The fast pace of home purchases and increased demand in relation to the low supply, along with rising prices for construction materials, will continue to influence the Romanian real estate market for the next year, according to analysts in the area.
Whether you are buying, selling or renting out a property in Romania (be it a plot of land, a house or an apartment), there are some true facts about the Romanian real estate market that you would want to know.
The Romanian real estate market (still) generates high returns for investors (compared to other markets in the EU)
A real estate is an asset that can generate significant regular, gradual income for an investor. As per the market analysts, investments in Romanian real estate can (still) offer high returns, which can reach 8% to 10% of your initial investment in the property. In some cases even higher, if you have some good investment abilities and experience in this market.
So, in Romania investing in houses for rent, or in apartments or even land, can still prove a good solution for generating extra income in 2022 and maybe the years to come as well.
Investing in a good real estate asset can generate returns comparable to investing in stocks, but with a much lower degree of risk. About the real estate market in Romania, the connoisseurs, but also the beneficiaries, say that it represents one of the safest investments in the context of the pandemics and the economic problems generated by it.
Given the year over year increased apatite for house acquisitions, all the big cities in Romania have registered a sharp increase in house prices, according to a study recently performed by the website analizeimobiliare.ro.
In Bucharest for example, the average sale price of apartments increased to 1,689 EUR/sqm. Brașov recorded an annual increase in apartment prices to an average of EUR 1,560 per square meter. In Cluj-Napoca, apartment prices increased to an average of 2,411 EUR/sqm. Constanța has seen an average price of 1475 EUR/sqm. In Timișoara, the average selling price of apartments remains around 1,443 EUR/sqm. (data was collected from a study conducted by the website imobiliare.ro for April 2022).
Interest in real estate investments among Romanians is at record high
Although house prices in Romania are now rising month by month, Romanians’ general interest in real estate investing is also on the rise. In recent years, people have managed their finances carefully, and somehow, the lack of activity (and of expenses) from the pandemic has accelerated the adoption of an investor mentality.
About the general opinion in the Romanian real estate market, it is very well known that Romanians would rather own their personal homes than living in rented houses. Probably hence the taste for real estate investments from more and more people.
This trend in real estate is turning ordinary people into investors, while they use their cash savings for generating additional passive income. Thus, many people are looking to buy apartments in the big cities, becoming more attracted to the ease of renting them out.
More and more Romanians buy homes without applying for bank loans
In terms of apartments, more and more Romanians are buying them with money from their own sources. The main reason is the fear of devaluation of the cash savings accumulated over years.
Among the most frequent purchases are one-room and two-room apartments, intended exclusively for rent. Also, many parents are purchasing apartments for their children in the bigger cities where they choose to study a form of higher education.
Price gaps between old and new apartments have significantly increased
Another important fact about the real estate market in Romania is that new apartments are often more expensive than old ones. At the local level, depending on the city, the price differences can be huge, or almost imperceptible.
In Constanța and Timișoara cities for example, the price differences between the new and the old apartments are imperceptible, being around 5-6%. In Brașov, the gap is a bit stronger, the percentage being between 10-15%, while in Bucharest the differences can reach up to 20% or even more.
In Cluj-Napoca, however, the price differences between new and old homes are between 20 and 40%. These notable differences are due to the new apartments built outside Cluj, in localities such as Florești, which contribute significantly to the price increase.
In Romania, the investment risk can significantly increase during times of economic crises or recessions
In Romania, compared to other EU countries, many people are dependent on their monthly salary income, and many are living from one wage to the other. So, when the economy slows down, if you own a rented home, there is a possibility that people living on rent may be unable to pay. The value of the property can also significantly decrease, so you would want to take into account this economic risk as well, as as an owner. Of course, no one likes to lose money.
When you sell a property, you can use the income to buy others, with smaller areas or in different areas of the city or country. Generally, investments go hand in hand with risk. The higher the expected return on investment, the higher the expected risk.
There are several ways to invest in real estate, as not only the residential market is profitable. So, we advise you to evaluate all types of real estate, from residential, commercial to industrial and land. To ensure the highest profit, it is necessary to carefully assess all opportunities before deciding for an investment.
Rental prices slightly increased post pandemics
According to Eurostat (EU Bureau of Statistics), 95% of Romanians are homeowners. Although this number is huge compared to the rest of the European Union, there are extremely many houses and apartments for rent, as a result of investments. The main ones are the students, the families who went to the big cities for a better job, but also foreigners who came to Romania for studies, seasonal or permanent jobs.
Since the beginning of the pandemic, the trend in terms of rents has been stagnant. With the relaxation of restrictions and the resumption of activities, this trend is growing slightly, especially in large cities.
The migration of companies to the largest cities in the country, the jobs that offer attractive incomes, university centers, are the ones that set the price of rents, in general. However, with most employees working remotely and migrating back to their hometowns, rental prices should fluctuate, given lower demand and supply.
Commissions can be negotiated with the local real estate agencies
About the real estate market in Romania, few people known that it is common to negotiate commissions when a client buys and sells a property through the same real estate agency. However, it is important to know that, depending on the nature of the contract signed with a real estate agency, the commissions vary between 1% and 4% of the final amount, followed by the sale of the home.
At the same time, you should know that the commission can hardly be changed after signing an intermediation contract. The agency will hardly agree to charge any other fees, even if the completion of the transaction takes place 6 months after the signing of the contract, for example. So, make sure you negotiate whatever you want to negotiate from the preliminary discussions.
10 trends identified in the real estate market for this year
- Mortgage interest rates will continue to hike, as Romanian Central Bank will be rising its reference interest;
- The first one will slightly lead to decrease in the possibility of people purchasing homes through mortgages;
- Young shoppers will be the hardest hit;
- New constructions remain among the favorites compared to old ones;
- The demand for apartments will slightly slow down, while purchases of houses outside the cities will remain steady;
- Demand for vacant homes and land remains high;
- Prices for houses that will be finalized within next 12 to 18 months will continue to increase, having as main reason the increase in building materials cost;
- Owners of used houses will no longer sell them so fast, choosing to turn them into real estate investments;
- The demand for homes with dedicated offices and bigger surfaces is growing, with more and more buyers working from home.
One of the most important changes regarding the real estate market in Romania, at present, is the one triggered by the recent pandemic. The pandemic has completely changed the way people perceive a home. Working remotely has become a habit among employers and employees, which is why a large percentage of the population, when buying a new home, will look for larger areas with generous space and terraces.
