Moldova

Residential property prices in Moldova’s capital, Chisinau, are rising, on the basis of Moldova’s economic growth.

Residential real estate prices have risen annually by 30 to 40% over the past five years, according to Lara Real Estate Agency. In 2007, apartment prices in Chisinau rose 12% to 14% in US dollar terms, and 4% in terms of Euro.

As the country turns to the west, more properties are being quoted in euros instead of US dollars which is the norm in Russia. Moldova aspires to join the European Union (EU), following the government’s 2005 decision.

The past few years have seen a house price explosion, which was due to increased demand from foreign investors and higher remittances from Gastarbeiters (foreign workers in Germany) combined with lack of supply.

Chisinau is the country’s political, economic, and cultural capital. It is the only city in Moldova with reasonable living conditions for expatriates. Many houses are built specially for rental. The city’s prime residential area is in its western section: Buiucani, the City Centre, and Botanica.

There are no restrictions on foreigners buying properties in Moldova, except for agricultural land.

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Moldova is the second smallest country to emerge from the former USSR; with a population of 4.1 million in 2008. It is the second poorest country in Europe with a GDP per capita of US$1,248 in 2007, and is heavily indebted. More than a decade after independence from the USSR, its economy and history have been on a rollercoaster ride. Moldova has seemingly insoluble separatist problems.

It is one of the former Soviet Union’s most densely populated countries, with 127 inhabitants per square kilometer. To address the huge demand for housing, the government built around 2,300 apartments in the past two years. They are planning to build seven thousand more units.

Only 34% of the population is employed and more than a third of the economy is agricultural. Over 75% of the population lives below the poverty line; by far the greater portion of the houses in Chisinau, for example, lack central hot water.

The country lacks natural resources and relies on imports of fuel and raw materials. The government is ridden with corruption and bureaucratic red tape. A remarkable portion of the population works overseas, about 25% of working age Moldovans, and they send back much needed foreign currency.

The average annual GDP growth rate from 2001 to 2005 was 7.08% per annum. Although economic growth slowed down to 4% in 2006 and 5% in 2007, these were still remarkable compared to e economic decline experienced for the entire 1990s, after independence. Real GDP per capita has also recovered and is back to its pre-independence level, after falling by 40% from 1992 to 1999.

Torn between its historical ties to Romania and its close links to Russia, the country’s major political predicament is the strength of the pro-Russian Slavic secessionist forces in the Eastern region of Transnistria, who want autonomy from mainland (Romanian) Moldova, and wish to be annexed by Russia.

The separatists have their own government, their own currency, media, army and police force, although Transnistria is not yet internationally recognized. The southern region of Gagauz also wants autonomy. It is inhabited by Christian Turks who fear “Romanization” by the centre, and even possible union with Romania.

A bloody civil war was fought against the Transnistrian forces in 1992. A three way peacekeeping force (Russian-Transnistrian-Moldovan) facilitated a fragile peace accord between the two factions. Autonomous territories were established in Transnistria and Gagauz by the 1994 constitution, and no armed conflict has occurred since, but relations between the central government and Transnistria remain volatile.