutsche Mark, and later on to the Euro with a fixed exchange rate, on 1 January 2026 Bulgaria became the 21st member of the euro area. This heavily impacted residential construction and it witnessed the all-time highest number of completed residential buildings and dwellings in 2025. To this contributed the combination of several well pronounced factors – widespread concerns about the overall price increase after the currency changeover, existing inflationary pressure, favorable financial conditions, and the considerable amount of cash that needed to be invested quickly and under some less transparent conditions.

Ever since this historic moment, it has been the release of quarterly data on the performance of the residential segment that has attracted public attention. Has the highest point been reached? Has the growth curve levelled off? Data on home transactions for January-September 2026 show it clearly – property transactions in Bulgaria are on the decline. What is more, the pace of decline itself is accelerating. In Q3 2026, 45,312 property sales were registered, 22% fewer than the 58,184 recorded a year earlier. In Q2 2026 the annual drop was 18% and in Q1 this year it stood at -15%. This, however, does not tell the whole story.

The latest available data on construction permits, starts, and completions is much more nuanced. When floor area is considered, permits increased in Q1 2026 by 33% and in Q2 this year by 4% on an annual basis, while started area grew by 58% and 9%, respectively. In parallel, completed floor area contracted by 44% in January-March this year and by 24% in April-June 2026. What is consistent, though, is that the peak performance in these three categories seems to me be over, at least for now.

Against this backdrop, as data by the Bulgarian National Bank shows, new housing loans continued to grow. In August 2026 their volume was 21% higher than in the same month last year amidst credit activity being backed by continuously low interest rates. 

All this comes to show that drawing any conclusions right now on the implications of the euro adoption of Bulgaria on its residential construction might turn hasty. Thus, the question of what the future direction of the segment would be remains open, at least for the moment. A clearer and more definite answer will be given on 8 December 2026 when EECFA publishes its winter construction forecast report. For sample report or orders, contact us.

Bulgaria’s Resilience and Recovery Plan – Save it or Lose it  

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Written by Yasen Georgiev (EPI, EECFA Bulgaria)

Less than 25% of the funding for its Resilience and Recovery Plan has landed in Bulgaria so far. Last month, the new Bulgarian government, which took office this January, submitted a request to revise its Plan. Will all milestones and targets be achieved and will the country get all payments by the deadline of August 2026?

No reforms, no money

Do you remember the Resilience and Recovery Facility (RRF) the European Commission came up with to assist member states after the pandemic? Unlike traditional EU funds, this instrument in the form of national Resilience and Recovery Plans (RRPs) is meant to provide grants in exchange for specific reforms, making it a performance-based tool going hand in hand with time-bound milestones and targets (i.e. reforms). The completion of the latter is strictly tied to the disbursement of funds for public investments which literally means “no reforms, no money”.

For various reasons, in many EU member countries the implementation of the RRF is not going according to initial plans, and governments are currently submitting requests for revisions. They are to be reviewed and eventually approved by the European Commission. This is the case also with Bulgaria and its RRP that is financed with EUR 5.69bln in grants. As of mid-May 2025, though, the country has received less than 25% of the overall amount in the form of a first installment totaling EUR 1.36bln.

What is now at stake is the remaining EUR 4.32bln

The question is when this sum will be disbursed and whether the disbursement will be in full. The overall completion rate of the milestones and targets Bulgaria committed to in its RRP is at 38%, which stands for 122 finished reforms out of 321 in total.

To make things worse, the respective regulation at EU level says that all milestones and targets are to be achieved by 31 August 2026, and any payment under the RRF is be executed by 31 December 2026.

The new government is trying to speed up implementation and get full access to eligible funding

To address the accumulated delays (resulting also from a series of seven parliamentary elections in three years) and several underperforming parliaments that failed to adopt the respective legislative reforms, in April 2025 the new government submitted a request to the Commission to revise its RRP.

Bulgaria proposes to remove or modify several measures across the plan while cancelling or downsizing projects currently delayed. Since some of the proposed modifications concern outstanding issues under the second payment request, along with the modification request, Bulgaria also withdrew the payment request, with a view to resubmit it following the approval of the amended plan.

The biggest construction-related projects that are to drop out of the new RRP include a programme for the construction and reconstruction of water supply and sewerage systems (EUR 152mln), a project for heat and electricity co-generation from geothermal sources (EUR 123mln) and a pilot project for green hydrogen (EUR 33mln).

