Romania’s economy may be on the slow road to recovery, but its real estate market continues to languish. Home values have been falling for the past four years and the year ending in August saw prices fall another 5.89%, according to real estate firm imobiliare.ro. Prices were on the rise prior to 2007 when the country looked forward to becoming a member of the European Union, but membership did not slow corruption and investors kept their money clear of the country. Then the European debt crisis further weakened things, leaving Romania in its current state of decline. For more on this continue reading the following article from Global Property Guide.
After four years of severe house price declines, Romania’s housing market is still in deep trouble, despite its slowly improving economy.
The average selling price of apartments plunged 5.89% during the year to end-August 2013, to €910 per square meter (sq. m.), based on figures released by real estate firm imobiliare.ro. House prices dropped 3% quarter-on-quarter during August 2013.
During the year to August 2013:
- In Bucharest, the capital, the average selling price of apartments dropped 6.6% to €1,054 per sq. m.
- In Brasov, the average selling price of apartments fell 4.2%, to an average of €814 per sq. m.
- In Timisoara, the average selling price of apartments increased 1.5% to €802 per sq. m.
- In Constanta, the country’s oldest city, apartment prices rose by 0.6% to an average of €869 per sq. m.
- In Cluj-Napoca, Romania’s second most populous city, apartment price increased 0.1% to €904 per sq. m.
From 2002 to early-2007, property prices and demand rose in anticipation of EU accession, which took place in January 2007. But investors were disappointed by non-implementation of promised economic and political reforms. Corruption is rife, and largely ignored (or tolerated) by the government.
Then came the Euro-crisis:
- In 2009, house prices plunged by 20.62% (-24.22% inflation-adjusted) from a year earlier.
- In 2010, house prices fell by 15.88% (-22.08% inflation-adjusted) from a year earlier.
- In 2011, house prices dropped again by 4.07% (-6.99% inflation-adjusted) from the previous year.
- In 2012, house prices fell by 1.31% (-5.96%) from a year earlier.
The construction sector remains depressed. In June 2013, the total number of residential building permits dropped by 7.6% to 3,564 units from the same period last year, according to the National Institute of Statistics (NIS). Likewise, the total useful area of residential building permits plunged by 15.8% to 629,364 sq. m. over the same period.
In 2012, the country’s total dwelling stock increased by 7.6% to about 8.5 million housing units from 2000, according to the NIS.
Romania’s housing market is expected to remain down for the rest of 2013, according to local real estate experts. House prices are projected to continue falling, albeit at a slower pace.
There are no restrictions on foreign nationals acquiring dwellings in Romania. Ownership of land is tricky, but companies incorporated in Romania as well as resident foreign nationals can acquire land, and non-resident EU citizens will be able to own land starting 2012.
The policy interest rate was cut by 50 basis points to 4.5% in August 2013 by the National Bank of Romania (BNR), in an effort to buoy the economy.
Romania’s economy expanded by 0.5% quarter-on-quarter and 1.5% year-on-year in Q2 2013. The economy is expected to grow by 1.6% for the whole year of 2013, after annual growth rates of 0.3% in 2012 and 2.2% in 2011 and declines of 1.1% in 2010 and 6.6% in 2009, according to the International Monetary Fund (IMF).
This article was republished with permission from Global Property Guide.