Romania Residential Real Estate Market Analysis 2023
Lalaine C. Delmendo | January 25, 2023
Quarter-on-quarter, apartment prices fell by 1.35% (-3.98% inflation-adjusted) in Q4 2022.
All major cities in the country saw decelerating property price growth during 2022:
- In Bucharest, the average selling price of apartments rose by 5.19% (but fell by 7.84% inflation-adjusted) y-o-y to €1,704 per sq. m, a slowdown from an annual growth of 13.68% during 2021.
- In Brasov, apartment prices rose by 11.24% (fell by a modest 2.54% inflation-adjusted) to an average of €1,623 per sq. m, a slowdown from an increase of 18.04% in 2021.
- In Cluj-Napoca, Romania's fourth most populous city, apartment prices rose strongly by 14.49% (0.31% inflation-adjusted) y-o-y to an average of €2,410 per sq. m, at par with the annual growth of 14.4% seen in 2021.
- In Constanta, the country's oldest city, apartment prices rose by a meager 1.63% (dropped 10.96% inflation-adjusted) y-o-y to €1,431 per sq. m, following an annual increase of 13.55% during 2021.
- In Timisoara, the average selling price of apartments went up by 5.52% (but fell by 7.55% inflation-adjusted) to €1,454 per sq. m, following a y-o-y growth of 6.65% in 2021.
Both demand and supply are now slowing. Nationwide, the total number of houses, land plots and apartments sold fell by a modest 3.35% to 52,946 units in June 2022 as compared to the same period last year, following annual growth of 15.6% during 2021 and 11.6% in 2020, according to data published by the National Agency for Cadastre and Land Registration (NACLR). Likewise in Q2 2022, only about 107,700 potential buyers searched for housing in the country's major regional centres, down by 23.3% from the previous quarter and by 29% from a year ago, according to the real estate intelligence platform Analize Imobiliare.
In the first eleven months of 2022, the total number of residential building permits in Romania fell by 13.3% to 40,969 units as compared to a year ago, according to the National Institute of Statistics (INS) – after rising by 24.1% in 2021 and falling by 2.9% in 2020.
During 2022, Romania's economy grew by about 5.8% from a year, according to the European Commission, following a y-o-y expansion of 5.1% in 2021 and a contraction of 3.7% in 2020. The International Monetary Fund's 2022 growth estimate for the country is more conservative at 4.8%.
Though the Romanian economy is expected to slow in the medium term, with a projected real GDP growth of just 1.8% this year and 2.2% in 2024.
Analysis of Romania Residential Property Market »
Moderate to good rental yields in Bucharest, Romania
Houses and apartments are not expensive in Bucharest, with a range of prices varying from around 950 euros per square metre (sq. m.) to 1,950 euros.
How much can you earn? Bucharest´s rental yields are good, at around 6% to 8%.
Please note that our prices primarily represent 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 decline slightly 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.
Rental income tax is moderate
Rental Income: Net rental income earned by nonresidents is taxed at a flat rate of 10%.
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 at a flat rate of 10%. Residents may deduct personal allowances and allowances for dependents.
Buying costs are moderate in Romania
Roundtrip transaction costs, i.e. the total cost of buying and selling a property, are around 7.44% 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%.
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.
Robust economic growth; inflation soaring
During 2022, Romania’s economy grew by about 5.8% from a year, following a y-o-y expansion of 5.1% in 2021 and a contraction of 3.7% in 2020, according to the European Commission (EC). Though the economy is expected to slow in the medium term, with a projected real GDP growth of just 1.8% this year and 2.2% in 2024.“After a strong 2022, Romania’s economy is set to slow down with real GDP growth at around 2% in the coming years due higher inflation, tighter financial conditions and the fallout from Russia’s war of aggression against Ukraine,” said the EC.
Before the Covid-19 pandemic, the economy had been growing by an annual average of almost 4% from 2011 to 2019.
Nationwide inflation stood at 16.37% in December 2022, from 16.76% in November and 15.32% in October, according to the INS. This was far higher than the annual average inflation rate of just 2.7% from 2011 to 2021.
Romania’s budget deficit was equivalent to about 5.7% of GDP in 2022, an improvement from shortfalls of 7.1% of GDP in 2021 and 9.2% of GDP in 2020. The government seeks to bring the deficit down to 4.4% of GDP this year and to below 3% in 2024. Likewise, the public debt is projected to fall slightly to 47.3% of GDP this year, from 47.9% in 2022 and 48.9% in 2021.
In November 2022, the seasonally-adjusted unemployment rate edged lower to 5.4%, from 5.5% in the previous month, according to INS.
In the past four years, the Romanian Leu (RON) depreciated moderately against the euro by 5.5%, reaching an average exchange rate of RON 4.9258 per euro. The recent decline in the currency’s value is mainly attributed to domestic political instability, the Covid-19 pandemic, as well as the Russia-Ukraine war.