Other investments to see reduced funds are the construction of industrial parks and youth centres with an overall cut of EUR 15mln. While funding for all of these projects is to be potentially channeled from other EU programmes, there are projects that will receive more from the RRP than initially foreseen like the construction of the third metro line in Sofia with EUR 33mln in additional funding.

If proposed reforms and modified projects are approved in Brussels, the government expects to get the second and third RRF payment in the course of the year, while all remaining installments are to be disbursed by the deadline in 2026.

Needless to say, this seems like a very ambitious plan given the insufficient performance of the RRP in Bulgaria so far. This could also be seen in the official position of the government – the country may receive all payments by the deadline of August 2026 but will not have time to make all investments. This would mean that the projects underway at that time are either going to be downsized or put on hold until money from other sources is secured.

Segment-level construction forecast on Bulgaria can be found in the EECFA Construction Forecast Report. The new forecast will be out on 23 June. Orders and sample report: eecfa.com

This would impact public investments in Bulgarian construction

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Written by Yasen Georgiev – EPI, EECFA Bulgaria

On 9 June 2024, Bulgarians are heading to the sixth parliamentary elections in the last three years. The lack of stable coalitions and the fragmented political landscape since 2021 will most probably lead to another fragile government construction with vague prospects for a 4-year term in power. This would have a detrimental effect on the absorption rate of EU money, and thus, public investments in construction.

The Bulgarian parliament building in Sofia by Angel Balashev on unsplash.com

Against this backdrop, Bulgaria’s economy is projected to grow by 1.9% in 2024 and 2.9% in 2025 according to the Spring 2024 Economic Forecast of the European Commission. These growth projections could have been significantly higher if public investments in general and government spending in infrastructure and construction in particular were in place. Traditionally, the main sources of public investments in energy efficiency of the residential and non-residential stock, urban mobility, road and railway connectivity, utilities, etc. are EU funds available for Bulgaria. However, as of May 2024 EU funding, along with national sources, prove to be absolutely underutilized for various internal and external reasons. These include the insufficient administrative capacity, the lack of project readiness, new priorities at EU level due to the pandemic (as the RRP was prepared as response to it) and Russia’s war against Ukraine. These setbacks have been additionally amplified by a series of government changes resulting in delays of administrative procedures and prolonged communication between Sofia and Brussels, but also by the lack of long-term mandates for the implementation of deep and sometimes painful reforms.

As of May 2024, the average disbursement rate of all EU-funded programmes and instruments during the ongoing budget cycle since 2021 is around 4%. What is more, EU-funded projects with a more extensive component of public investments in construction are disbursed at less than 2% (see table). In contrast, contracted amounts are ten times higher. Still, this shows a slow pace of implementation given the fact that the current financial framework ends in 2027, and certain instruments such as the Recovery and Resilience Plan (RRP) end in 2026. While funding within the classical Operational Programmes could be used up to two years after the period ends, if projects are duly contracted, the resources under the RRP are not transferable in time, according to the respective regulation.

On the one hand, the low absorption rate is due to the delays in finalizing EU projects within the previous financial framework (2014-2020) and the late approval of the new EU programmes within the current budgetary framework (2021-2027).

On the other hand, this performance is linked to home-made political and bureaucratic deficiencies that struggle with the new concepts for EU funding that is made available provided that commitments to reforms are met within strict deadlines. This is the case with the Recovery and Resilience Plan (RRP) that provides funds for green and digital transition projects based on a detailed reform agenda mutually agreed between Bulgaria and the European Commission. This agenda includes amendments of existing legislation or new laws that have to be passed by the parliament, which in recent years has been either not functioning or preoccupied with domestic issues. This barely left time for unpopular reforms, the majority of which have been avoided by political parties due to the constant prospects for new elections.

As a result, currently, Bulgaria is in the fifth implementation period of its Recovery and Resilience Plan but has met only the respective milestones and targets that are set in the first period (with a deadline in June 2022). Thus, projects under the RRP will have to be either downsized and/or implemented with national funding only.

In parallel, Bulgaria struggles with the absorption of EU money in coal-dependent regions under the Just Transition Mechanism, which secures funding for large-scale investments that also include construction activities. It remains to be seen if similar implementation difficulties will show up with the newly launched ‘Municipal Projects Investment’ programme that disburses national funding only.

