Bulgaria: Big cash deals and Eurozone expectations fuel property boom
Source: Euractiv
SOFIA – Bulgaria has recorded the sharpest increase in housing prices across the European Union, with a staggering 18.3% year-on-year rise in the final quarter of 2024, according to Eurostat data published on Tuesday.
Over the past 15 years, housing prices in the country have more than doubled, increasing by 115%. The upward trend has accelerated in recent months amid growing expectations that Bulgaria will adopt the euro on 1 January 2026.
In Q4 2024, property prices rose by 4.2% in the euro area and by 4.9% across the EU. Bulgaria’s growth was nearly four times higher. Meanwhile, France and Finland recorded a 1.9% decline in housing prices.
Feeding the informal economy
Real estate brokers told Euractiv that the market is flooded with cash transactions, many of which are believed to stem from unreported income and illicit funds circulating in the country’s grey and black economies.
In 2024, only a third of property transactions in the capital, Sofia – where prices have risen the most – will be financed by bank loans, while the remaining two thirds will be paid in cash.
In other major cities, the prevalence of cash payments is even higher. The development in the Bulgarian property market raises concerns amid long-standing criticism of the ineffectiveness of Bulgarian law enforcement in dealing with money laundering.
A key driver behind this surge in property purchases is the fear that owners of large amounts of undeclared cash will seek to convert their funds into property before Bulgaria joins the eurozone. Depositing money in Bulgarian banks would require disclosure of its origin.
Fifty shades of grey economy
According to a 2022 European Parliament report, since joining the EU, Bulgaria has consistently ranked as the bloc’s leading grey economy, with over 30% of its economy falling outside the formal sector.If the entire Bulgarian economy were formalised, the country could surpass Greece in GDP per capita.
By 2017, Bulgaria managed to reduce the size of its grey economy to 29%, but this trend has since reversed. By 2023, the grey economy had grown again to 34.6% of GDP, according to a study by global consulting firm Kearney, as quoted by the Bulgarian news agency.
Six sectors in Bulgaria have grey economy levels exceeding 50% – hospitality and food services (70%), agriculture (66%), entertainment and sports (58%), construction (56%), and wholesale and retail trade (53%).
Bulgaria remains on the Financial Action Task Force’s (FATF) grey list of jurisdictions subject to enhanced monitoring due to concerns about money laundering and terrorist financing.
The world’s leading international financial crime watchdog added Bulgaria to its grey list at the end of October 2023, citing strategic deficiencies in the country’s framework for combating money laundering and illicit financial flows.
(Krassen Nikolov | Euractiv.bg)
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