Romania: Overview
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Romania’s house price boom falters
After rising by as much as 50% y-o-y in 2007, house prices in some districts of Bucharest fell in the first quarter of 2008. Although estimates of the price crash range from 10% to 25%, the general consensus is that the 5-year house price boom is over.
While real estate prices have been constantly rising since 2002, prices of old apartments in Bucharest jumped by about 160% from 2005 to 2007. In some parts of Bucharest, the increases were much higher.
Demand for Romanian properties rose in anticipation of EU accession in January 2007. A year after, investors were disappointed with the rate promised reforms are taking place. Corruption is rife and largely ignored (or tolerated) by the government.
Foreign buying had been enormously important in pushing up house prices, as Romanian property was a significant bargain in trans-European terms. Romania was advertised alongside Bulgaria as the land of opportunity for British and other foreign buyers.
Investors who took euro-denominated loans to join the housing boom are now affected by higher interest rates and the depreciating Romanian new leu (RON). The ECB raised rates key rates four times from 3% in Sep 2006 to 4% in June 2007, where it remained until now. After appreciating strongly from RON34.2 per euro in 2004 to RON 3.2 in mid-2007, the currency depreciated to about RON3.70 in the first quarter of 2008.
The selling price for apartments in the centre of Bucharest ranges from €3,900 to €4,400 per square meter (sq. m.), according to Global Property Guide research.
There are no restrictions on foreign nationals acquiring dwellings, but ownership of land is a bit tricky. Companies incorporated in Romania as well as resident-foreign nationals can acquire land. Non-resident EU citizens can own land starting January 2012.
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.
TAXES AND COSTS
Last Updated: Nov 20, 2008
Rental income tax is moderate
Effective Tax Rate on Rental Income |
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| 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.
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%.
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.
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.

RESIDENTIAL PROPERTY AROUND THE WORLD
Asia & Pacific
Looming housing slump in China
America & Caribbean
The great U.S. housing market crash
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| RESIDENTIAL PROPERTY FACTS | |
| Price (sq.m): €3,484 For a 120 sq. m. property, usually an apartment. | Rental Yield: 5.50% For a 120 sq. m. property, usually an apartment. |
| Rent/month: €1,916 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. |
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Roundtrip Cost:
7.6%
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: 0.0 Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation. |
| Landlord & Tenant Law: Pro-Landlord Rating is based on a detailed study of each country’s law and practice. | |
MARCH 2009
JANUARY 2009
- Bucharest residential market - CB Richard Ellis
OCTOBER 2008
- Interest for luxury apartments dropping - Bucharest Business W
MAY 2008
- Old Apartment Price May Drop 20-25 pc in Bucharest - Seeurope.net
APRIL 2008
- Experience and passion for real estate - Bucharest Business
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