This interplay of bottlenecks in utilizing available EU and national funding could be tackled appropriately only if a stable government is formed after the parliamentary elections in June. What is also very much needed is that the new government is reform-oriented and abstains from populist measures. The latter would lead to postponing reforms and thus would limit the absorption rate of the available EU funding, which could negatively impact meaningful public investments that come with the oversight of the EU, and which is likely to keep the economic growth below its potential.

More on Bulgarian construction and the segment-level forecast can be found in the EECFA Construction Forecast Report. The new forecast will be out on 25 June. Orders and sample report: eecfa.com

Bulgaria’s RRP revisited: slow progress, downsized and removed projects, concerns over timely implementation

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Written by Yasen Georgiev – EPI, EECFA Bulgaria

In our post about a year ago we wrote about the opportunities the RRF could bring to Bulgarian construction. After months of no updates, September and October this year brought news for the future prospects of Bulgaria’s Recovery and Resilience Plan (RRP). In late September 2023 Bulgaria’s government submitted a modified version of the RRP to the European Commission (EC), whereas in early October the country submitted in Brussels its second payment request worth €724mln.

Main government buildings Sofia, Bulgaria. Source: Jack Krier, unsplash.com

The modified version, which still needs to be approved by the EC, comes to meet the respective regulation on EU level that grants allocation for all member states are to be updated in June 2022 based on each country’s post-pandemic recovery performance. Since Bulgaria registered a comparatively better economic outcome in 2020 and 2021 than initially expected, the maximum grant allocation under the RRP was reduced by €580mln (from €6.27bln to €5.69bln).

In order to align the RRP with this downward revision, the government proposed a modification of the plan. It concerns 17 projects included in the original version of the plan, some of them extensive construction works.

Notable downsized projects are those linked to:

  • building national infrastructure for storage of electricity from renewables (decrease by around €400mln to €400mln); 
  • modernisation of hospital facilities (decrease by around €80.5mln to around €100mln);
  • improving the energy efficiency of the building stock (decrease by €43mln to €880mln);
  • modernisation of educational infrastructures: renovation of schools and kindergartens, construction of new ones as well as renovation of student residences (decrease by around €1mln to €290mln).

Three projects were completely dropped out of the updated RRP:

  • the construction of an intermodal transport terminal in Ruse (€23mln);
  • the digital transformation of the Bulgarian Post (€52mln;
  • digitalising of the management, control and efficient use of water (€58mln).

Simultaneously, funding has been revised upward for these projects:

  • the extension of Sofia’s third metro line (increase by around €11.5mln to €122.6mln)
  • construction and/or renovation of youth centres (increase by around €1mln to €33mln).

The second payment, which was initially due by the end of 2022, relates to 61 milestones and 5 targets. Projects under this payment are in such areas as energy-efficient street lighting, smart industry, renovation of buildings, digitalisation of the electricity transmission grid, renewable sources, electricity storage, and the digitalisation of railway transport, among others. Reforms within the scope of the second payment aim at the decarbonisation of the energy sector by boosting the uptake of renewable energy and energy efficiency improvements, providing support for sustainable urban transport, making public procurement more competitive, and many more.

Now the European Commission is assessing the request according to the respective regulation since payments are performance-based and contingent on project implementation and reforms outlined in the RRP.

Against this backdrop, there are growing concerns that Bulgaria is substantially lagging behind in making full use of resources available under the plan. The third payment request (€724mln) should have been submitted by the end of June 2023, which was not the case, since even as of mid-October only 6 out of 46 milestones and targets were implemented. A delay is expected with the submission of the fourth payment request (€612mln) that is due by the end of 2023. It includes commitments for meeting 41 milestones and targets, of which only one was implemented by mid-October.

These delays would not be worrying if the available funding was disbursed under the traditional multi-annual financial framework which allows for budget phasing and transfers between funding periods. However, in case of this funding instrument, all measures must be implemented within a very tight frame: the Regulation establishing the Recovery and Resilience Plans requires all milestones and targets within the national plans to be completed by August 2026.

The delay so far has mainly been due to the lack of working parliament and a political instability over a period of two years. Nowadays, under the condition of a functioning legislative body and a government, which has a supporting majority in it, it remains to be seen how Bulgaria will catch up in channelling these resources in its economy for the sake of the comprehensive and horizontal green and digital transition that all EU countries are currently facing.

Check out the forecast for Bulgaria’s construction sector up to 2025 in the EECFA Forecast Report. Orders and sample report: eecfa.com.

