Why the property market crisis won't affect Romania

September 6th, 2007     |     Print     |     Tell a friend

If you are just a little interested in economic news you certainly know there is a credit crisis in US affecting the real estate sector as well. This situation acts on the US market and some voices are saying that it will influence the European property market as well.

It may surprise you to read that you can still find good places to invest in real estate properties and still expecting a strong growth for at least 5 to 10 years.

This is the case of emerging markets, and Romania is a very good example.

Why is Romania still a hot spot to invest?

1. Old and outdated house supply. This is the main characteristic of Romania real estate. There was little close to nothing invested in the residential sector in the past decade and a half. 90% of the current properties were built in the former communist regime and are not offering the quality of life the middle class is looking for.

2. Demand for residential properties is coming from the new and dynamic middle class which is profiting from the recent economic revival. They will benefit the most from the EU integration of Romania (first of January 2007).

3. Another thing to consider is that mortgage is still underdeveloped compared to the rest of EU countries or the US.

• Interest are pretty high, offering some considerably profit margin for banks, and competition in this sector will only get tougher. More banks from EU countries will try to take advantage from the new EU member country with a 22 mill people population.
• Credit conditions are still intended to sustain buyers looking to live in the properties they buy, being quite hard to take credit for pure investment purpose.
• The vast majority of potential buyers still don’t qualify for a zero down payment mortgage. They usually have to make a down payment up to 25-30% from the purchase price.

These are the main characteristics of Romania property market that are making it different from other EU countries, including other recent members like Estonia or the Czech Republic.

Conclusion: The mortgage credit sector is not overheated and has plenty of room for further development.

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