Market in Depth

Romanian housing market remains robust, but there are storm clouds ahead

Lalaine C. Delmendo | March 02, 2019

Romania's house prices continue to rise, albeit at a much slower pace. Demand is now weakening, amidst rapidly rising interest rates. Economic growth, while it remains robust, has decelerated sharply from the previous year.

The average selling price of apartments in Romania rose by 6.44% (3.32% inflation-adjusted) to €1,239 (US$ 1,415) per square metre (sq. m.) in 2018 from a year earlier, based on the figures from However, this is actually a market deceleration - house prices rose by 10.41% in 2016, and by 10.86% in 2017.

During the latest quarter nationwide house prices rose by 1.56% (1.13% inflation-adjusted) (q-o-q) in Q4 2018.

All major cities in the country saw house price rises during 2018:
  • In Bucharest the average selling price of apartments rose by 6.04% (2.93% inflation-adjusted) y-o-y to €1,335 (US$ 1,525) per sq. m.
  • In Cluj-Napoca, Romania's fourth most populous city, apartment prices sharply rose by 6.73% (3.6% inflation-adjusted) y-o-y to €1,555 (US$ 1,776) per sq. m.
  • In Timisoara, the average selling price of apartments went up by 4.77% (1.7% inflation-adjusted) to €1,207 (US$ 1,378) per sq. m.
  • In Brasov, the average selling price of apartments soared 9.43% (6.23% inflation-adjusted) to €1,102 (US$ 1,258) per sq. m.
  • In Constanta, the country's oldest city, apartment prices rose by just 2.01% (fell by 0.98% when adjusted for inflation) to €1,117 (US$ 1,276) per sq. m.

Demand is weakening. In Q3 2018, the demand for residential dwellings (including both houses and apartments) in Romania's largest regional centres fell by 2% from a year earlier, according to real estate intelligence platform Analize Imobiliare

On the other hand, residential construction continues to rise. In 2018, the total number of residential building permits in Romania rose by 2.6% to 42,694 units from a year earlier, according to the National Institute of Statistics (INS). Likewise, the area of residential building permits issued in 2018 also increased 9.5% y-o-y to 10.67 million sq. m.

Romania house prices
Romania's economy grew by a robust 3.6% in 2018.  But this was a deceleration from 2017's record 7.3% growth, as the effect of tax breaks and wage increases have faded, according to the European Commission (EC). The economy is expected to expand by about 3.8% this year.

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

Moderate to good rental yields in Bucharest, Romania

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

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.

Read Taxes and Costs »

Buying Guide

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%.

Read Buying Guide »

Landlord and Tenant

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.

Read Landlord and Tenant »


Romania economy remains robust; but the government's budget deficit exceeds the 3% ceiling

Romania’s economic growth remained robust in 2018, but decelerated sharply from the previous year’s record growth, as the effect of the tax breaks and wage increases started to fade. In 2018, the economy grew by about 3.6% in 2018 from a year earlier, after annual growth rates of 7.3% in 2017 and 4.8% in 2016, according to the European Commission (EC).

Romania gdp inflation
The Romanian government expects the economy to expand by a robust 5.5% this year, mainly backed by strong household consumption. However, international bodies such as the European Commission and International Monetary Fund (IMF) are more conservative, projecting a 2018 GDP growth rate for Romania of 3.8% and 3.4%, respectively.

The country recorded a budget deficit of about 3.3% of GDP in 2018, up from the previous year’s 2.9% shortfall and the biggest deficit since 2012, according to the EC.

The increased deficit was mainly due to the country’s expansionary fiscal stance. Some of the government’s recent measures include:
  • Reduction of VAT from 20% to 19% beginning January 1, 2017
  • Elimination of the 1% special construction tax
  • Ratification of the unified wage law (UWL), raising all public wages by 25% in January 2018
  • Lowering personal income tax from 16% to 10%

As a result of fiscal easing, the EC expects that Romania’s deficit will increase further to 3.4% of GDP this year and to 4.7% of GDP in 2020.

