Real Estate
Several years ago, Romania as well as other former communist countries, did not have a real estate market, as all of the properties were state-owned. Passing of several property laws have changed this picture. Now it is safe to say that opportunities abound. The real estate market shows spectacular dynamics by increasing the number of investors and by the increasing the number and value of transactions. This is due to the general improvement in the business environment and the country entry into the EU. The continuously improving highways infrastructure, due to the government commitments to EU standards, makes the property market and especially the land market even more attractive.
The land itself is Romania's most valuable natural resource. There is plenty of agriculture land open for development, and as the Ease of Doing Business rank of 2008 indicates, dealing with Construction Permits in Romania is fast and easy. Romania is ranked on the 81 place out of 181, as obtaining each of the necessary permits take up to 30 days in average.
Institutional investors, private retirement funds and investment funds, which evaluating the investment opportunities in Romania, consider it as a market with major potential. The country is now officially on the map of most of the important real estate funds in the world. They identify opportunities in a market that still lacks in investment grade products. Therefore, generous yields can still be obtained here, especially considering the relative low level of risk. Property in Romania is extremely competitively priced, up to 25–30% lower than in other eastern European countries. As residential prices are still low compared to the region, this sector has probably the biggest opportunity in terms of future growth and development.
Because of the characteristics of the Romanian residential market (a strong propensity to own versus rent), the residential investment market is still focused on development. The biggest profits today, and will be in the future, in development. This is true especially as the middle income housing projects become a more and more concrete opportunity, due to rising income and available mortgage schemes.
The mortgage market became far more widely available to Romanians in the recent years. An increasing range of flexible financing products assist Romanians to fulfill their dream, by purchasing their own home. The young mortgage loan market in Romania underwent a significant metamorphosis in the recent years and now has become one of the residential market's relevant growth factors. It represents a low percentage of the country’s GDP, which indicates a massive potential for growth. According to the National Bank of Romania the housing loan market is predominated by Bucharest, which accounts for as many as 42% of the total amount of housing loans extended in Romania.
On 15 January 2009 the National Bank of Romania approved new regulation in order to strengthen the prudential framework and improve risk management in relation to household loans amid the ongoing crisis on global financial markets. The new regulation will limit the fallout of the global crisis on the domestic economy, as lenders would have the possibility to calculate a higher indebtedness level for the borrowers that would have high-quality real estate assets as collateral for their credits. This will insure the Romanian real estate market vitality despite global financial crisis implications. (Source: National Bank of Romania - press release, 15.1.2009)
Romania is still one of the least developed EU Member States with regards to dependence on mortgage debt. The level of mortgage Indebtedness by Romanian households is definitely lower than in other countries of the Central/ Eastern Europe region, let alone in Western European and North American economies. In addition, the demographic-economic fundamentals of residential markets of Romania's largest cities remain relatively strong. In the longer term, there are good prospects for market recovery based on the country’s low housing saturation rate, the vast backlog demand for housing and the strong demographic factors.
The end of 2008 brought alarming news for the Romanian residential development market. 2009 may well be a hard year for the Romanian economy suffering collateral damage from the global financial crisis. Even so, the hard times on the market allow clearing it from the unprofessional and unviable developers, who distort the market rather than support its development. In the long term, the crisis should benefit all participants in this respect.
Property and Real Estate Market
- The Romanian real estate market shows spectacular dynamics by increasing the number of investors and by the number and value of transactions.
- Continuously improving infrastructure, due to the government commitments to improve the highway infrastructure to EU standards.
- Plenty of agriculture land is open for development.
- According to the Ease of Doing Business rank of 2008 dealing with Construction Permits in Romania is fast and easy.
- Romania is on the map of most of the important real estate funds in the world.
- Romanian residential market has a strong propensity to own versus rent, so the residential market is focused on development.
- Property in Romania remains extremely competitively priced – even 25–30% lowers than in other eastern European hotspots.
- Available mortgage market with increasing range of flexible financing products assist Romanians purchasing their own home.
- On 15 January 2009 the National Bank of Romania approved new regulation which relaxes mortgage loans rules, in order to limit the fallout of the global crisis on the domestic economy.
- 2009 may be a hard year for the Romanian economy suffering collateral damage from the global financial crisis. Even so, the demographic-economic fundamentals of residential markets of Romania's largest cities remain relatively strong.
- In the longer term, there are good prospects for market recovery based on the country’s low housing saturation rate, the vast backlog demand for housing and the strong demographic factors.
Several years ago, Romania as well as other former communist countries, did not have a real estate market, as all of the properties were state-owned. Passing of several property laws have changed this picture. Now it is safe to say that opportunities abound. The real estate market shows spectacular dynamics by increasing the number of investors and by the increasing the number and value of transactions. This is due to the general improvement in the business environment and the country entry into the EU. The continuously improving highways infrastructure, due to the government commitments to EU standards, makes the property market and especially the land market even more attractive.
The land itself is Romania's most valuable natural resource. There is plenty of agriculture land open for development, and as the Ease of Doing Business rank of 2008 indicates, dealing with Construction Permits in Romania is fast and easy. Romania is ranked on the 81 place out of 181, as obtaining each of the necessary permits take up to 30 days in average.
Institutional investors, private retirement funds and investment funds, which evaluating the investment opportunities in Romania, consider it as a market with major potential. The country is now officially on the map of most of the important real estate funds in the world. They identify opportunities in a market that still lacks in investment grade products. Therefore, generous yields can still be obtained here, especially considering the relative low level of risk. Property in Romania is extremely competitively priced, up to 25–30% lower than in other eastern European countries. As residential prices are still low compared to the region, this sector has probably the biggest opportunity in terms of future growth and development.
Because of the characteristics of the Romanian residential market (a strong propensity to own versus rent), the residential investment market is still focused on development. The biggest profits today, and will be in the future, in development. This is true especially as the middle income housing projects become a more and more concrete opportunity, due to rising income and available mortgage schemes.
The mortgage market became far more widely available to Romanians in the recent years. An increasing range of flexible financing products assist Romanians to fulfill their dream, by purchasing their own home. The young mortgage loan market in Romania underwent a significant metamorphosis in the recent years and now has become one of the residential market's relevant growth factors. It represents a low percentage of the country’s GDP, which indicates a massive potential for growth. According to the National Bank of Romania the housing loan market is predominated by Bucharest, which accounts for as many as 42% of the total amount of housing loans extended in Romania.
On 15 January 2009 the National Bank of Romania approved new regulation in order to strengthen the prudential framework and improve risk management in relation to household loans amid the ongoing crisis on global financial markets. The new regulation will limit the fallout of the global crisis on the domestic economy, as lenders would have the possibility to calculate a higher indebtedness level for the borrowers that would have high-quality real estate assets as collateral for their credits. This will insure the Romanian real estate market vitality despite global financial crisis implications. (Source: National Bank of Romania - press release, 15.1.2009)
Romania is still one of the least developed EU Member States with regards to dependence on mortgage debt. The level of mortgage Indebtedness by Romanian households is definitely lower than in other countries of the Central/ Eastern Europe region, let alone in Western European and North American economies. In addition, the demographic-economic fundamentals of residential markets of Romania's largest cities remain relatively strong. In the longer term, there are good prospects for market recovery based on the country’s low housing saturation rate, the vast backlog demand for housing and the strong demographic factors.
The end of 2008 brought alarming news for the Romanian residential development market. 2009 may well be a hard year for the Romanian economy suffering collateral damage from the global financial crisis. Even so, the hard times on the market allow clearing it from the unprofessional and unviable developers, who distort the market rather than support its development. In the long term, the crisis should benefit all participants in this respect.