Romania Property Market
September 5th, 2007
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History
For a better understanding of the current Romania property market you have to know some historical facts.
Before the communist regime, Romania’s economy and real estate market was similar to other European countries’. Bucharest was even called “the little Paris” because of the architectural similitude.
In the 50’s the properties were illegally confiscated by the communist regime.
During the next decades most privately owned houses in cities were demolished and the population was forced to live in block apartments. These apartments were small, bad finished and were offering poor living conditions.
In late 90’s the state owned all the apartments. A political decision allowed tenants to buy the apartments for small prices. Nowadays 90% of the residential properties in Romania are owned by their inhabitants.
After 1990 many Romanians tried to regain the properties confiscated from them or their relatives. The restitution was not well regarded by political regimes in late 90’s so the process was long and many owners had to fight in court for their rights. Because of the unclear juridical regime many buildings are still in poor condition.
Restitution is now a well established process.
Only in 2002-2003 the mortgage legal framework has been improved and mortgage law became applicable. Since 2002 the economical progress, bigger income and relaxed credit conditions have allowed a growing number of people to by properties.
Present
The good news is that today housing situation in Romania is not good. Romanian society has seen some radical structural transformations, with many political, psychological and economical changes.
There is a great need for new houses and economical growth in late years has provided the means to satisfy such needs. So everything is set to profit from Romanian real estate market.
Most part of the urban population is living in old communist apartments especially because there is no real alternative. Until this year, 2007, no medium price apartment project was delivered. We expect close to 1,000 new apartments on the market in the second part of 2007 (in Bucharest).
Houses are in short too, with few residential projects in suburb close to Bucharest and other big cities, they are really like a drop the in ocean compared to actual demand.
Until now the market was dominated by individuals building their own houses and investors developing small luxurious apartment buildings in top of the market location.
Many transactions were made with big land properties, investors trying to secure land for further residential projects. Commercial and industrial land is in great demand to, in direct connection with strong economical growth.
Future
Looking on Bucharest streets 5-6 years ago you would saw many old, improper cars. Today streets are full with new, modern cars, auto industry and auto trading being one of the most profitable economical sectors in the country.
The same will happen with the real estate. Of course, there are differences between real estate market and the auto market, but the psychological and economical factors that will bring the change are the very same: people don’t like their old communist houses and they have increasing access to economical resources.
With many foreign investments and increasing productivity, income in Romania is on a very positive trend. EU integration has brought the opportunity for millions of people to work abroad. These people are sending 6 billion euro annually and most of the money are invested in real estate properties.
With expanding demand and increased medium income the properties prices are set to appreciate at least for the next 10-15 years.
More about investing in Romanian properties in the Independent Guide
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