Following the entry of Romania into the EU on 1 January 2007, there has been a sudden rush of interest in Romania. It’s not hard to see why. Whereas the entry date for the first Eastern European eight countries was known well in advance, there were only a few months’ notice for everyone that Romania and Bulgaria were definitely joining the Union.
|Whereas those interested in benefiting from the ‘Dublin Effect’ of rapidly increasing property prices in the run up to EU entry had eight countries to choose from during the 2004 round, this time there were only two to choose from – Bulgaria and Romania. Bulgaria has had a high profile amongst international property buyers for many years because of all the talk about the opportunities on the Black Sea coast, but not so many people were talking about Romania. This is perhaps somewhat surprising considering that Romania is the largest territory in Eastern Europe after Poland – although still pretty poor by European standards, a new market of 22 million people is one that is impossible to ignore. |
Around the same time, Romania started to get some decent mortgage products for the first time – previously they were pretty poor but, in the autumn of 2006, there were vast improvements as to what was on offer and now they are very similar to those offered by most other Eastern European territories, if not better - some banks offer 100% mortgages already.
The net result of all the above is that Romania has gone from ‘zero’ to ‘hero’ among international property investors in less than a year.
Naturally most of the interest in Romania is currently centred on the capital, Bucharest. With the city having a population of just under 2 million, making it one of the biggest cities in Eastern Europe, it is perfectly natural that this is the main centre of interest.
Although all of the Eastern European capitals suffered neglect under the Communist system, Bucharest is the city that suffered the worst due to the actions of the dictator Nicolae Ceausescu – an egomaniac of such proportions that he makes your average African dictator look quite reasonable in comparison. His greatest ‘legacy’ to the nation is his Palace, the construction of which led to much of the centre of Bucharest to be destroyed so that he could build the third biggest structure on Earth, bankrupting the country in the process. Under such circumstances, it is quite fitting that Ceausescu was the only one of the Eastern European presidents to reach a grisly end.
It is such a shame that Bucharest was destroyed in such a way because it was a beautiful city before the Second World War, its wide boulevards earning it the accolade of ‘Paris of the East’.
While this situation is very sad, it is good news for prospective property investors because the standard of housing in Bucharest currently, even some 17 years after the revolution, is totally abysmal, meaning that there is likely to be high demand for the new developments that are only just now starting to appear on the market in quantity.
At the start of the year, Knight Frank puts Romania as joint fifth for growth in 2007 at 12.5%. We said at the time that this looked a little pessimistic, but even we originally under-estimated the massive growth that Bucharest would see in its property prices during 2007. Figures just in for the first half of 2007 show that prices were up 27% already on the same period in 2006 - that's very impressive. In fact, Bucharest could very well end up as being Eastern Europe's star performer for the year.
The question is how long it will last though. The rapid rise in prices can be accounted for by the fact that there aren't that many new developments in progress considering the large size of the city, and so speculators are causing the rapid rise in prices. As more developments come onto the market, the stellar growth will probably slow but, looking at other Eastern European markets, there are definitely a good two or three years ahead before there is any sign of the city becoming saturated.
Outside the capital, there are other possibilities. Anyone with a vague interest in buying property in Eastern Europe will be well aware of the boom that has taken place on Bulgaria’s Black Sea Coast. Under such circumstances it is perhaps quite surprising that there has been little development on Romania’s Black Sea Coast which is, after all, just a 75 miles away from the Bulgarian resorts. Romania’s main resort city is Constanta. There is not much development happening there at the moment but, chances are that this situation is not going to stay that way for long. If you can grab some of the first frontline developments in this area, then there is the possibility to make some quick profits for sure.
The other locations in Bulgaria that have shown fast growth in property prices are the ski resorts such as Bansko. With the rugged Transylvanian Alps forming a backbone to Romania, the country is also of interest to skiers, most notably the resort of Poiana Brasov. The infrastructure still needs a lot of development and there is little new property being built at the moment. But you only need to look at what has happened to prices at Bulgarian ski resorts over the past few years to realize that there is plenty of potential here for fast property appreciation.
If you fear that you've already missed the chance of getting into Bucharest at ground level, then it's also worth looking at some of Romania's second-tier cities such as Sibiu and Cluj-Napoca. Remember that Romania is the second biggest country in Eastern Europe after Poland and you only have to see the fantastic growth that has occurred there in second and third-tier cities to see that there is also potential in other Romanian cities apart from Bucharest as well.
In summary, Romania is definitely one of the more interesting developing territories at the moment. If you have been thinking of investing in Bulgaria then it is well worth your while looking at Romania instead as this market looks to have more potential right now. But please don't procrastinate on your decision for too long. Prices in Bucharest are already far from cheap and the real growth in this market is happening right now.
Additional Background Information
The above contains our thoughts on the current state of the market. But, like any type of investment, there are no guarantees as prices are always influenced by a huge number of different variables.
You can keep abreast of developments in the market by checking out the articles in our News section where we’ve trawled the Internet for every story connected with property in Romania so you don’t have to. By checking the news reports regularly and thinking through the consequences of each piece of news, you should be able to get a good idea as to how quickly or slowly property prices in the market are going to rise in the near future.
The information in this section only tells half the story, however as only a small proportion of Romanian property news is translated in English, which means that the locals are getting a lot more useful information than foreigners are.
Investing in the wrong markets could make the difference between making tens of thousands and losing tens of thousands over the next few years. If you’re seriously considering investing in Romania, then you should think of subscribing to our Premium Service so that you can get all the breaking news from the market at the same time the Romanians are hearing it.
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