Relationship Between the Housing Market and Macroeconomic Factors in Bulgaria and the European Union

Abstract

The paper investigates the correlation between house prices and main macroeconomic factors for the markets in Bulgaria and the EU for the period from 2016 to the first half of 2023. The analysis aims to enrich existing research on the Bulgarian housing market which is still developing and compare the findings to the EU market as a benchmark for the performance of a developed residential market. Residential property prices in Bulgaria experience the highest correlation with inflation, unemployment and GDP while they are least related to changes in the average mortgage interest rate. In contrast, the European housing market overall is most strongly correlated to changes in the average mortgage interest rate, followed by GDP and unemployment while it is least related to inflation. Results are consistent with existing studies which indicate that different macroeconomic factors impact the housing markets because of local economy specifics. Comparison to prior analysis of the Bulgarian market suggests that the relationship between housing prices and macroeconomic factors also varies during different periods and economic cycles.