Property for Sale in Romania

The latest ‘Central Europe Property & Investment Fair’ held in Warsaw earlier this month saw strong investor interest focused on the more emergent Central and Eastern European markets such as Romania.  Specific interest exists in the residential and commercial property markets in Romania and is growing almost daily although the amount of transactions going through remains relatively low when compared to better established markets such as the Czech Republic and Hungary for example.

But does property for sale in Romania really represent an attractive investment commodity for the medium to long term when considered in light of the fact that the Minister of Finance in Romania recently announced prospective property tax increases and the Chief Economist from Romania’s National Bank has stated that the real estate market in Romania could be due a negative correction as it has boomed excessively particularly in Bucharest?  Amberlamb takes a closer look at whether property for sale in Romania represents a sound investment choice.

The latest edition of Knight Frank’s quarterly Global House Price Index suggests that property prices in much of Eastern Europe have a way to go before they level up to the European average and before countries such as Romania find their natural position.  But conversely Valentin Lazea from the National Bank of Romania commented this weekend that property prices could ‘collapse’ in parts of Romania where they have boomed too high too quickly. 

So what’s an international property investor to think?

Well, Valentin Lazea the Chief Economist from the National Bank of Romania has a valid point, in Northern Bucharest property prices have increased sharply and rapidly suggesting that they are due a negative correction.  However, Western Romanian cities such as the fourth most populated city of Timisoara could present an almost unrivalled property investment opportunity for both investors with a desire for residential and commercial real estate in emerging markets. 

Property for sale in Romania in areas such as Timisoara have yet to witness a massive increase in prices, but the amount of money being ploughed into the development of real estate and infrastructure in the immediate areas in and around the city is huge because Timisoara is located close to Romania’s border with the EU and it is acting as a strategic headquarters, logistics centre and industrial base for the country and many international companies establishing operations in Romania where overhead and staffing costs are low and access to the rest of the EU is easy. 

Currently in Timisoara investors are being sought for a range of retail, industrial and office developments and property investors considering their options in Romania should also consider the residential side of things because as the city expands and develops, the amount of professional inward migration expected is substantial with each individual, family or couple arriving likely to be in search of property for sale and rent.

There are however a number of factors waiting in the wings which negatively tinge the prospects for the property market in Romania a little.  On the one hand the Ministry of Public Finance, which recently committed to leaving the flat tax and VAT rates unchanged until 2008 in Romania, made no such promises when it comes to property tax.  In fact the Minster of Finance Mr. Vladescu said that “the tax on property level in Romania can hardly be considered burdening” and that as a result home owners can expect a tax increase to bring to around 1% the amount of annual property tax a home owner will have to pay.

Another negative factor potentially affecting the short to medium attraction or otherwise of property in Romania as an investment commodity for investors seeking strong capital growth and/or rental yields is the fact that the central bank in Romania is committed to controlling the property market in terms of its stability.  This is because instability in the market place could have a hugely negative effect on the entire Romanian economy and undermine the country. 

Basically the central bank are committed to protecting the real estate market because a massive withdrawal of investment or a large downturn in property prices would leave banks in Romania overexposed and seeking refinancing which could have a hugely damaging long term effect on Romania’s economy.  So, on the one hand this fact could be positive as it means it’s unlikely the real estate market will be allowed to crash – but on the other hand those investors seeking large returns from investments made into this particular emerging market may be restricted in terms of the speed at which their investment will be allowed to rise.

Romania remains an attractive and interesting country when it comes to considering property investment; but let’s not forget for one moment that it is an emerging country with a relatively immature investment property marketplace and that means there are known and as yet unknown risks associated with investing in real estate in Romania.  As with any emerging market however, when it comes to property for sale in Romania there will be those who reap substantial dividends, of that we are sure!

Special Reports: Property News for Romania

Romania Property Investment Potential
Romania has an exciting emerging property market sector that’s attracting growing levels of overseas investor interest and generating impressive growth

Romania Property Buying Process
After Romania joins the EU in 2007 its property buying process will become simplified

Romania Property Investor’s Introductory Guide
The real estate market in Romania is in its infancy but offers property investors stunning property at incredibly affordable prices.