Business Club

The Romanian real estate market seems to have ended its decline caused by the global economic crisis. At national level, prices for homes are on average 10% higher than last year, according to a dedicated portal on the web. In late October, the average asking price for apartments was 980 Euro per sqm, which is 52.4% lower than the market peak, in March 2008, when sellers generally asked for 2,058 Euro per sqm. The lowest pricing level was reached in December 2014, when median figures on the above mentioned portal were around 891 Euro per sqm, 10% lower than at present. The market for older apartments and newly built evolved differently. In Bucharest, for instance, a brand new apartment cost 1,155 Euro per sqm in late October, 55% lower than the March 2008 peak. By comparison, an older apartment is now, on an average, 1,043 Euro per sqm, almost 53% less than on the peak market. 

We spoke about this with the head of the Romanian Real Estate Association, Dragos Vlasceanu: "This study only confirms the rumors circulating on the market last year, because the figures for 2014, from all points of view, were pointing to such an increase, and everyone was expecting official confirmation, which we now have. In Romania prices are rising, and we are at the point at which we only have growth, for the time being. First of all, banks are more open to lending out mortgages. Banks have relaxed a lot lending policies, and right now a lot of people qualify for mortgages, which is in fact encouraged by higher rents. Here in Romania, generally speaking, rents are more expensive than mortgages. This is the reason for which any tenant want to purchase a home, even by mortgage."

One factor that encouraged the residential real estate market was the 2009 government program called 'First Home', aimed at people who don't own, by themselves or with a spouse, a single home, or who own a home, by themselves or with a spouse, a home with less than 50 sqm living surface. According to the program, down payments are only 5%, with below the market interest rates. The program was expanded, and the owners who used the First Home program could purchase a more spacious home with support from the National Loan Guarantee Fund for SMEs. 

Here is Dragos Vlasceanu: "This program continues to have a major influence on the 40 to 60 thousand Euro segment, which has the highest number of transactions. This program continues to encourage first time buyers to make the step, and qualify for accessing this type of loan. In this way, the state contributes to boosting demand, and, of course, a slight rise in prices across the market. That does not mean that they will still go up 5 years from now, but it's a beginning, and everyone wants to buy a home, a lot of people have been waiting for prices to go down, it's already been 7 years since prices have been going down, and it's time to see a slight increase."

The head of the Romanian Real Estate Association also spoke of the situation of residential complexes in larger cities:

 "Right now, in Bucharest and Ilfov county, about 7,000 homes get sold each month. Developers cannot built this many homes, so this simply took them by surprise. The new home sector is more active, and everyone is looking for areas where to build. Demand is much higher than the supply right now, which is also associated with the severe drop in bank deposit interest rates. There is a lot of money on the real estate market for investing in projects. In the residential areas close to cities, the demand has gone  up a lot, and money is getting invested heavily in real estate. People prefer buying homes rather than keeping their money in the bank."

Romania right now is third in Central and Eastern Europe  after Poland and the Czech Republic in terms of real estate transactions, which in the first three quarters of the year amounted to 600 million Euro, according to a study published by Jones Lang LaSalle Romania. In 2014, real estate transactions in this country amounted to 1.15 billion Euro, a record figure for the last few years. This figure was, among other things, a result of the store chain Auchan taking over the Real chain of stores, a transaction between 260-280 million Euro.