What opportunities the RRF can bring to Bulgaria’s construction

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Written by Anita Dangova, EPI, EECFA Bulgaria

Bulgaria’s Recovery and Resilience Plan (RRP) aims to facilitate economic and social recovery from the COVID-19 crisis and to create a more sustainable, equitable, and successful economy. It includes a set of schemes not only to restore the economy’s growth potential, but to boost it, too. In achieving this, several construction projects to increase energy efficiency and decrease CO2 impact are to be implemented in 2023-2026.

The official cover of Bulgaria’s RRP; Source: National Recovery and Resilience Plan of the Republic of Bulgaria

How the RRP will impact housing construction

One of the major projects provides support for sustainable energy-efficient renovation of the housing stock since, currently, only 7% of the floor area of occupied residential buildings complies with modern energy efficiency (EE) requirements. The project, to be launched by end 2022 with an implementation period till 2026, will attract a total of EUR 607mln under the Recovery and Resilience Facility (RRF). Multi-family residential buildings will be eligible for financing nationwide and renovated units have to achieve 30% primary energy savings. Residential buildings to be financed under this scheme are divided into two groups depending on the time of application of owners’ associations: 

  • applications until March 2023: 100% of the project funding will be provided from the RRP, 
  • applications from April 2023 to December 2023: 80% of the project funding will be provided under the RRP, and 20% will be in the form of self-contribution. 

Another project with an implementation period till 2025 is dubbed “Program for the financing of single renewable energy measures in single-family and multi-family buildings”. Total planned funding is EUR 123mln (EUR 72mln from the RRP and EUR 51mln in the form of national and private co-financing). The project aims to increase the use of renewable energy in final energy consumption in households by financing new solar systems for domestic hot water and photovoltaic systems. There are two measures:

  • construction of solar systems for domestic hot water supply. The maximum amount of grant per individual household is to be 100% of the cost of the system, but no more than EUR 1000;
  • construction of photovoltaic systems up to 10 kW. The maximum amount of grant per individual household is to be up to 70% of the system cost, but no more than EUR 7700.

How non-residential construction will benefit from the RRP

One of the projects finances – between 2022 and 2026 – the sustainable energy renovation of non-residential buildings owned by municipalities and national authorities (regional administrations, ministries); the Bulgarian Academy of Sciences; public-private partnerships for buildings in the field of production, trade and services; non-profit legal entities, municipal enterprises, and commercial companies. The project consists of two components: 1) EUR 189mln (without VAT) to public buildings; 2) EUR 120mln (without VAT) for manufacturing, commercial and service buildings.

Continue reading What opportunities the RRF can bring to Bulgaria’s construction

Potential impact of the war in Ukraine on the Bulgarian construction market

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Written by Yasen Georgiev, EPI, EECFA Bulgaria

Like elsewhere in the EECFA countries that are not directly impacted by the war in Ukraine, construction market in Bulgaria entered a period of an increasing unpredictability. What stands behind is an interplay between domestic and external factors.

The Bulgarian construction market entered 2022 with a mixed performance: booming residential construction, stagnating non-residential one and a rather heterogeneous civil engineering. Residential construction benefited from favourable financing conditions and fears for inflation that turned property investments into a safe haven. At the same time, non-residential construction was struggling to recover from the Covid-19 shock. Civil engineering was heavily impacted by the lack of clear future prospects and direction because of the political turmoil in 2021 with three rounds of parliamentary elections, and the absence of new EU funding (Bulgaria’s Recovery and Resilience Plan was approved by the European Commission in April 2022, while the EU’s Operational Programmes are still not finalized).

Sofia, Bulgaria. Source: pixabay.com

The war in Ukraine, however, increased the level of uncertainty throughout the entire construction market. Building material costs and shortage and/or equipment shortage were the fastest growing factors limiting the activity of construction enterprises in February-April 2022. Despite the slow pace, the number of clients with payment delays over the last months was also on the rise. As a result, the overall business climate in the construction sector started to deteriorate rapidly in April (Source: NSI, Business survey in construction).

Simultaneously, the headwind from the pre-war period in the residential segment continues. Compared to Q1 2021, permitted residential buildings increased by 20%, dwellings in them by 8%, and their total built-up area by 14%. However, signs of cooling are in sight: compared to the previous quarter, permitted residential buildings decreased by 3.1%, the number of dwellings in them by 23.4%, as well as their total built-up area by 17.1%. On quarterly basis, started residential buildings in Q1 2022 dropped by 4%, their total built-up area contracted by 10%, although dwellings in them went up by 5% (NSI, building permits issued for construction of new buildings).

