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The Best reasons to invest in Romania

Discussion in 'Romania property' started by chrisnolen, Jul 6, 2007.

  1. chrisnolen

    chrisnolen New Member

    If you are still wondering- does is pay to come and invest in Romania, we have collected some of the best reasons to come and invest in the land of opportunities -
    1. The economy becomes stronger and stronger
    The statistics is showing that Romania has the most fast growing economy in the EU after Estonia, Latvia and Lithuania.
    After the major changes Romania has been through starting the 90’ with the big achievement in 2007- entering to the European Union, Romania kept getting stronger and stronger
    2. Fast growing GDP
    GDP (purchasing power parity) has reached US$$197.3 .
    It is growing and growing in more then 20% per annum. This rate is definitely setting Romania as one of the largest economies in Eastern Europe.

    3. More foreigners are coming to invest!
    Foreign direct investment (FDI) which started to gain popularity at 2001, has been growing extremely fast by reaching over €5,000 million in 2005, and more the €8,000 million in 2006.
    Major Companies from all over the world have been coming to invest in Romania in the last few years and among them also private investors who feel it’s the right time to invest.
    Most of the FDI – 55%, is still in Bucharest.
    4. Falling Inflation
    2005 also saw inflation fall to a record low of 7.5% from dizzying heights of 22% in 2002, and it is expected to fall to 3.8% by 2007. With inflation under control, this will inevitably lead to more confidence in the property buying market.
    5. Increasing Employment
    Unemployment fell to 6.2% in May 2006 (less than 3% in Bucharest) which is lower than many more developed European economies. The rate is keep getting lower and lower.
    Romania has a leading role in attracting FDI Eastern Europe. In 2005, out of the total EUR 10.4 billion in FDI attracted by countries in the region, Romania received half of these inflows.
    6. EU Funding
    Romania gained the most substantial funds in terms of EU funding per capita between 2004 and 2006. For the years 2007-2013, Romania will receive an additional €30 billion, the highest allocation of all the new EU member states.
    Most of this funds will be invested into the local infrastructure such as - road, hospitals, schools, bridges etc. The EU funds will assist in this case also in creating more jobs and therefore more potential customers who is looking to buy/rent properties. As far as it looks…the boom is yet to come!

    7. The tourists are coming!
    The tourism industry in Romania is becoming more and more important. In 2006 – the incomes was more then $8 billion from tourism only with a 7.4% annual growth forecasted over the next ten years (Source: World Travel and Tourism Council).
    8. Estimation for total increasing (based on the salaries increasing 14% per year)
    We already witnessed a dramatic growth in the employee’s minimum salary rules in Romania.
    The salaries increasing are not over yet…the estimation is a continuing growth in the salaries of 14% per year.
    For now the Romania average salary is almost 15% from the average EU salary.
    If Romanian wages and salaries continue to increase by this average (as they have done during the previous 6 years),the percentage will double around every six years. In order for wages to rise to the current level of the EU average, it will take 29 years. That is assuming the euro wages increase by 5% per year and Romanian wages increase by 14% percent over the same period.
    These trends will create in addition to the growing employment an increasing need for properties in Romania.
    The EU average monthly salary is currently €2,400 per month.

    9. Romania has the lowest tax rates in the European Union.

    In 2005 the Romania Government introduced a flat rate of only 16% for income and corporation tax
    This tax is helping Romania to become more attractive for foreign investors who seek for new business locations.
    Recent fiscal reforms have helped Romania to become more competitive and have also served to push the property market – and promote Romania as a modern low tax country.

    10. The best prices per SQM in the area!
    It continues to amaze us…when a land is sold in amazing prices again and again.
    In the local reality here at Romania, it is perfectly reasonable that you will buy a land at 200€ /sqm and sell it in 600€/sqm after 3 months. No matter the price tag you will put on your property – it will be sold and fast.
     
  2. anna2

    anna2 New Member

    It's a beautiful country, no doubt about that. The mountains around Brasov and the Retezat are stunning. But the Romanian Black Sea coast dosen't have much going for it in my opinion and the government has a lot to do infrastrucure wise to encourage tourism.
     
  3. markf

    markf New Member

    Unfortunately, nothing is real and should be taken very cautiously.

    That's simply false. Romanians have big troubles now. Leu has dropped 20% since July 2007, inflation is among the biggest in Europe and today some guys from the European BAnk stated that Romania will enter the Eurozone (making Euro as official currency) in 2015 (instead of 2012, as everybody hoped).

