Romanian housing catastrophe continues
After two years of severe house price declines, Romania’s housing market is still in deep trouble. There are no official house price figures, but local property experts agree - house prices have have continued to plunge in 2010 and in the first half of 2011.
•Average house price in Romania fell by about 10% in 2010, according to the evaluation firm Darian, whose survey included 27 Romanian cities. The average price of used apartments was RON3,317 (€774) per square meter (sq. m.), while new flats cost about RON3,625 (€846) per sq. m.
•The average asking price for old homes in Bucharest slid 20% in 2010, based on the latest report released by Radio Romania International. Three to four-bedroom apartments registered the sharpest drop of all, at 25%.
•The average asking price of newly built houses and villas all across the country was 42% lower in 2010 compared to the peak levels seen in 2008, according to the real estate firm imobiliare.ro. In Bucharest, the average price of townhouses and villas dropped by 19% to RON5,999 (€1,400) per sq. m. in 2010.
•According to Marketbeat: Romanian Real Estate Report, Spring 2011, house prices plunged by around 15%-20% y-o-y in 2010 and were approximately 55%-60% of the levels registered in Q1 2008.
“Due to the current declining market, customers are waiting for prices to reach a new low before they make a final decision”, says Razvan Muntean, director at Imopedia.
From 2002 to early-2007, property prices and demand for Romanian properties rose in anticipation of EU accession in January 2007. But investors were disappointed, not least by non-implementation of promised economic and political reforms. Corruption is rife in Romania, and largely ignored (or tolerated) by the government.
Recently, the Bank of Romania cut the benchmark interest rate by 25 basis points to 6.25%. The key rate has been cut several times since June 2010.
There are no restrictions on foreign nationals acquiring dwellings in Romania, but ownership of land is tricky. Companies incorporated in Romania as well as resident foreign nationals can acquire land. Non-resident EU citizens will be able to own land starting 2012.
•Average house price in Romania fell by about 10% in 2010, according to the evaluation firm Darian, whose survey included 27 Romanian cities. The average price of used apartments was RON3,317 (€774) per square meter (sq. m.), while new flats cost about RON3,625 (€846) per sq. m.
•The average asking price for old homes in Bucharest slid 20% in 2010, based on the latest report released by Radio Romania International. Three to four-bedroom apartments registered the sharpest drop of all, at 25%.
•The average asking price of newly built houses and villas all across the country was 42% lower in 2010 compared to the peak levels seen in 2008, according to the real estate firm imobiliare.ro. In Bucharest, the average price of townhouses and villas dropped by 19% to RON5,999 (€1,400) per sq. m. in 2010.
•According to Marketbeat: Romanian Real Estate Report, Spring 2011, house prices plunged by around 15%-20% y-o-y in 2010 and were approximately 55%-60% of the levels registered in Q1 2008.
“Due to the current declining market, customers are waiting for prices to reach a new low before they make a final decision”, says Razvan Muntean, director at Imopedia.
From 2002 to early-2007, property prices and demand for Romanian properties rose in anticipation of EU accession in January 2007. But investors were disappointed, not least by non-implementation of promised economic and political reforms. Corruption is rife in Romania, and largely ignored (or tolerated) by the government.
Recently, the Bank of Romania cut the benchmark interest rate by 25 basis points to 6.25%. The key rate has been cut several times since June 2010.
There are no restrictions on foreign nationals acquiring dwellings in Romania, but ownership of land is tricky. Companies incorporated in Romania as well as resident foreign nationals can acquire land. Non-resident EU citizens will be able to own land starting 2012.
RENTAL YIELDS
Last Updated: May 02, 2011
Gross rental returns in Bucharest have fallen considerably from the peak of the boom, and now vary from 4.9% to 6.5% (for the smallest apartments).
Buying prices have fallen substantially since the peak in 2008, but not nearly as much as rents, no doubt due to the deep recession. Prices are now near 2006 levels, but rents are below even those levels.
Buying prices have fallen substantially since the peak in 2008, but not nearly as much as rents, no doubt due to the deep recession. Prices are now near 2006 levels, but rents are below even those levels.