Similar trends are to be seen elsewhere. In Q1 2022 permitted administrative buildings decreased both in number (by 45%), and in total built-up area (by 54%) compared to the previous quarter. Issued permits for construction of other types of buildings are less by 8%, and their total built-up area down by 28%. On an annual basis, there is a reduction of issued permits for construction of administrative buildings and their total area, respectively by 35% and 82%. Permits issued for construction of other buildings sank by 4%, as well as their total built-up area by 1.3%. Against the previous quarter, started administrative buildings and their total built-up area shrank by 21% and 51%, respectively. Started other types of buildings also decreased by 6%, as well as their total built-up area by 15%.

What becomes evident from the data above is that the construction market is most likely to keep a high level of volatility triggered by two opposing market forces:

  1. the need for investors to search for shelter from inflation and
  2. the necessity for developers to adjust to market conditions they are not used to (material shortages, constant upward changes in prices of materials and fuels, and labour costs).

In that puzzle, the situation in Ukraine will further affect the sector, surely not in a predictable way and most probably neither in a positive one. However, the government is yet to finally start investments within the Recovery and Resilience Facility in 2022, which, accompanied by unleashing the EU funding from other sources in the years to come, might secure a soft landing for the sector before its potential new take-off when the market regains momentum again.

EECFA (Eastern European Construction Forecasting Association) conducts research on the construction markets of 8 Eastern-European countries, including Bulgaria. The current reports were issued in December 2021 and the next reports will be issued on 27 June 2022. For orders and sample report: eecfa.com

Property demand pushing up Bulgarian residential construction

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Written by Dragomir Belchev, EPI – EECFA Bulgaria

Construction activity

Since the start of the pandemic, the activity of construction companies in Bulgaria was hindered by economic uncertainty, the government’s anti-COVID measures and the lack of workforce due to quarantine or illness. Therefore, during the period of March 2020 – March 2021, NSI (National Statistical Institute) data shows that building construction decreased by 8.4%. However, the sector has signs of recovery as in March 2021 building construction production index increased by 8.0% for the first time compared to the same month a year earlier.

Short-term indicators also suggest the improved confidence of investors after the hesitant 2020. In the first quarter of 2021, permitted floor area was 11.0% more than in Q1 2020, and almost 4% more than Q1 2019. The same trend, but with stronger dynamics, is also observed regarding started floor area. During the first quarter, accumulated construction permits resulted in starting of more than 660 000 sqm., which is nearly 25% more than in the corresponding quarter of 2020, and by 5.5% more compared to 2019.

Sofia (Bulgaria) – Source: unsplash.com (photo taken by Georgi Kalaydzhiev)

Residential property market

Despite the experienced difficulties, residential construction is remaining in the center of investors’ attention due to the growing residential property market especially in the largest cities (Sofia, Plovdiv, Varna, Burgas, etc.). After the initial withdrawal of buyers in the middle of 2020, it became clear that there would be no evident shift on the residential property market.

Regarding the supply side of the market, 15 623 new dwellings were completed last year (Q2 2020 – Q1 2021), which is 17.4% higher than a year ago and is the highest figure in the last 10 years. Still, this cannot catch up with demand which pushed prices up at the end of 2020 and in early 2021. The number of transactions went up in the first quarter of 2021 by 17% compared to the same quarter of 2020, and it is actually the strongest first quarter in the last 5 years. The ongoing housing price increase intensified after 2015. Since then, the accumulated price growth has been over 41%.

There are several factors contributing to the ongoing process:

Low interest rates on housing loans: last year banks improved the conditions of granting loans. The average interest rate on housing loans in March 2021 is 2.75%, which is historic low. The increasing interest in buying a home resulted in a 6% growth of newly granted loans in the period of April 2020 – March 2021 compared to the same period a year earlier. In Q1 2021, 20% of all deals are financed with bank loans but there are significant differences between cities. In Sofia, where buying a property is the most expensive, nearly half of the deals are financed with the banks’ help. In Varna the share is 32%, while in Burgas and Plovdiv the respective deals are 30% and 25%.

Low deposit rates: interest rates on deposits are close to 0% as in the last months some banks started to refuse taking new term deposits, which shifted people’s savings into real estates as the most reliable option.

