Romanian Property News

“Flamboyant real estate market”, “Bucharest is more expensive than Paris”, “exponential growth for the apartments prices”, “infant unsustainable market”, “best investment opportunity”…The list can continue with supportive and dismissive comments made on the Romanian estate market. What is the truth? Several negative comments regarding Romanian properties are based on the very young real estate market throughout the country. I am not sure whether this is a reason to make people reluctant when investing, but it is a valid comment. Up until a few years ago, Romanians did not have the concept of mortgaging – virtually all properties were bought with “money upfront”. This controlled the market due to two reasons. Firstly – buyers earning relatively low incomes could not afford saving large amounts of money, particularly for first time buyers; secondly – lack of financial dynamics forced the sellers to keep their prices within certain boundaries. All this changed when mortgaging came up – buyers ready to invest their future lifetime earnings into a property prompted sellers to exponentially increase their asking prices.

What happens at the moment? The increases have all slowed down – we are seeing now the house prices levelling with the average mortgage values. It appears that the EU accession of Romania hasn’t kicked in yet, but we’re likely to see increases pacing up again in the near future, as foreign small investors will soon appear on the market.

Would prices still increase? My view is that yes, the average price of Romanian real estate will increase, regardless on whether we’re talking about property in new developments, old blocks of flats, or houses and villas. But why? Surely, they’re not good value for money (or at least not as good as their Paris or Barcelona counterparts)…Maybe so (as a born-and-raised Romanian I can say “definitely so!” for some of the available alternatives) but the trend will be dictated by reasons similar to the ones witnessed by the UK market over the past few years. The UK housing market had a range of factors that made it explode, but one of the main ones was very simple to explain – high demand versus low availability. This is the same with the Romanian real estate market – in spite of the increase in demand, the past 18 years saw no major developments being finalised throughout Romania. Yes, quite a few villas have sprung throughout various sought-after locations, but the market was not supplied with the badly-needed, heavily in-demand affordable housing. We see now a high number development projects in various stages, but it’s still too little and too…early – there are too few such projects, most of them are built in Bucharest and bear price tags pushing them towards the luxury market segment. So, meanwhile, until thousands of blocks of flats will replenish the heavily unbalanced market, we will see prices going up, and up, and up. Meanwhile, factors such as increasing land prices, developers having to look towards the outskirts, and poor commuting infrastructure will push the above “until” further away from the present.

Last posts in Reviews

• Predictions for Romanian house prices in 2008 – slight fluctuations, mostly stagnating
• The house prices crisis – is Romania next?
• Trident pinpoints south of Bucharest for affordable flats
• Rental prices for studio flats in Bucharest – autumn 2007 statistics
• High prices for medium sized land plots in Pipera