Romanian Property News

Why should you invest in Romania? Is it still worth going to the Eastern Europe for a good property deal? On a market flooded by overseas alternatives, from Spain and Italy to Eastern Europe and the Middle East, are there any particular reasons why investors should focus their attention on the Romanian market? You can find below a brief list of issues that are likely to bias you towards Romania; in order to avoid over-praising, I’ve done my best to spice each of the listed advantages with a few bureaucratic hurdles or ‘under development’ aspects.
Now let’s see the ten reasons:

1. The housing market – the Romanian real estate market is still in its infancy. This makes some of the housing prices rather volatile, particularly in the sought-after areas – large cities, seaside, sky resorts, but overall the prices keep increasing. Compared to the number of properties available, there is a high number of agencies, situation that fragments the market. However, several large estate agents, such as Regatta and Eurisko, strengthened their position over the past year and more and more web sites advertising properties, typically for individuals, started to appear. Coming back to the volatility of the market, on the negative side you might be quoted very different prices for the same house or flat, but on the positive side, with a bit of shopping around, you are guaranteed to find very good value for your money.
2. The pricing – year after year, predictions indicate that there is still room for growth for the house pricing. With a housing market offer well under the needs of the population, the only way is up for the available properties. It is true, you will not find anymore the heavily advertised £10000 flats in the centre of Bucharest, but there are plenty of good deals to be made. Bear in mind, the prices did increase by approximately 50% over 2006, but the predictions made early last year by the A place in the sun series aimed towards 400% over the following five years, so this is clearly only the beginning.
3. The ‘other’ cities. The standard foreign investor looks at Bucharest as the only alternative; this makes the housing request rather uneven – opportunities still exist on the capital city, but the market becomes rather crowded. Large cities around Romania do witness similar growth in the housing prices, but properties there are far more affordable than the ones in Bucharest. While prices are not likely to reach similar levels to Bucharest, smaller investors may find better value by looking away from the capital. Two good examples of such cities are Cluj and Sibiu , both with good development projects currently underway. While Bucharest gets saturated, Sibiu slowly becomes a powerful financial centre and Cluj concentrates the business from the Transylvanian area.

4. The new developments – very few blocks of flats were built over the past 18 years in Romania. After a booming period for all types of construction during the Ceausescu era, the lack of coordination and investment led to a virtually dead period in terms of new developments. Another phase started over the past couple of years, with a large number of projects aimed at the upper class (see Monte Carol Palace or Orhideea Gardens). Whole areas were covered with villas around the large cities (see Corbeanca and Jilava near Bucharest), blocks with expensive fittings and close circuit facilities were built nearby lakes or parks in the centre of Bucharest - the Monte Carol Palace mentioned above. Time has now come for massive projects aimed at the middle class (with a family income around €800-1000/month), affordable, no-thrills flats; the Vitan Platinum Towers  is only a drop in the ocean when compared to the current market needs, hundreds similar projects are likely to appear in the next few years aiming to rebalance the market.
5. The legislation – as all countries exiting the communist era, Romania is famous for bureaucracy (also likely to be influenced by the Latin spirit); the oddly shaped queue (thinner towards the end and very thick when approaching the teller) is the norm for any government-related service. In spite of this, the inventive Romanian spirit led to a parallel service industry developed over the past years, ready to provide investors with a “complete package”, including ready-made forms, people queuing to get all the paperwork sorted, and well-oiled clerks and civil servants. While this is not how business should be done, such agencies will guarantee you a swift resolution of all required
   paperwork, reducing the process from months to days.
6. The planning permission – the biggest hurdle for the UK housing market must be planning permission – plots of land quadruple their value when the owners obtain the long-awaited planning permissions, big projects collapse due to the local council rejecting the development proposal. Although this is a slightly exaggerated view, as UK’s example is a good one to follow because rules must be in place to avoid chaotic development, Romania is situated at the other extreme. Current process for obtaining planning permissions is rather straightforward and is not likely to hit any problems when going through the administrative hoops. This situation might change in the future, but for the time being does influence the price of land, see below.
7. The land – due to the relatively easy process required to obtain planning permission, virtually any plot of land in Romania can be transformed from agricultural to housing . As a result, any land bought in the vicinity of cities is likely to be part of a satellite village in 10-20 years time (see the expansion of cities below), with its value likely to increase accordingly. Prices already increased over the past few years and particularly over 2006  for all types of land, but, with current prices still as low as a few Euros per square meter for larger plots, this is yet another guaranteed investment that should be considered.
8. The workforce migration – the Romanian workforce market is currently in turmoil. A part of the workers are looking into migrating abroad and most of the ones that want to remain in Romania challenge their employers for western European wages. One of the heavily discussed results of the EU integration was a possible the exodus of workforce towards the West. Without debating whether this will have a positive or negative impact on the foreign economies, the Romanian economy already sees the changes brought by the migrating workforce. Returning temp workers bring back their economies, boosting the prices particularly during the holiday periods. The economy overall strengthens due to this welcomed influx of capital, situation likely to grow in the future. Further, the employees and unions pressure is likely to push the salaries up over the next few years. What will happen then – the house market prices will raise, once again!
9. The expansion of cities – the creation of Bucharest Metropolitan Area is underway  and it won’t be long before other large cities will follow its example. The under-developed villages around these cities will go through substantial changes, with derelict dwellings likely to transform into villas and whole agricultural plots nearby becoming new housing districts. With city prices currently reaching hundreds of euros per square meters in all major cities, these plots will be the only alternative in the near future for small investors aiming to be within commuting distance from city centres.
10. The developing road infrastructure – it is difficult to see the positive side of a big disadvantage. The lack of motorways and well-built roads in Romania makes transport a challenge and commuting an utopia, but the situation will change. Rather slowly until now, with only one undergoing motorway and another one ready to start, hopefully faster in the near future, under the scrutiny of the EU, the motorway infrastructure will improve substantially over the next years. Why is this important for housing? We can see this very well in the UK – being next to a busy road will have a negative impact on the interest for a property, but being in the middle of nowhere does not make wonders for the price tag of a house, particularly for working couples. The ongoing motorway mentioned above has already had a strong positive impact on the prices nearby the city of Oradea, and this is likely to repeat when further motorways will appear on the map. Therefore, buying land in the vicinity of soon-to-start major road developments, either for housing or for industrial projects, is likely to be a very good investment.

Concluding, Romania is going through quite a few changes these days - economical, social, political, even cultural, all likely to impact on the already booming market. Aside from the comments made in the last reason, the potential investors will not get an easy ride, as they might find that projects might take longer to complete; further, salary increases, motorway construction, and city expansions will not happen overnight in an environment still stained by bureaucracy. However, properties offering good value for money are definitely out there, ready for all types of investors.

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