    Yes, the GDP is growing, but the rythm is somewhere around 5% / year, and the trend is down, not up. And one more thing, only a couple of years ago Romania managed to reach the GDP from 1989. This says everything.

    Not so fast!... the so called invesments were, in 2006, mainly from the privatisations of BCR Bank (with Erste Bank Austria) and Petrom (romanian state owned oil company). In 2007 only 2 big investments were announced, Ford at Craiova - but this is still uncertain - and ***** at Cluj. On the contrary, the investors are starting to migrate elsewhere because the Romanians are mass-migrating towards Italy and Spain, and due to the lack of workers salaries are becoming much expansive than in China (textiles) or India (IT&C).

    Today, the gross of FDI is in construction and residential market. This is a market which depends essentialy of the state of economy which is in deep crisis now.

    You should read the news. Romania has the 2nd inflation rate in EU after Latvia. In 2007 was expected to fall to 3.8%, but finaly it was... 6.7%, which is quite huge (almost 2 times the target).

    You know why? Because a. 3 million are working abroad (1 million in Spain, 1 million in Italy, 1 million in Canada, UK, France, Germany, Greece and Israel mainly) and b. because some 3 million paysans are cuantified as... "rural workers" (in fact they are living under the poverty line). The government did everything, after 2000, to erase these poor people from the official statistics because their acceptance was against the criterias of EU.

    Let me quote some numbers, they are more relevant than any blah blah. In 2007, 1st year as EU member, Romania...
    - submitted to EU 1 billion Euro
    - took from EU only 400 millions out of its deserved 3 billions shared.
    You know why? Because the bureaucracy was unable to "absorb" the funds.

    As for example out of 200 km of motorways, planified in 2007, Romania constructed 0. Zero. Null. Nada. Rien. Niente.

    Really?!

    ... and now, after 1Euro=3.75 Lei, even less.

    In July 2007 the average salary was 1000 Lei. At a rate of 1Euro=3,11Lei this was 322 Euros. Today the average salary is 1100 Lei. At a rate of 1Euro=3,75 Lei, this is 293 Euro. A netto decrease worth of 10%.

    This 16% will not last. The government has already acknowledged tjat in 2009 they will be unable to provide pensions and state salaries, so everyone expects aditional taxes.

    This is a joke, isn't it?

    Even Dinu Patriciu, the Romanian oil mogul has recently (23Jan. 2008) stated that prices in real estate will fall... "and this fall will hurt". Coface has released an explicit report that states that prices in old communist era build flats will drop by 50% by 2010. The real estate agencies are among the most cited businesses when speaking of bankruptcy in 2007 (together with construction companies and small retailers).

    IMHO the only reason to invest today in real estate in Romania, apart from any personal reasons (need to work in Romania, marrying somebody there etc.), is the intense desire of losing some big bucks. And when I'm saying "losing", I do not mean losing 5% or 10%, but 40-50%.
     
  4. markonugent1

    markonugent1 New Member

    hi, i am going on an inspection trip with *** on wed 2 bucharest 2 look at property, does any know if *** are a company 2 be trusted or r they just after a sale and have no interest in a real investor, i was going 2 purchace about 10 studios, i was told that there would be a 400% incrase in 10years plus 10%+ rental yields, is this just a sale pitch or r these figures expected.
     
  5. Aegean

    Aegean New Member

    Looks like the post before yours may hold the answers - To the agents you're just a commission and they will hype it to the limit - even lie to get a sale it would appear.
     
  6. DC

    DC New Member

    How can any person, know what the future is? To say things will increase xyz is simply unsubstantiated fact.

    The rental yields who told you that. Romania in many areas, the yields do not add up. Be serious, if you are serious investor you would do your home work.

    The other side of the equation is the borrowing, how are you going to borrow and how much. At what rate, are yields going to cover the rent. Have you taken tax and accounting advice. Or are you winging it.

    By asking is xyz going to stitch me up, then you already know they are. Serious investors, or most that I know with x more than 10 million dont go on inspection trips, they go and check things out themselves. The inspection trip format sometimes is a 3 day high pressure sales trip. Sometimes it is not but depending who you go with.

    What research did you do.
    What finance analysis did you do.
    What rental yields are you expecting
    Have you done this before.
    Why are you doing 10 units in an untried market, are you very wealthy and want to risk it all.
    Are you a gambler, speculator or investor?
    The investor being diligent about what and why they are doing things. ie. Will know what is true and what is not.