Speculative investment: investors’ invest in acquiring properties in early construction stages with intentions to re-sell after the completion, which generates additional demand, and increases prices. Additionally, the growing profitability of the real estate market attracts the savings of people working abroad who look for investment opportunities in their country of origin.

Residential construction forecast is available in the EECFA Construction Forecast Report Bulgaria that can be purchased on eecfa.com. EECFA (Eastern European Construction Forecasting Association) conducts research on the construction markets of 8 Eastern-European countries.

Will COVID-19 shake Bulgarian housing?

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How much the pandemic hit construction activity: short-term implications for the residential property market

Written by Dragomir Belchev, EPI – EECFA Bulgaria

Construction activity

Construction sector in Bulgaria, and building construction in particular, was not affected as hard as others by the COVID-19 crisis. Yet, limited economic activity during the 3-month long state of emergency (between March 13th and May 13th) resulted in a drop of the index of construction production during this period by 16.9% on average. In June building construction output was 4.3% lower as companies in the sector are returning to business as usual. But already started residential and non-residential projects are financially ensured and are expected to be completed on time. And the accumulated started projects during the last several years started to materialize and 3660 dwellings were completed in Q2 2020, which is 56% higher than in Q2 2019. On the other hand, the economic uncertainty temporarily cooled down investor thirst in residential projects. Permitted dwellings in Q2 2020 dropped by 29.9%, while in terms of started dwellings the decline was not so dramatic (-15.6%).

The full exposure of the Bulgarian residential construction to the COVID-19 crisis remains to be seen in the months to come. Unemployment rate reached 5.9% in Q2 2020, which is 1.8 p.p. more than at the end of 2019. In mid-term the loss of income will reflect in people’s intention for buying a home, which could have a cooling effect on investments in residential property.

Residential property market

During the state of emergency, activity on the residential property market was restricted due to hampered administrative services. Additionally, the uncertainty regarding the near future made buyers temporarily pull away from the market. As a result, the total number of home transactions in Bulgaria in Q2 2020 shrank by 27.8% over Q2 2019. In Sofia, which has the largest chunk of the market (around 15%), the decline was lower (-7.6%).

During this summer we saw buyers gradually returning to the market, but while they are expecting a more significant price reduction, sellers are still reluctant to make such sacrifice. The shortage of quality property in big cities still puts the market power in the hands of supply with price levels almost unchanged compared to the beginning of 2020. In short-term, demand for property is fostered by 3 main factors:

  • Despite increasing unemployment, there is no major loss of income of people willing to buy before the start of the COVID-19 crisis.
  • Interest rates on mortgages were stable in the last 5 months, and as of July 2020 the average interest rate reached 2.89%, nearing the historic low of 2.85%. During the state of emergency financial institutions started to be much stricter in requirements, taking into account the affected sectors of the economy. In general, banks have the needed liquidity to finance viable projects of both sides – construction entrepreneurs and families buying a home. According to the Bulgarian National Bank data, the total sum of granted loans remain stable except for a considerable negative change in May 2020 when new housing loans decreased by nearly 28% over May 2019.
  • Buying property as investment is popular among people with free money since deposit rates are close to zero. Such investments could record good profitability especially when made before the completion of the construction project.

One segment of residential property market is experiencing a noticeable upturn. Due to pandemic, people are seeking more freedom and fresh air, which is resulting in strong demand for family houses in the agglomeration of big cities or near to them (in radius of 30 km).

Construction forecast for Bulgaria, including residential forecast, is available in the latest EECFA Forecast Report Bulgaria that you may buy on eecfa.com

Bulgaria C-19 situation in construction (status on 15 April 2020)

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Written by Yasen Georgiev and Dragomir Belchev, EPI – EECFA Bulgaria

Physical restrictions

There is no curfew or full lockdown, but there are some physical restrictions most important of which are:

  • Foreign nationals are not allowed to enter Bulgaria (with some exceptions);
  • Introduction of checkpoints at the entry and exit roads of the largest cities (regional centers);
  • All places for public access for gathering of people are closed (restaurants, malls, kindergartens, schools, parks, etc.);
  • 14-day quarantine for all Bulgarians arriving from abroad is mandatory.
  • All employers, depending on the specifics and capabilities, should introduce a remote work for their employees. If it is not possible, employers organize enhanced anti-epidemic measures on the workplace.

