On 2 August 2026 the Institute for Market Economics published an analysis citing a Bulgarian National Bank calculation: in the third quarter of 2025, residential property in Bulgaria stood 13.8% above its equilibrium level.
The number travelled fast, and in fairly alarming headlines. It is worth understanding what it actually measures — because "overvaluation" here means neither that you overpaid for a particular apartment, nor that a crash is coming.
This piece builds on our market report for the first half of 2026, which covered transaction volumes and price behaviour. The BNB estimate is new information and looks at the market from a different angle — not what is happening, but how much of it the economic fundamentals can explain.
The BNB uses a vector error correction model that compares the observed house price index with a long-run equilibrium level estimated by the model.
That equilibrium level depends mainly on:
Overvaluation is the percentage deviation of the actual index from that modelled level. Which leads to a point that is often missed: higher incomes and lower interest rates raise not only market prices but the equilibrium value too. Price growth alone does not automatically create overvaluation — it appears when prices outrun the fundamentals.
Two facts that rarely make the headline.
First, housing is currently more affordable relative to incomes than through most of the past decade, measured by the purchasing power of the average wage. Over the last five years wages have risen faster than property prices.
Second, the sector is heavy in the economy but stable: real estate activities accounted for 8.2% of gross value added in 2025, and construction supports around 7.6% of employment. These are not the readings of a market in free fall.
The economists citing the data do not expect a repeat of 2008. The concern is about the trend — if overvaluation keeps building, correcting it becomes more painful.
Prices react strongly to sentiment because for many Bulgarians property is the primary store of savings. According to a 2025 survey by the research firm Dynata, real estate remains the preferred form of investment for 39% of Bulgarians.
The logic is understandable: deposit rates are low, and with higher inflation their real return is negative. The result is that part of housing demand is not for living in but for storing value — and that is precisely the part most sensitive to a shift in expectations.
Here the arithmetic is unforgiving, and worth running before the transaction rather than after it.
A buyer who puts down 20% of their own funds loses roughly half of that equity on a 10% fall in price. At the minimum permitted 15% deposit the effect is sharper still. This is not an argument against buying — it is an argument for treating the size of the deposit as a buffer, not merely an entry requirement.
Owners without a mortgage are affected too. Lower values mean a sense of reduced wealth, more cautious spending and smaller collateral in the eyes of the banks. The effect is slower but broader.
Since 1 October 2024, banks have been subject to requirements on loans secured by residential property:
Deviations are permitted, but their total in any quarter may not exceed 5% of loans newly granted or renegotiated in the preceding quarter.
The measures limit the riskiest practices, but they have not cooled the market: as at June 2026 housing loans were growing by more than 26% year on year (indicative, as at August 2026). If overvaluation keeps rising, the BNB has the option of tightening individual thresholds or narrowing the permitted deviations.
For an owner-occupier buyer, nothing dramatic changes. The BNB indicator is macroeconomic — it says nothing about a specific apartment, neighbourhood or building, and that is precisely where the question of whether the price is good gets settled.
The practical conclusions are about discipline:
On every transaction we look at the specific property, not the national index: comparable achieved prices in the same location and class, the discount realistically available, and how quickly the property would sell if needed. We have the conversation about deposit and instalment before the offer — not after the loan is approved.
If you are considering a purchase, or wondering whether this is a good moment to sell, call us or come by the office. We will go through the numbers for your case calmly, and without the headlines.
