Real estate in Romania: the evolution of housing prices in Romania
Evolution of real estate in Romania from 2000-2013
Housing prices in Romania: 2000 - 2008
The Romanian real estate market experienced a strong surge at the turn of the millenium.
Average real estate prices in large cities like Bucharest doubled between 2005 and 2008, and quadrupled between 2003 and 2008.
Housing prices in Romania: 2008 - 2013
After onslaught of the economic crisis in 2008, this trend began to reverse. Prices decreased due mainly to the reluctance of Romanian banks to finance new real estate loans.
In 2010, the average prices of real estate transactions in Bucharest resembled those in 2006 before Romania had joined the European Union. In 2012 the average prices resembled those in 2004.
Table illustration the evolution of the real estation market in Bucharest
|Year||Average price per m2|
Sources: the average transaction price generally charged on real estate for middle class housing in central Bucharest and its outskirts.
The individual price of each property depends on the following factors in order of importance:
- Location and the quality of the area
- The year the building was constructed.
- The location of the appartment in the building.
- The state of the appartment.
The impact of the 2008 financial crisis on the price of real estate in Romania:
The financial crisis in the autumn of 2008 put an abrupt end to the steady growth of the Romanian housing market, which had already begun to weaken in the Spring of 2008.
This rapid downward trend can be explained by the following:
- The rates of interest increased rapidly (this was directly felt in Romania because variable interest rates are the norm);
- Banks have made the conditions for loans considerably more difficult such that potential buyers must often postpone their projects, creating an imbalance between supply and demand;
- The banks, anticipating a decrease in the value of real estate, have often required further guarantees from those taking out a loan (such as cash collateral) forcing some borrowers to sell their properties at a loss to satisfy bank requirements;
- The prevailing 'wait and see' attitude.
In addition to falling prices, the number of real estate transactions slowed after 2010.
The Romanian government has taken certain measures to stimulate this economic sector including a series of devices to foster home ownership among young people.
The majority of analysts (including the team at LPG Expertiza Contabila and LPG Romania) predict that this crisis will be short lived thanks to the measures taken by the Romanian government in conjunction with measures in Europe and worldwide.
Growth is expected to be restored to the Romanian real estate market at the end of 2014.
Risks involved in making a purchase in the Romanian real estate market:
Buyers are advised to pay attention to the following when considering a purchase:
- The existence of a land registration certificate indicating the registered mortgages;
- The legal status of the sold property to ensure that:
(i) the seller is the legitimate owner
(ii) that the seller is authorized to relinquish ownership of the property (certain legal provisions regarding privatization restrict the ability to sell certain properties for those who have received the property rights;
- The that seller has paid all taxes and charges associated with the property;
- That the building is correctly registered;
- The energy performance certificate of the property to be sold must be supplied;
- The property's susceptibility to and ability to be insured from earthquakes.
In certain cases, it is advisable to pay attention to other specifics, and may even require the assistance of specialists.
As a consulting firm, (not a real estate agent), LPG Expertiza Contabila and LPG Romania can assist people and companies interested in obtaining property in Romania. The services we offer include:
- Assistance in researching a property
- Assistance in setting up financing
- Designing a tax and asset strategy
- Advice from a legal standpoint
- Interpreting and translation.