What determines prices in the property market?

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One of the latter pieces sparked a heated discussion in the comments. Of course, the biggest pain of Plovdiv residents was not overlooked – the rise in housing prices. Readers say prices should be in line with wages in the city, and the current situation is due to greed and the desire for profit by developers and unscrupulous realtors.

Using simple facts as an example, we will try to show you what pricing actually depends on.

You’ve probably heard of the butterfly effect, where a flap of a butterfly’s wings in one part of the world can cause a hurricane in the other. In a global world with its close economic and political ties, this is exactly how it works.

1. Housing construction in the country is facing a serious problem – the prices of building materials have increased many times. Naturally, their increase cannot but affect the price of new buildings.

Almost all types of construction products went up in price and for some of them the price increase was unprecedented. Ferrous and non-ferrous metals rose by 200% and wood-based materials by over 100%. There is already a shortage of wood.

2. Europe’s energy crisis threatens to reduce production of aluminium, which is used in the manufacture of passenger lifts, ventilation pipes, radiators, metal tiles, doors and engineering equipment.

3. Logistics problems have worsened.

4. Another non-obvious factor for the appreciation is the shortage of labour. It is known that builders are often forced to reassign workers to priority sites.

5. Real estate price growth depends on the inflation rate and GDP growth. As of July, inflation in Bulgaria reached the cosmic (!) 12.5%. Against this backdrop, housing is growing by ~1.1% each month. The “printing press” of the ECB, which has poured 4 trillion euros into the markets since the beginning of the pandemic, has also affected the growth of inflation and hence appreciation.

6. Demand is much higher than supply. And cheap mortgages with still low interest rates help to buy the “most attractive” objects.

7. The unstable political and economic situation in the world increases the interest in protective assets. Real estate is one of them.

As you can see, pricing consists of a large number of seemingly non-obvious nuances that most directly affect the real estate market. And this is part of the things that make up the price.