Housing credit dynamics – recent data
- Household credit growth slightly accelerated – to 44% annually in
September. Thus, loans extended to households reached BGN 17.6
billion, which represent some 29% of GDP (the so called penetration
rate).
- There has been more considerable deceleration in the segment of
consumer credit. The expansion of housing loans continued at
relatively fast pace (at 50%) despite the increase in the interest levels.
- Housing credit in arrears continued to increase in absolute terms,
reaching BGN 160 million as of September. Its share in the total
volume of housing credit remained relatively low (2.2%). It must be
taken into account that most housing loans are long-term, and
considerable nominal growth of mortgage credit in Bulgaria has been
notable in the most recent 3 years. It could be expected that with the
increasing maturity of the loans, the share of bad credit will tend to
increase.
- Significant impact on official data for the credit dynamics is
produced by the net sales of credit estimated at some BGN 3 billion
for the last 12 months, including BGN 723 million in September. The
sales of credit portfolios improve the financial indicators of the local
banks, the share of bad credit as well, and free resource for
additional credit expansion. Meanwhile, the increasing net sales of
credit transfers credit risks from local banks toward financial institutions
outside the Bulgarian banking system.
- The official statistics has for now not reported reduced confidence in
the local banking system from the foreign bank-owners. The net
foreign liabilities of the banking system kept on growing – with BGN
680 million as of September.
- In September credit markets continued to be volatile due to doubts
about liquidity issues of some of the largest banks on global scale.
Interest rates on leva-denominated housing credit only slightly
declined compared to the high interest levels in August. The annual
percentage rate of charge on housing credit, including besides
interest payments all fees at the clients’ expense, fell down to 10.24%
in September, but remained substantially higher than a year ago.
Housing prices in regional cities
- Growth of average housing prices decelerated – down to 3% (on
Q2 basis), reaching BGN 1418 per sq. m. in nominal terms. Growth
on annual basis (on Q2 2007 basis) is slowing down, but as we
expected, remained faster than the nominal growth of the
economy.
- The difference between housing prices in Sofia and Varna is
enlarging. Prices in Ruse reported nominal decline relative to the
previous quarter. The third city with most expensive housing in the
country is Burgas, then Plovdiv, immediately followed by Ruse.
Three of the five biggest cities report negative nominal growth, as
most considerable is the decline in Stara Zagora ( -6% on Q2 2008
basis).
- Prices in Sofia increased at 6.8% in Q2 2008, as the capital city is
again among the cities with most rapid price growth.
Interpretation of the recent data for Sofia and the other regional
cities requires taking into account the specifics of the
methodology applied. The survey includes existing standard
apartments, excluding houses with yards, luxury apartments and
maisonettes. Probably the moderation of the price dynamics is
most tangible with purchases of unfinished housing, because the
impact of the global crisis on construction entrepreneurs is more
notable.
- The low lack in depth of the housing market in smaller regional
cities partially explains the strong price volatility – quarters with very
high and very low growth rate coming immediately one after the
other.
- On annual basis (i.e. relative to Q3 2007) housing price growth is
most rapid in Sofia (52%) and in Plovdiv (42%).
Business climate
- The business climate indicator is formed on the basis of surveys among
companies, conducted by the NSI. The economic state in the country
in October deteriorated, as the composite business climate has
reported its biggest monthly drop for the last two years.
- The estimations current state of the industrial enteprises are more
pessimistic, as decline in production activity was reported. Managers’
opionions for the current state of retail sales are more optimistic
compared to a month earlier. Inflation in the service sector is not
expected.
- The indicator business climate in construction declined by 5 points
compared to its September level due to more moderate
expectations. The shortage of labor force and the volatile global
environment were again pointed out as the main factors impeding
the activity. The share of managers, having inflationary expectations
of the following three months, is declining.
IWATCH Housing Market in Bulgaria October 2008 (PDF - 86 KB) |
