Bucharest
- Bucharest is expecting the highest output growth in Europe
- Bucharest attracts large multinationals companies which have a presence in the city.
- Bucharest as the capital city will benefit greatly from the improvements and benefits to the country in terms of EU funding and access to new trading partners in the community as a result of Romania EU acceding.
- Improving roads and transport will benefit the city as it will mean easier access within the city as well as for incoming visitors.
- Excellent growth Potential - Bucharest’s land values have risen in line with the economic growth in the country.
- Bucharest is situated in the 37th place of 91 cities across the world with rental yield of 5.54%, suggesting relatively high Returns from rental investments.
- Bucharest is No 26 in the Global Property Guide's list of World's Most Expensive Residential Real Estate Markets 2009, at 5,184 US$ per square meter.
- Shortage of planned new developments within commuting distance of the city. Demand for new houses in Bucharest is estimated at 300,000 units. This demand cannot be met by the relatively small number of homes built by the municipality (2,000 apartments per year).
- Lack of affordable housing in Bucharest, own as well as rental. Old housing stock in the city is crumbling and distressed. Many are looking to move onto the property ladder and out of the noisy and crowded city centre.
- The market focus increasingly turns towards moderately priced smaller and better quality 2 and 3 bedroom apartments.
Yields in Bucharest
| Last Updated: May 15, 2008 | |||||
| BUCHAREST - Apartments | COST (€) | YIELD (p.a.) | PRICE/SQ.M. (€) | ||
| TO BUY | MONTHLY RENT | TO BUY | MONTHLY RENT | ||
| 75 sq. m. | 316,425 | 1,319 | 5.00% | 4,219 | 17.59 |
| 120 sq. m. | 478,800 | 2,210 | 5.54% | 3,990 | 18.42 |
| 165 sq. m. | 730,620 | 3,288 | 5.40% | 4,428 | 19.93 |
| 250 sq. m. | 978,250 | 5,098 | 6.25% | 3,913 | 20.39 |
| 1 Floreasca, Dorobanti, Unirii, Rosetti, Romana, Kiseleff, Primaverii, Aviatorilor, Baneasa, Aviatiei, Scoala Herestrau Source: Global Property Guide |
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Bucharest is now expecting the highest output growth in the midterm ever registered in E-Regi (European regional economic growth index) history. Romania climbed up 10 spots, from 58th in 2006 to 48th in 2008. E-Regi identifies cities across Europe where demand for real estate is likely to be strongest in the medium term (European Regional Economic Growth Index, 2008). The city's excellent economic standing can be seen in the low unemployment rate (currently 1.8%), large demand for labor and high growth rate (20% higher than the national average). This translates into relatively high purchasing power and credit worthiness of the capital city's population.
Bucharest, as the capital city, will benefit greatly from the improvements and benefits to the country, in terms of EU funding and access to new trading partners in the community as a result of Romania EU acceding. The EU is highly committed to long term investments in the city, mainly through infrastructure projects and local administration. In addition, major multinational companies tend to choose this kind of thriving cities to locate their overseas operations, encouraged by the stability that EU membership brings.
Bucharest has secured massive funding from the EU and the World Bank to improve the transport network quality. Bucharest has a small underground system which is being expanded and improved. There are plans to link it to the city's airports. The city is linked to Budapest and other cities in Western Europe via Corridor IV, due for completion in 2012. Addressing these issues will benefit the city as it will mean easier access to incoming visitors. (http://www.worldbank.org, Transport Restructuring Project).
Bucharest's land values have risen in line with the economic growth in the country. Land to the north of the city, around the airports, where initial development began, has risen by a tenfold in just two years (http://www.colliers.com). Despite the increases in the south and west parts of the city had not been yet so dramatic, they show indications of mirroring the north.
The gross annual rental income expressed as a percentage of today's property purchase price. This is what a landlord can expect as return to his investment. The rental yield is a tool for evaluation whether property is over-valued or under-valued. Rental yields are generally below 5% in most European cities, suggesting that property is still overvalued. Bucharest is situated in the 37th place of 91 cities across the world with rental yield of 5.54%, suggesting relatively high Returns from rental investments (source: global property guide).
Gross Rental Yields - Romania Compared to Continent
| Moldova |  14.17% |
| Macedonia | 10.11% |
| Ukraine | 9.09% |
| Hungary | 6.84% |
| Netherlands | 6.63% |
| Poland | 5.95% |
| Romania | 5.54% |
| Slovenia | 5.49% |
| Turkey | 5.48% |
| Croatia | 5.07% |
| Czech Rep. | 5.02% |
| Belgium | 4.90% |
| Switzerland | 4.80% |
| Germany | 4.80% |
| Bulgaria | 4.62% |
| Russia | 4.61% |
| Denmark | 4.61% |
| Latvia | 4.40% |
| Austria | 4.40% |
Bucharest is No 26 in the Global Property Guide's list of World's Most Expensive Residential Real Estate Markets 2009, at 5,184 US$ per square meter. This puts her ahead of Prague (34th place), Warsaw (38th place) and Budapest (70th place).The figures are based on the average price of a 120 sq. m., good-condition high-end used apartment in the city centre of more than 110 cities around the world, typically the economic centre where most foreigners are likely to buy. Data were collected during 2008. The US dollar exchange rate used is that of January 27, 2009 (source: global property guide).
Square Meter Prices - Romania Compared to Continent
| Monaco | €36,617 |
| UK | €19,094 |
| Russia | €13,408 |
| France | €9,329 |
| Italy | €7,054 |
| Ireland | €6,980 |
| Finland | €6,468 |
| Greece | €6,048 |
| Switzerland | €5,534 |
| Luxembourg | €5,376 |
| Montenegro | €4,759 |
| Denmark | €4,620 |
| Spain | €4,365 |
| Andorra | €4,140 |
| Romania | €3,990 |
| Czech Rep. | €3,890 |
| Slovak Rep. | €3,597 |
There is currently a great shortage of planned new developments within commuting distance of the city. Demand for new houses in Bucharest is estimated at 300,000 units, but only 9,500 apartments were built in 2008. The pressure of demand for homes cannot be met, as there are relatively small numbers of homes built by the municipality (2,000 apartments per year).
There is a severe lack of affordable housing, own as well as rental. Old housing stock in the city is crumbling and distressed, often built hastily during the 1980s and badly maintained. Often these concrete tower blocks are cramped and have antiquated heating systems and utilities – not ideal in the Bucharest winter. The market focus increasingly turns towards moderately priced smaller and better quality 2 and 3 bedroom apartments in Bucharest. This tendency will be additionally stimulated by the new VAT regulations, lowering VAT from 19% to 5% for the first time buyers of the smaller types of the apartments. Despite the variable standard of properties available, it is relatively expensive to rent or buy in the city, and many are looking to move out of the noisy and crowded city. Up until now, the options have been limited.