    The agent (we are agents) we want to sell, some people have different moral and ethical frameworks, from I will say anything to get a deal or others the more serious ones will work in long term and moralistic way. ie. Sell you what you need not a load of tosh. But you have to protect yourself by knowing what you are getting into.

    You are moving to unknown territory. Good luck.
     
  7. markonugent1

    markonugent1 New Member

    Thank you for your reply,

    I am new to overseas property investment, i live in n.ireland and have made alot of money in the property boom over here, as you know the boom has ended and i have alot of equity and would like to continue investing in property.

    My problem is i dont know who to trust, the company that has told me about bucharest are constantly on t.v and have a property channel on sky, this is why i thought i could trust this company as they are well known.

    they sent me info on a new off-plan development they are starting shortly with 20% reduction in price as i am an existing customer of theres, i had purchased a property in berlin of them a few months ago. also they said that once they were finished you had an option to sign a 3yrs or 9yrs guaranteed rental scheme for 10% rental yield, and they except a 400% increase in the property in 10yrs, i know this sounds to good to be true so i am going out to look round and investigate myself, i wont be making any decisions when im out there.

    Have you any advice for me, do these deals come around, or have you any suggestions on places for me to invest in, what i am after is capital growth and as long as the rent will cover the mortgage.
     
  8. DC

    DC New Member

    Mark, speak to a variety of people, get a good feel for things. If agent 1 says abc, and agent 2 and 3 say def, then you know something is out of kilter.

    To say in 10 years they are expecting 400% growth, if in Germany, that it could be codswallop. Why because in real terms Berlin experienced a negative growth last year, and they are saying it will go up 40% a year. Come on.

    Maybe, you have to look into things in more depth. Learn about leveraging your money. Look at who is underwriting the rental guarantees, look at the costs and taxes as well. You need to know how much the mortgage is going to cost prior to purchase.

    Yes, it is work, but worth it. Remember all agents have a vested interested to sell. Me too, I want to sell, but there is a level of integrity (high) with what we do, or try to do, we dont bake the figures, so they are pie in the sky, it is real figures. There are few really good deals out there, you need to look into the detail. Details.

    I hope this helps. Think how long it took you to make the money, apply the same criteria in the spending it. If it took you 2 years to make the money, dont spend in 2 hours, or 2 days or 2 weeks, do your research. Money will always find a home.
     
  9. Karl Wilkinson

    Karl Wilkinson New Member

    In July 2007 the average salary was 1000 Lei. At a rate of 1Euro=3,11Lei this was 322 Euros. Today the average salary is 1100 Lei. At a rate of 1Euro=3,75 Lei, this is 293 Euro. A netto decrease worth of 10%.


    Why would this be a relevant arguement? After all, most Romania's still purchase goods using the LEI. A stronger aguement would be the fact that inflation rises are not covering salary rises.
     
  10. Karl Wilkinson

    Karl Wilkinson New Member

    Scare mongering is obviously a hobby of yours. Please remember that Romania has a population of 22 million and is not dependant on off-plan investors.

    One example. A recent report states that Romanian retailers have the highest expenditure/m2 in Europe. Looking to the future, (after all investment is an assessment of future trends), this tells me that retailers will continue to expand through-out the country, and not only in Bucuresti.

    It is true that the economy and real estate market has stagnated in recent months, but please remember that the same happened in 2005. Agencies where panicking then as they are panicking now. OK the big deals and profits are few and far between, but I cannot accept your prediction that prices will fall by 40-50%. Real investors will still manage to find good deals in Romania.


     
  11. David howe

    David howe New Member

    Caution with Property Management

    Several people have recently come to us after having paid extortionate amounts for furniture packs on reliance of promises of extortionate rents. These rents are not realistic and people are being lured into spending money in anticapation of a rent that will not be achievable. People before making decisions should be getting 2-3 opinions of likely rental before making such commitments.

    David Howe LLB. LLM
     
    Last edited by a moderator: Feb 10, 2011
  12. eSTATE Consulting

    eSTATE Consulting New Member

     
  13. romaniapromo

    romaniapromo New Member

    romania is great to invest right now...
    anyone, must find some good investment agent and invest in Romania..
     
  14. mikephillip17

    mikephillip17 New Member

    Thanks for sharing the information guys...
     
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