In December 2018, the seasonally-adjusted unemployment rate was 3.8%, down from 3.9% in November and 4% in October and actually the lowest level in more than two decades, according to INS.

The total number of unemployed persons in Romania fell to 349,700 in December 2018, down from last year’s 418,744 unemployed people.

Inflation stood at 3.3% in December 2018, slightly lower than the previous month’s 3.4% and the lowest level in a year. Inflation is projected at 3.5% this year, according to the EC.

On January 2019, the Romanian Leu (RON) recorded a new historic low against the euro, with the exchange rate at around RON 4.7023 per euro. The currency depreciation is mainly attributed to the growing skepticism among investors about the government’s expansionary policies.

Official toleration of corruption is raising the political temperature
Romania is poised between future and past. Does Romania want to be a modern state, in which politicians are elected on the basis of policies and are prosecuted and imprisoned for corruption? Or does it want to be a clientilist state, in which politics is about who you accept money from?

Romania unemployment
The two most prominent voices of the progressive future are president Klaus Iohannis, elected in November 2014, and Laura Codruta Kovesi, former head of the country’s National Anticorruption Directorate (DNA).

Iohannis was elected President in November 2014 on an anti-corruption platform. Since Iohannis’ election there have been a series of arrests for corruption, and increased support for the DNA, which has charged or convicted no less 18 ministers from governments that have been in power in Romania since 2004, as well as thousands of lower-level politicians, media moguls, judges and businesspeople.

However progress was set back by the Social Democratic Party’s (PSD) triumph in the December 11, 2016 Parliamentary elections. The PSD’s support is strong among the poor, whose perception is that almost all Romanian politicians are tainted, so why seemingly target the PSD?

The PSD appointed the relatively clean Sorin Grindeanu as Prime Minister. But the real power is the PSD’s Liviu Dragnea, convicted of bribery and ballot-forging during the 2012 parliamentary election and thus barred by law from becoming prime minister. One of the Grindeanu government’s first steps was to pass Emergency Ordinance 13, effectively decriminalising official misconduct in which the financial damage is less than 200,000 lei - clearly a step towards Dragnea becoming prime minister.

This unleashed a storm of popular protest and mass demonstrations. The demonstrations had their effect. Ordinance 13 was repealed and justice minister Florin Iordache resigned, a scapegoat for Ordinance 13.

However on December 18, 2017, a group of PSD senators and deputies submitted another draft bill setting lower penalties for corruption offenses and decriminalizing some of them. Similar to Ordinance 13, the draft bill suggests to decriminalize abuse of office with financial damage worth EUR 200,000 and below, arguing that criminal sanctions should apply only when the damages are "substantial". The bill also propose perpetrators to serve only three years of jail time, and those with severe illness or are over 60 years old to be allowed to serve their sentences at home.

Just six months after becoming a premier, Grindeanu was ousted in a no-confidence vote with the PSD and its coalition partner ALDE in June 2017. Grindeanu was reluctant to resign, accusing Dragnea of seeking to "concentrate all the power in his hands". In June 2017, former Economy Minister Mihai Tudose took over as Romania’s Prime Minister, as designated by President Iohannis.

However in January 2018, Tudose resigned after his own party, PSD, abandoned him in an internal power struggle with the party’s all-powerful chairman Dragnea. He was replaced by Viorica Dancila, a former member of European Parliament, who is now Romania’s first woman prime minister.

Romania assumed the EU Council Presidency on January 1, 2019, the first time since it joined the bloc in 2007. But the Romanian government has repeatedly faced criticism from Members of Parliament (MEP) about the rule of law, corruption scandals, and alleged civil rights abuses in the country.

Just recently, EU Commission President Jean-Claude Juncker warned the Romanian government not to press ahead with a planned law that would grant amnesty to politicans who have been imprisoned for corruption – a move undermines EU “essentials” and that could rekindle protests against decriminalizing corrupt acts.

“It would be a step backwards,” said Juncker.

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