Romanian Property News

I’m not sure what the latest real estate news is the US, but at least in the UK I’m getting rather fed up with warnings about plummeting house prices. By all means I am not neglecting/ignoring the issue, but I believe that the overwhelming attention of the media is just fuelling the market fury, adding panic to an already worried decreasing army of buyers, rather than providing people with actual information. So, while we see all this worrying picture in UK and US, what’s happening to the Romanian real estate market?

Let’s start with the recent developments. The demand for housing is still booming, particularly in the large cities; while this was no surprise for Bucharest, others, such as Cluj and Ploiesti, will see a sustained increase in the near future due to international companies relocating some of their production lines to Romania. Cluj was already chosen by Nokia, who is rapidly setting up a strong production division nearby the city, and Ploiesti has been already favoured by an increasing number of large companies due to its closeness to Bucharest (about 40 miles) and the relatively lower price tag for land in the area. Next, the banks – currently the Romanian National Bank is slowly trying to impose stricter loan regulations in order to avoid banks encouraging high-risk buyers to go ahead and invest. While this seems like an aggressive measure, which may slightly discourage the market, it is actually beneficial on the long term as it is one of the steps towards avoiding house market crashes. As expected, at the other end, the number of houses or apartments offered is increasing, but there is a previously unnoticed issue that might substantially slow down this increase: availability of workforce. Yes, after being a “keen” exporter of construction workforce, Romania now is bracing itself – as fewer and fewer builders stay in Romania, construction companies are finding it increasingly difficult to gather the necessary workforce to start their project. So, after revealing all these details, what does the big picture look like?

The market seems relatively stable for new developments – as none of the newly built flats has developed any flaws/structural problems, in spite of the people generally complaining about their quality, they are seen as a good investment. As a result, while you might get the odd reluctant buyer, the developers are not shy to steadily increase their prices, as the flats seem to sell. The pre-1990 blocks are slightly under question – with values typically lower than the new apartments, the buyers tend to appreciate them either for better position or cheaper price; as new developments will appear all over the Bucharest in the next 2-5 years, flats in “old” blocks, esthetically less appealing, from the entrance in the block to the balcony in the flat, may slightly fall in value, but will remain, even considering the fall, as the preferred alternative for a bargain, particularly for the buy to let market. The restrictions imposed by the banks have done little to discourage the buyers – one of the very few benefits of the traditional bureaucratic systems in Romania is the excessive precaution of the banks in giving out loans, hence the newly imposed restrictions affected strongly the loan sharks of the market and only mildly influenced the banks. Finally, the government is (allegedly, for now) aiming to bring back the Romanian builders by providing them with incentives (this is where the fuzzy picture starts, as the builders have asked for a very precise incentive: more money, which is precisely what the government is unlikely to have). Nevertheless, with price of land and materials representing the overwhelming majority of the construction costs, the resulting increase due to more expensive workforce is not likely to put a hole in the budget.