Bulgaria and Schengen. What will happen to property prices when Bulgaria introduces the euro

Will Bulgaria join Schengen, when will this happen and how will it affect the standard of living in the country and property prices – this question worries Bulgarians and foreign owners of Bulgarian property. In 2020, Bulgaria entered the so-called “waiting room” of the eurozone. This means that in 2023 the country may become its full member and replace the local lev with the single European currency – the euro. Discussions about joining the Schengen area also continue. How will the property market change with Bulgaria’s entry into the eurozone and Schengen, will prices for flats and houses rise – the analysis of this question is in our article. 

Bulgaria’s entry into the eurozone and Schengen

Since 2007, Bulgaria has been a member of the European Union. The country’s citizens freely travel across all European countries and have the right to work and study in them.

However, the state was accepted into neither Schengen nor the eurozone. The reasons were the high corruption at that time, the lack of transparency in the banking system, and many countries’ concerns about a possible influx of refugees and the poverty of citizens.

Bulgaria, nevertheless, did not abandon its ambitions. After changes to legislation, adjustments to the operation of banks, and bringing immigration policy in line with European standards, in 2020 Bulgaria was admitted to the eurozone “waiting room”.

Over the next 3 years, during which the Bulgarian lev will be included in the European exchange rate mechanism, and state structures and the budget will be prepared for the transition to the euro, the country has every chance of joining the eurozone.

With Bulgaria’s inclusion in the Schengen Agreement, everything is not so simple. The migration crisis and the distrust of many states towards the border control system have led, year after year, to the absence of agreements on the country’s accession to Schengen.

At the beginning of 2021, the question is not even being seriously discussed. This means that, despite the general practice according to which a European state first becomes a member of the Schengen area and then of the eurozone, Bulgaria may first introduce the euro and only afterwards join Schengen. However, the situation may change. 

Forecast – changes in Bulgarian property prices in connection with the country’s entry into the eurozone

Most participants in the Bulgarian property market, as well as potential home buyers, are, to put it mildly, concerned about the question of joining the euro area. Some picture in their imagination scary stories about a market collapse. Others expect the value of properties to rise. 

For many years, prices for flats, cottages and industrial properties in Bulgaria have been quoted in euros. In this way, the property market hedges itself against possible currency risks associated with the potential depreciation of the lev and high inflation before the transition to the euro. For this reason, no significant changes in apartment prices are expected after the change of currency. 

Most likely, participants in the property market will face the usual price fluctuations linked to changes in demand. In the absence of new global financial crises, prices for property in Burgas, Varna, Sofia, at popular Black Sea resorts and in small seaside towns will continue to rise, as they have over the last several years.

Property in large cities and on the coast is liquid, in demand for permanent residence, summer holidays and as an investment. For a long time, it has been used as a way to preserve and increase income. This trend is expected to continue after the transition to the euro.

The following factors may additionally contribute to a rise in value:

• Improvement in lending conditions, primarily a reduction in interest rates. This will lead to increased demand among young people and among the population with a stable but modest income.
• The introduction of the euro is expected to attract multinational companies from the European Union, the USA and China. This will cause an inflow of staff from other countries, an increase in the purchasing power of the local population employed in these companies and, as a result, growing demand for property. This factor will gain even greater weight if the country becomes a member of the Schengen Agreement. 
• Increased trust in the state among solvent property buyers and investors from Europe, Israel and Russia. Formally, the country’s inclusion in the eurozone and Schengen indicates that it has overcome its legislative problems and has turned into a state with a stable economy. For many investors this is a significant factor.
• A rise in prices for services and materials. This factor is linked to possible rounding when converting prices from levs to euros and will affect, above all, new-build developments. 

However, there is a risk that a new crisis will hit the European Union and world markets, which would lead to stagnation or a decrease in flat prices.

Taking the current situation on the property market into account, Bulgaria Avenue suggests not waiting until Bulgaria switches to the euro or becomes part of the single Schengen area, but buying a flat by the sea today. All signs indicate that in the future it will only become more expensive.