Romania Property - An Introduction
Romania property
is one of the key investment opportunities available right now. Experiencing phenomenal capital growth, the property market is being boosted by a number of factors, not least the country's accession to the European Union in January 2007.
Bucharest property is performing well in particular, with investors seeing growth as high as 40% in some some areas of the city. In addition, Romania's second tier cities - such as Brasov , Cluj-Napoca and Constanta - and even third tier cities ( Baia Mare for example) - are beginning to experience high capital growth of their own.
ROMANIA PROPERTY MARKET DRIVERS
Both internal and external factors are driving growth in Romania property markets. The first, and one of the most important, factors is affordability.
Bucharest property , for example, seems expensive when compared to property in other Southern, Central and Eastern European capital cities. However, Bucharest locals, in the main, own their own property outright, giving them a level of affordability other Europeans do not have. As locals aspire to better quality, new build property they need very little finance in order to purchase it, having the built-in equity of their current property to use.
This brings us to the second driver of Romania's property prices - the developing mortgage market in the country.
ROMANIA MORTGAGE MARKET
Up until only a few years ago there was no finance market in Romania to speak of, especially for foreign investors. However, the market has developed rapidly since then. The availability of finance to both locals and foreign investors has provided a huge boost to the Romania property market, with Bucharest property benefiting the most.
EU ACCESSION & FDI
Romania's accession to the European Union in January 2007 sparked a massive amount of Foreign Direct Investment (FDI) into the country, beginning, in fact, in 2006 in anticipation. Some EUR 9 million of FDI was fed into Romania in 2006, with a further EUR 7.2 billion in 2007. But what does that
mean
?
FDI is a key barometer for future property price growth. Areas where there are high levels of FDI boom - and those without languish. It should be noted, however, that the type of FDI is just as, if not more, important than the amount. White collar, 'hi-tech' FDI is better than blue collar manual FDI, putting it simply. Romania is receiving high levels of the former.
Nokia, for example, are building a technology village in Cluj-Napoca and the city can anticipate a property boom leading up to and beyond completion. Why? Because FDI - especially hi-tech FDI - brings well paid jobs, providing a boost to the spending power of the local population and increasing their aspirations. With higher wages come higher expectations and in countries such as Romania where the locals still live in old, Communist style panelak buildings, demand for high quality, new build property is high.
The same sort of FDI - in the technological, finance and banking and telecommunications industries - is happening across Romania, leading to wage rises and, crucially, a new middle class.
THE NEW MIDDLE CLASS
This phenomenon has taken some time to gather steam; but now there is a new generation embracing capitalism and consumerism for the very first time.
And this new middle class is helping the mortgage market too - with better jobs comes greater confidence in borrowing. White collar employment in particular is helping fuel the growth and development of the Romania mortgage market .
While it is true to say, however, that the country is renowned for its levels of poverty and cheap labour, this emerging middle class is growing fast, evidenced by the fact that Lugera and Makler, the second largest recruitment firm in Romania, placed 2,500 people last year; 40% of whom were in the IT sector. They are experiencing shortages in highly specialised positions, specifically high level management positions, resulting in salary inflation.
When we consider that only 5,000 new apartments were built in 2006 in Bucharest, and the capital’s population is over two million, it becomes clear that a few top earners could absorb the lot - property price growth is inevitable.
