The Romanian housing market is growing, but for how much longer?

Romanian house prices keep going up but not as fast as they used to. Weakening demand and increasing interest rates have curbed the growth of the housing market, according to Korter. In addition to that, economic growth in Romania slowed down compared to previous years.

Decelerating growth in real estate

The average selling price of residential units in Romania in 2018 went up 6.44% compared to the year before, reaching a price of €1,239 ($ 1,415) per square meter. However, it seems that growth is slowing down when you compare this to 2017 (10,86%) and 2016 (10,41%).

Each city of importance in Romania saw an increase in the average selling prices in 2018.

Romanian House Prices

Increasing property supply

Residential construction is on the rise, with 2.6% growth in residential building permits, totaling 42.694 units in 2018. Along with this trend, the total area involved with the building permits also increased by 9.5%, now coming to a total of 10.67 million sqm.

Buying Romanian Property as a foreign national

There are currently no restrictions for foreign nationals who want to buy property in Romania. The ownership of land is a bit more complicated and only possible for companies located in Romania, non-nationals with a residence permit, and EU nationals.

Economic forecast Romania

In 2018 Romania showed a decent economical growth of 3.6%. Compared to 2017, where the economic growth was 7.3%, a decelerating trend can be witnessed. However, keep in mind that the effect of tax breaks and increasing wages introduced in that year have slowly evaporated, which is the main reason for the decrease in growth. For 2019 an economic growth of 3.8% is expected.

Rental Yields in Bucharest

Properties in Bucharest are affordable with prices of around EUR 1.500 per sqm. The numbers below illustrate what these prices mean:-

● For about EUR 190.000 you can buy a 120 sqm. apartment in Bucharest
● For about EUR 105.000 you can buy a 70 sqm. apartment in Bucharest

Knowing this we can take a look at the average rental yields:-

● A 120 sqm. apartment in Bucharest will result in a rental yield of about EUR 950 per month which equals 6% annual yield of the total value.
● A 70 sqm. apartment in Bucharest will result in a rental yield of about EUR 550 per month which equals 6.3% annual yield of the total value.

Conclusions investing in Romanian real estate

Even though rental yields are not exceptional and economic growth seems to slow down, Romania is still an attractive place for real estate investment. With one of the lowest prices for new real estate and continuous economic growth, the future of Romanian real estate looks bright.

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