Romanian real estate market
Romanian real estate market - 2018
2016 was marked as Romania's shifting point. After the economic global crisis hitting at 2009, Romania began to show signs of positive growth and the economy reflected a sharp change in direction.
In fact, starting in 2014, a number of entrepreneurs began developing real estate projects, usually financed by private capital. After seeing that they were able to return the investments relatively quickly, when focusing mainly on building medium-sized residential projects, they become the initial engine the economy was expecting.
Romania's purchasing power & growth - 2018
The fundamental change in the direction of positive growth is based on a central fact: the demand for residential apartments & houses has never changed!
There has always been a shortage of residential apartments & houses, mainly in the main cities where most of Romania's working population (Bucharest, Cluj, Timisoara, etc.) is located.
As of 2012, the banks have also started to stabilize, following several challenging years due to the global crisis that has not passed on any of the countries in the region. During this period they kept their equity and low exposure, therefore, are currently not showing any liquidity problems.
The growth engine was based on the fact that the pre-2009 market was based on non-realistic housing prices for the local buyer, focusing on selling them mostly to foreign investors.
The foreign investors arriving to the capital cities and purchased huge quantities of apartments for the purpose of renting them, were actually the catalyst for creating “the bubble” that raised the prices of apartments and prevented young couples and even local investors from purchasing the same apartments exactly.
However, during the years following this bubble explosion, the demand was still there, simply because Bucharest itself has about 2.5 million inhabitants and their purchasing power is enormous!
Following this guideline means that you have to focus on the existing & local purchasing power to create economic prosperity and success in any real estate project you choose to invest in.
The local customer
The average wage in Romania is about 700 euros a month. The local labor market is experiencing a significant growth, having a very low unemployment figure, after many foreign companies in the financial and hi-tech sectors entered Romania in recent years.
These companies have opened their operational services centers & call centers in Romania and employ thousands of workers throughout the country, mainly in capital cities. Their impact on the employment market is so dramatic, as they have created new employment conditions and raised the average wage in the economy, which affects all sectors in a sweeping manner.
The labor market in Romania is in fact at lacking the require manpower, a situation which affects employers to create more attractive conditions for their employees.
Providing employment stability is a mandatory matter for an employer who wants to survive in such a competitive market where there are not enough workers...
The Romanian customer is accustomed to paying a monthly rent of about € 300-400 per month.
The dream of purchasing an apartment / house is embedded deeply among all the Romanian people, The Romanian client financial approach is based on a careful self-financial management because of the difficulty in obtaining personal credit from the banks (Overdraft is not part of the list of habits of the average Romanian). The Romanian client is cautious and will spend only what they can afford to spend.
Governmental financing support for promoting the real estate market
There are over 25 banks operating in Romania, all of which offer loans and mortgages to purchase an apartment, under competitive conditions.
The Romanian government has understood that a number of financial measures are required to stimulate the market by enabling people different audiences to purchase apartments & housing.
The understanding that buying apartments is an engine for an overall financial growth, has led to the launching of a unique program called "Prima Casa" (First housing program). The plan grants the ones who purchase their first home, the possibility of receiving a loan on preferential terms from the bank, with very limited equity, together with state collateral for payment of the mortgage.
The government, of course, made certain restrictive conditions in order to prevent abuse of the excellent benefits it provides to these buyers’, and added different restrictions for the banks that enjoy state guarantees and limited the interest rate that the bank can charge its customers.
In addition, the state has launched a special VAT reduction plan for entrepreneurs and construction companies, allowing them to sell houses (with certain restrictions regarding the size of the house, the size of the yard, etc.) in 5% VAT, which reflects a 14% reduction in the normal
value of VAT. (19%)
Both plans were successfully implemented throughout Romania and despite the fact that the financial crisis has already ended, the government kept all the programs intact and in fact has stimulated the real estate sector by enabling other entrepreneurs to build large projects for the general public.
In conclusion -
In general, it is important to understand that the days of the bubble are over.
The Romanian customer acquires only what he can afford, so the supply of apartments and houses in the market is fully compatible with an average income of € 700-1000 per month (and accordingly the mortgage!).
An entrepreneur who tries to raise the standard price level will encounter resistance and will have issues when closing a deal. The market is characterized by a mature market which is experiencing accelerated processes of growth and prosperity, with an emphasis on long-term stability and vision, but at the same time allows large and safe profits for the entrepreneurs
Mentor Capital and the Romanian market
Mentor Capital has been active in the Romanian market since 2005. The company's management has an active branch in Bucharest and has continued its activity with great success throughout the years in Romania.
Unlike other companies that came to Romania for the purpose of making quick exits and took accordingly high risks that are not based on a thorough knowledge of the market (and most of which are listed companies' funds), MCBA company's management is a long-term visionaries , operating based on the needs of the local target audience and avoiding speculative operations.
According to this principle, the secured Investment model was developed, enabling private investors to join the various investments made by the Company and benefit from the growth of success offered by Romania, in a cautious and transparent manner.
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