House Price Determinants: Evidence from Bulgaria as a New Eurozone Member State

This study examines the relationship between house prices and the factors driving their growth under conditions of transition from a long-standing currency board regime to Eurozone membership. The main objective is to identify and quantify key factors explaining the variation in house price growth in Bulgaria in conditions of prolonged currency convergence. The study applies a set of econometric techniques, including stationarity tests (ADF), Ljung-Box estimation, Shapiro-Wilk test, Kolmogorov-Smirnov test, ARCH LM test, t-tests. The study is based on 40 observations of quarterly data for the period 2015Q4-2025Q3 on 48 selected predictors with an impact on the general house price index. The final ARIMAX(0,2,1) model contains estimates of second-differenced data. The model includes a first-order moving average component and three exogenous regressors: the homeowners' expense index, the average rents of housing in Bulgaria and the homeowners' utility expenses index. The model explains nearly 90% of the variation in the acceleration of housing prices, with a low mean squared error. The diagnostic analysis confirms the adequacy of the model with a lack of autocorrelation in the residuals and successful capture of all systematic information in the data. All three exogenous regressors are statistically significant at the 1% level with strong and stable impacts on the dynamics of housing prices. The non-parametric correlation analysis shows statistically significant monotonic relationships between all regressors and the dependent variable. For the set of traditional macroeconomic, demographic, financial and industry factors, no statistically significant relationship is established. The results show that during Bulgaria's transition from a currency board to the Eurozone, the sustainable growth of housing prices was due to factors of national specificity.