The state of emergency, firstly announced on March 13, along with restrictive measures regarding COVID 19, were extended to May 13, 2020.

Construction works

According to the Association of Construction Entrepreneurs, there are no frozen residential construction sites, but it is hard to imagine that the work is going to continue with the same volumes. Additionally, obtaining construction permits is becoming increasingly difficult despite the effort of municipalities to introduce e-services.

Construction works of largest infrastructure projects continue at present, but with slower pace since there are difficulties in deliveries of construction materials. Delays are expected on the Bulgarian part of ‘TurkStream’ due to the obligatory 14-day quarantine for foreign workers who are employed on the site.

We are planning to issue the new EECFA Bulgaria Construction Forecast Report on 29 June 2020. Sample report and order

Anticovid measures in construction

There are no specific anticovid measures regarding the construction sector. Most important current economic measures implemented by the government include:

  • The government will support companies with proven impact from the epidemic by covering 60% of the employees’ wages for up to three months. The initial aid package has been set at approximately €2.3bln, a sum which Prime Minister Boyko Borissov predicts may be insufficient. The list of eligible sectors was firstly narrowed to tourism and catering, later on extended to manufacturing industries. However, this scheme is not meant for companies that cannot prove direct COVID implications.
  • The deadline for annual financial statements and payment of corporate taxes is postponed from end-March to end-June (estimated effect of BGN 800mn/EUR 400mn within the year).
  • Possibility for companies and individuals to postpone loan and interest payments for 6 months.
  • Interest-free loans granted by the state-owned Bulgarian Development Bank directed to individuals, which are in difficult financial situation as a result of the COVID 19 restrictions.
  • Interest-free loans are also planned for companies, but conditions are not clear yet.

Sofia Office Construction: The Beat Goes On (For Now)

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Written by Yasen Georgiev and Dragomir Belchev, EPI – EECFA Bulgaria

Bulgaria’s non-residential construction is set to grow in 2019 and 2020. The positive figures in the latest EECFA Bulgaria Construction Forecast Report are backed by, among others, the accelerated growth in office construction which is to witness the completion of many big projects in 2019-2021. The question is not on whether their delivery will impact the segment, but on how.

NV Tower, Balkan Business Center (left), Sky Fort (middle), Synergy Tower, Sofia Tech One,  Advance Business Center (right); Sources: www.markan.bg, www.advancecenter.bg, www.capital.bg, http://www.aaa.bg

As shown by the 2019 Summer EECFA Bulgaria Construction Forecast Report (which can be purchased here), non-residential construction in the country is to be on a growth path in 2019 and 2020, a major driver being office construction. After bouncing back in 2017, and keeping the momentum in 2018, it is relishing a real revival and is predicted to increase by over 10% on average in 2019-2021.

Office-related construction is mainly concentrated in Sofia where all major projects are located. The city is an attractive destination for companies that benefit from a favorable mix of skilled young population, competitive labor costs and rent levels to establish and expand in spheres linked to Information Technology, business process outsourcing and shared services. Companies in these sectors are active in relocations, often driven by their expansion plans and/or the rising preference of their employees for modern office premises.

Existing office space in Sofia totaled 2mln sqm at the end of 2018. In H1 2019 it witnessed the delivery of 100 000sqm and now looks forward to another 400 000sqm with an expected completion till 2021.

These dynamics are fueled by the peak in permitted office space registered in H2 2018 – an all-time high performance that by far exceeded the pre-crisis record of H1 2008 (265 065sqm).

In H1 2019 another 129 545sqm were permitted, which is still a rise of more than 90% y-o-y. It remains to be seen whether this data on permitted floor space will translate into the size of started office premises and, later on, in the number and volume of completed ones. H2 2015 recorded the peak in terms of started office floor space so far and if it is to be outperformed, H2 2019 and H1 2020 seem to be the perfect timing.

Against the backdrop of the latest development, the question is not on whether the delivery of all projects in the active pipeline will impact the segment, but on how. Demand is awaited to see logical limitations in the future because of skilled labor shortage being on the rise, the increased application of AI solutions and the changing behavior of office employees in favor of more flexible and remote work.

This altogether should keep the present rent levels in Sofia, or even put them under pressure. Rents did not considerably change over the last years and even now continue to be among the lowest in the CEE region. Thus, provided that all projects are delivered, office yields will be questioned. This scenario seems increasingly possible unless a new wave of major restructuring and cost-cutting takes place in countries with higher labor costs.