Land Market in Romania
December 7th, 2007
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Useless to say that every real estate business is a land business first. Since the beginning of 90’s, immediately after communism fall, land was targeted by some investors.
In 2000 construction land price in Bucharest was about $20-60 per sqm. The same land property is now evaluated around €500-800 per sqm. In top-of the market areas such Primaverii land is worth about €2,000-4,000 per sqm.
Construction Land
BUCHAREST
Since mid-90’s Bucharest construction land is in poll position, with many big investors securing large properties for further investments. Prices in Bucharest are at a very high level.
Communist era factories were situated inside the city on big land properties. The inner city factories were bought mainly for their land as a real estate investment. A big partner in this market is still the state, owner of big, valuable properties.
There is a short reserve of small construction land properties suitable for small investors inside the city itself. Land business in Bucharest is dominated by big players. Is hard for someone to buy land and build his own house especially in highly demanded area (north). The expensive land cost commute investors interest from houses to apartments.
The market was dominated lately by big transactions. Demand came primary from residential developers. They bought former industrial factories for their land, with a medium area transaction in 2006 of 6 ha. They look to secure properties for further apartment projects that will supply the increasing demand coming from the middle class buyers. The total supply coming from former industrial factories is few thousand hectares, with probably more then 50% sold.
Bucharest is surrounded by big agricultural land properties. Some of these properties were controlled by the state. The agricultural land is transformed into construction land.
Most developers come from Israel and Spain looking to benefit from their experience on the local market and searching emergent markets, among which Romania is the hot spot.
Most wanted areas:
Pipera (far nord)
Trafic Greu (south)
Militari (west)
Pantelimon-Colentina (east)
Trends:
Demand will remain strong with focus on retail and residential projects. New areas that were considered unattractive in the past will become more and more interesting and will emerge with development potential. This include:
North west (Odai, Chitila, Bucurestii Noi)
Central East (Salajan)
South (Rahova)
Price:
For large transactions of over 6 ha the medium price is around €500-600 per sqm.
Price will increase in 2007 with a 30-40% rate and probably even 100% in undeveloped parts of the city.
MAJOR AND MEDIUM CITIES
Prices have increased in medium and big cities as well, but there is still place for small medium investors to profit from the positive trend.
Medium-small properties are available within the cities or near by. The price inside the city’s limits will start from €150-200 per sqm and go up to €1000-1500 per sqm. The big difference comes from local potential, population number, local economy and available properties.
Is common thing for investors to buy a medium size property (5000-15000 sqm) and than split it and sell to local buyers interested of building private houses. To make it more profitable investors prefer agricultural land close to city, which is then transformed in construction land and sold.
Agricultural land
During the restitution owners recovered their farm properties. The usual farm land size is one or two hectares, still there are many properties under one hectare. This explains the Romanian agriculture very low profit.
The perspective is set to change, EU integration bringing more opportunities and financial resources.
According to official data the number of transactions with agricultural land has increased in last years, with price per ha at around €2500-3000 in the present from €400 in 2005.
Price was raised by investors coming from abroad to invest in agricultural land for farming. Private farmers look for 50 to 150 Ha size properties, while for companies the key interest is in land over 500 Ha.
For agricultural land the prices are varying according to the size, location, quality of soil and access to water and roads. The average price per hectare is currently, according to the Realtors about €2000 for non-irrigated land and by €3500 for irrigated land. Most of the demand is for the plains but there is a large interest as well for hilly and mountain areas.
Foreign companies are interested to buy agriculture land mostly in the western and southern part of Romania where the economic activity and trading are more developed.
Most analysts agree that agricultural land price will rise in the next years until it reaches €6000-6500 per ha.
Legal aspects:
Under the current low is not possible for foreign person to own land in Romania.
Ways to go around this law:
- EU farmers can buy agricultural land with no restrictions.
- Foreigners with legal residence in Romania are allowed to buy land.
- There are no restrictions for foreign controlled companies registered in Romania to own land.
- A foreign citizen can form a company in Romania and then buy every type of property, including land
This will change from 2013, when EU citizens will be aloud to buy and own land in the country.
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