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Last Updated: Dec 02, 2016




With low interest rates and an improving economy, Romania's housing market has grown robustly over the past year.  And there's lots of construction.

"If I want to develop residential, it is a safe bet. The good news is that banks are financing such developments with good terms, so I might have quite a high return on my investment," says Ilinca Paun, Managing Director of Colliers International.

The average selling price of apartments rose by 8.40% (8.56% inflation-adjusted) to €1,045 (US$ 1,155.98) per square metre (sq. m.) during the year to September 2016, based on figures from imobiliare.ro. On a quarterly basis, house prices rose by 2.45% (2.81% inflation-adjusted) in Q3 2016.

All major cities in Romania experienced rising house prices during the year to September 2016:
  • In Bucharest, the capital, the average selling price of apartments rose by 5.34% (5.49% inflation-adjusted) to €1,144 (US$ 1,265.49) per sq. m.
  • In Cluj-Napoca, Romania’s second most populous city, apartment prices were up by 9.52% (9.68% inflation-adjusted) to €1,231 (US$ 1,361.73) per sq. m.
  • In Timisoara, the average selling price of apartments surged by 10.73% (10.88% inflation-adjusted) to €1,022 (US$ 1,130.54) per sq. m.
  • In Brasov, the average selling price of apartments increased by 6.85% (7% inflation-adjusted) to €920 (US$ 1,017.70) per sq. m.
  • In Constanta, the country’s oldest city, apartment prices rose by 5.07% (5.22% inflation-adjusted) to €953 (US$ 1,054.21) per sq. m.

The Romanian economy grew by 3.8% in 2015, and growth of 5% is expected in 2016. In 2017, the economy will still expand but at a slower pace of 3.8%, according to the IMF.

"Both residential supply and demand are gathering steam as a result of the favourable economic outlook and the newly introduced fiscal regulations," say Knight Frank.

Romania house pricesRomania's new Fiscal Code was introduced on January 1, 2016.  Most notably, it reduces the standard VAT rate from 24% to 20%, but also simplifies the tax collection process, to boost investment and economic growth.

There are no restrictions on foreign nationals acquiring dwellings in Romania.  Ownership of land is tricky, but companies incorporated in Romania as well as resident foreign nationals and non-resident EU citizens can acquire land.

Analysis of Romania Residential Property Market »


RENTAL YIELDS
Last Updated: May 24, 2016



Houses and apartments are not expensive in Bucharest, at around 1,500 euros per square metre (sq. m.).
  • a 120 sq. m. apartment in Bucharest will cost around 190,000 euros
  • a 70 sq.m. apartment in Bucharest will cost around 105,000 euros

The purchase price of apartments in Bucharest is around 1,550 euros per sq. m..

How much can you earn?  Bucharest's rental yields are good:
  • a 120 sq.m. apartment can rent for about 950 euros per month, earning a rental yield of 6.1%.
  • a 70 sq. m. apartment can rent for about 550 euros per month, earning a rental yield of 6.1%

Please note that our prices primarily represent very well-maintained apartments. We have used the “useful area” instead of the “built area” when we computed for the sq. m. prices because we only included old apartments in our survey. When one buys an old apartment in Bucharest, one buys the useful area. But when a developer sells an apartment, he sells the built surface. Therefore, the buyer becomes co-owner of the conjoint spaces.

Currency risk: over the past four years the Romanian Leu has remained largely stable against the euro.

Conclusion:  Bucharest is a bargain. In only a few European countries are homes less expensive than in Romania.  Even more important, Romanian price to rent ratios are very low.  Romania is growing rather rapidly, so there is upside potential. But, well, it very much depends whether you want exposure to Romania given that gross rental yields are good, but not extraordinary.

Round trip transaction costs are moderate in Romania. See our Romania transaction costs analysis and our Residential property transaction costs in Romania compared to other countries.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: May 31, 2016



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 0.50% depending on the value of the inheritance.

Residents: Residents are taxed on their worldwide income. Residents may deduct personal allowances and allowances for dependents.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: May 31, 2016



Roundtrip transaction costs, i.e. the total cost of buying and selling a property, are around 8.44% to 16.20% 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%.

Read Buying Guide  »



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.

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Dec 02, 2016


Romania is Europe's fast-growing economy

Romania gdp inflationIn Q2 2016, Romania posted 6% y-o-y economic expansion, its highest GDP growth since Q3 2008, according to the National Institute of Statistics (NIS), beating an earlier growth forecast of 4.1%. The rise of private consumption, as a result of the tax cuts and the 25% public sector wage hikes, have powered recent growth.

Romania is predicted have the highest economic growth in Europe this year, growing by around 5% in 2016, followed by Ireland (4.9%), based on the IMF's latest World Economic Report in October 2016.  Then over the next two years the economy is expected to slightly slow, with growth rates of 3.8% and 3.3% in 2017 and 2018, respectively.

The country's budget deficit is predicted to decline to be 2.9% of GDP in 2016. During the first nine months of 2016, Romania's consolidated national budget had a deficit of RON 3.7 billion (US$ 896 million) (0.49% of GDP), down from a surplus of RON 6.16 billion (US$ 1.49 billion) (0.87% of GDP) in the same period last year, according to the finance ministry.

In September 2016, Romania's unemployment rate was 5.9%, significantly down from 6.9% in the same period last year, according to the NIS.

The country's annual inflation was -0.6% in September 2016, according to the NIS. In 2015, inflation was also at -0.6%, a decline from 1.1% in 2014. This was also a sharp drop from 4% inflation in 2013, 3.3% in 2012, 5.8% in 2011, and 6.1% in 2010, according to the IMF.
Political tensions remain, amidst anti-corruption drive
The fresh face in national politics is president Klaus Iohannis, elected in November 2014.  Previously mayor of Sibiu, he turned it into one of Romania´s most popular tourist destinations.  His popular appeal is as outsider to the country´s corrupt and warring political elite, although he briefly became president of the National Liberal Party during June-December 2014.  Romania has a long history of corruption and of protests against corruption.

Former Prime Minister Victor Ponta resigned in November 2015 after some 20,000 people took to the streets in protest against a Bucharest nightclub fire.  On November 17, 2015, Dacian Cioloș, replacing Ponta, became Romania's prime minister.

“In my opinion, it is much more than a mere government change," said Iohannis of Ponta´s resignation.  "I believe we are talking about a paradigm change in the Romanian politics and I believe it is good..."

Since Iohannis' election there have been a series of arrests for corruption, and increased support for the National Anticorruption Directorate (DNA).  In March 2015 former Finance Minister Darius Valcov was arrested (though in June the Supreme Court ordered his release to stand trial in conditions of freedom).  In September 2015, prosecutors formally indicted Ponta on corruption charges. Ciolos is expected to remain prime minister until elections at the end of 2016.







  • Moderate yields in Bucharest
  • Pro-landlord rental market
  • Low to moderate transaction costs
  • Foreigners cant buy land
  • High inflation rate
  • Property is expensive relative to GDP
RESIDENTIAL PROPERTY FACTS
Price (sq.m): €1,537 For a 120 sq. m. property, usually an apartment.
Rental Yield: 7.76% For a 120 sq. m. property, usually an apartment.
Rent/month: €1,193 For a 120 sq. m. property.
Income Tax: 12.00% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 12.32% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: n.a. Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Pro-Landlord Rating is based on a detailed study of each country’s law and practice.

Baltics Real Estate Market Overview 2016 - Colliers InternationalPoland Residential Market Q2 2016 REASPoland Residential Market Q3 2016 REAS
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