The Real Estate Market

The effects of the so-called 'Debt Discharge Bill', aimed at people who are unable to pay a mortgage, have started surfacing on the real estate market. This law came into effect in mid-May, allowing any holder of mortgage-backed loan below the equivalent of 250,000 Euros to hand back his home to the bank in exchange for wiping off the remainder of the loan. Rents went up 1.5% lately, according to Ziarul Financiar newspaper, and owners expect that potential buyers will have a much harder time getting loans, as banks decided to raise the down payment on mortgages after the law came into effect. 

According to Marian Teleleu, broker with Re/Max, who spoke to Ziarul Financiar, said that demand for home buying has dropped 10 to 15%, and that now it is expected that the rental market will go up. He added that people who have the possibility to buy a home are putting pressure on sellers to drop prices, because they know they now have leverage, which will result in a settling of prices. Dragos Valceanu, president of the Real Estate Broker Association, told us what happens in real estate development:

"For the last few years, loaning in this area has recovered, and banks have resumed financing serious projects. The difference compared to last year consists in the land market, especially residential terrain, ranging from small plots, 500 sqm, to larger plots, over 5,000 sqm, used for residential development. Here we have a radical difference as compared to last year. Whereas last year people simply made plans, now people are starting to buy terrains to build those homes that last year were just blueprints. Therefore the terrain market is crowded, there are lots of buyers, and they want to buy now, in this period, so that they can get their construction permits by autumn. There is a lot of demand for terrains, and that is evident in terms of prices, which have settled somewhat, the margin of negotiation is much narrower. Otherwise, prices are not affected by the new Debt Discharge Bill, because there is no payment in installments; that also applies to logistical, storage and office space."

Dragos Valceanu also talked about the specifics of prices:

"Prices vary depending on the area, as well as on the level of comfort homes offer, and as a reference point we can take a very crowded area of Bucharest, the Dristor area, where we have plenty of public transportation, two metro lines, and apartment buildings built after 1980. Here, a two-bedroom apartment costs around 50,000 Euros. At the opposite pole, an apartment in a new building, built at the periphery, with more difficult access to public transportation, where prices continue to be quite attractive, costs around 40 to 45 thousand Euros. If you compromise in terms of surface, then you look at buying a two-bedroom apartment with even 30,000 Euros, while a single-bedroom apartment can be found for as little as 20,000 Euros. And we're talking about new buildings, built this year."

We asked Dragos Valceanu what happens outside Bucharest, in the rest of the country:

"There is more inertia in the rest of the country. Changes occur first in the capital, then it takes a while for them to follow in the rest of the country. So things are a bit more settled in the rest of the country; over there, demand is always at a rather stable level, and prices, of course are much lower than in Bucharest, on an average, but changes from one year to the other are also smaller."

The number of real estate transactions last year was higher by over 65,000 as compared to 2014, with over 890,000 contracts signed across the country, according to the National Land Registry and Real Estate Advertising Agency. Most transactions occurred in Bucharest, 83,000, Ilfov County (the county where Bucharest lies), 57,000, and Timis County, with 44,000. The counties with the lowest number of transactions were Covasna- 7,700, Bistrita-Nasaud- 7, 900, and Gorj, with 9,100. Nationally, 185,000 mortgage loans were registered, 151,000 as compared to 2014. In 2015, at the national level, 6.4 million transactions were registered with the National Land Registry and Real Estate Advertising Agency, up 600,000 as compared to 2014.

The local real estate market will continue to go up in the following years, with estimates of growth for key segments, such as the investment market, the office market, and industrial space, according to the market report of a real estate company. Ilinca Paun, manager with Colliers International Romania, said: "As compared to the other countries in Central and Eastern Europe, Romania enjoys healthy domestic growth, and there are palpable signs showing that the country is more  and more attractive. International investors and developers are trying to take advantage as much as they can in the shortest time possible of the market's potential. You grow and adapt, or you go under, this is what the current state of the market is. There are a number of projects in all sectors, and the fight will be won by those who adapt the fastest to market demands and trends."

(Translated by C. Cotoiu)