TAXES AND COSTS
Last Updated: Oct 10, 2011
Rental Income: Net rental income earned by nonresidents is taxed at a flat rate of 16%.
Capital Gains: No tax is levied on the capital gains realized by individuals from selling real property; however transfer tax is levied on the transfer of immovable property in Romania.
Inheritance: Inheritance tax is imposed at regressive rates from 2% to 0.5% depending on the value of the inheritance.
Residents: Residents are taxed on their worldwide income. Residents may deduct personal allowances and allowances for dependents.
Capital Gains: No tax is levied on the capital gains realized by individuals from selling real property; however transfer tax is levied on the transfer of immovable property in Romania.
Inheritance: Inheritance tax is imposed at regressive rates from 2% to 0.5% depending on the value of the inheritance.
Residents: Residents are taxed on their worldwide income. Residents may deduct personal allowances and allowances for dependents.
BUYING GUIDE
Last Updated: Apr 21, 2007
Roundtrip transaction costs, i.e. the total cost of buying and selling a property, are around 7% to 12% of property value. The greatest cost is the real estate agent’s commission of 6%, half paid by the seller and the other half by the buyer. Stamp duty can reach up to 3%.
LANDLORD AND TENANT
Last Updated: Jul 20, 2006
Rent: Rents can be freely negotiated. Progressive annual increases can be stipulated in the lease contract.Tenant Security: The agreement automatically terminates at the end of the contract and no further notice is necessary. The landlord can terminate the lease before the agreed term only if the tenant did not pay rent for three consecutive months and if the tenant did not comply with the contractual provisions.
ECONOMIC GROWTH
Last Updated: Sep 04, 2011
Romanian economy recovering
Romania (GDP/cap US$7,542 in 2010) is the largest of the Balkan countries. It has a population of 21.6 million.
In March 2011, the International Monetary Fund (IMF) approved a €3.6 billion Stand-By Arrangement to help the government meet possible future shocks.
To reduce the fiscal deficit, the government has had to implement strict prudential measures such as increasing taxes, cutting public sector wages (by about 25%), and reducing social services.
Now the economy seems to be mending, and is projected to expand by 1.5% this year, and by about 3.5% to 4% in 2012, according to the IMF.
Average annual GDP growth was 6.3% from 2001 to 2008, making Romania one of Europe's fastest-growing economies. However, due to the global financial meltdown, the economy contracted by 7.1% in 2009 and by 1.3% in 2010. The economy grew by 1.6% y-o-y to Q1 2011.
In 2010, Romania’s unemployment rate was 7.6%, up from an average of 5.4% from 2004 to 2009. By May 2011, the unemployment rate was down to 5.9%.
The government is targeting 4% inflation at the end of 2011. However, consumer prices will likely increase by 6.1% in 2011 before plunging to 3.4% in 2012. The currency fell after the crisis from RON 3.2 to the ruro in mid-1997 to RON4.3 in early 2010. But during the first four months of 2011, the currency rose almost 5% against the euro.
In March 2011, the International Monetary Fund (IMF) approved a €3.6 billion Stand-By Arrangement to help the government meet possible future shocks.
To reduce the fiscal deficit, the government has had to implement strict prudential measures such as increasing taxes, cutting public sector wages (by about 25%), and reducing social services.
Now the economy seems to be mending, and is projected to expand by 1.5% this year, and by about 3.5% to 4% in 2012, according to the IMF.
Average annual GDP growth was 6.3% from 2001 to 2008, making Romania one of Europe's fastest-growing economies. However, due to the global financial meltdown, the economy contracted by 7.1% in 2009 and by 1.3% in 2010. The economy grew by 1.6% y-o-y to Q1 2011.
In 2010, Romania’s unemployment rate was 7.6%, up from an average of 5.4% from 2004 to 2009. By May 2011, the unemployment rate was down to 5.9%.
The government is targeting 4% inflation at the end of 2011. However, consumer prices will likely increase by 6.1% in 2011 before plunging to 3.4% in 2012. The currency fell after the crisis from RON 3.2 to the ruro in mid-1997 to RON4.3 in early 2010. But during the first four months of 2011, the currency rose almost 5% against the euro.
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