Romania: Overview

RENTAL YIELDS

Last Updated: May 25, 2009

Romania, slightly up from last year at 6.63%

This has been a year of bad news for residential property investors in Romania.

Gross rental yields in Bucharest, Romania, stand at an average of 6.63%, up from 5.54% last year. This rise in yields reflects the fact that, while rents have fallen significantly, prices have fallen even further.

Prices now average €2,829 per square metre for upscale apartments in central Sofia sampled by the Global Property Guide - a considerable decline on last year’s average price of €4,137 per square metre.

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TAXES AND COSTS

Last Updated: Nov 20, 2008

Rental income tax is moderate

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	12%	12%	12%
Click here to see a worked example
Source:			Disclaimer

Rental Income: Net rental income earned by non-residents is taxed at a flat rate of 16%.

Capital Gains: No capital gains tax is levied on individuals pertaining to their earnings from sales of real estate properties.

Inheritance: Inheritance tax is imposed at regressive rates from 3% 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.

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BUYING GUIDE

Last Updated: Apr 21, 2007

Buying costs are moderate in Romania

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%.

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LANDLORD AND TENANT

Last Updated: Jul 20, 2006

Romanian law is pro-landlord

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.

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ECONOMIC GROWTH

Last Updated: May 30, 2008

Continued woes even with EU accession

Romania (GDP/cap US$7,700 in 2007) is the largest of the Balkan countries with a population of 21.6 million. Romania was set to ascend to the EU in 2004, but was left out with Bulgaria for failing to meet EU conditions.

Romania’s economy grew 6% in 2007, down from 7.9% in 2006. Average annual GDP growth was 6% from 2001 to 2006, making Romania one of Europe's fastest-growing economies. Unemployment dropped to 3.6% in 2007 from 7.7% in 2005.

In 1 January 2007, Romania and Bulgaria became EU members not because they have improved but because of high hopes that they will reform faster when taken in. The European Commission (EC), which tackles EU membership, cannot be more wrong.

With the EU accession “policy anchor” removed, Romania reneged on reform promises. Pro-market reforms are stalled. Corruption and bureaucratic inefficiency is widespread. In June 2007, the EC called on Romania to do more to combat corruption or else it will be sanctioned.

Inflation was at 4.8% in 2007 but is expected to rise to 7.5% in 2008. The budget deficit is expected to reach 3% of GDP in 2008, beyond the eurozone limit. The government has set a timeline for euro adoption by 2010 – 2014.