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EU accession promises further growth for Romania’s property market

16th November 2006 Print
Romania The potential of Romania’s property market may have gone unnoticed by UK investors but its progress since 2000 guarantees that this won’t be for much longer, comments Property Secrets CEO Neil Lewis.

Whilst its neighbours Hungary, and notably Bulgaria, have received attention from press and investors alike, Romania has been making economic and political reforms which have paved the way for its entry into the EU. The results have been impressive.

“The effects of Romania’s reforms have been remarkable. The National Bank of Romania recently announced that in 2006, GDP has increased impressively from 6.9% to 7.8% in Q1 and Q2 respectively, whilst unemployment rests at just above 5%.

“A key economic pointer for potential investors should also be the levels of FDI entering Romania, with previous experience highlighting that instead of dropping after EU accession, it in fact increases substantially following membership. Ultimately, this will significantly drive demand for property”.

To date, a barrier to foreign investment in Romania has been the lack of competitive mortgage finance which naturally deterred many investors. Whilst Romania’s current law on borrowing is strict and lending of more that 75% LTV is illegal over 20 years, Lewis believes this will not always be the case.

“There are two reasons why foreign investors will soon receive competitive mortgage options on a par with Romania’s neighbours. The first is using Bulgaria as an example. The original finance packages on the Bulgarian market were poor, but as the first competitive mortgage entered the market, other lenders began clambering for market share and delivering better terms.

“The second reason is that there are already packages on the Romanian market that in the next 18-24 months will begin to offer more competitive terms. These will mature and drive attractive borrowing conditions for foreigners as well as native Romanians whose money will also help drive property price growth even higher”.

And Lewis adds that the current payment terms do not have the same restrictions for buyers willing to adopt a long-term investment strategy in Romania.

“The cost of off-plan investments can be offset by the length of development time so that the investor can still take advantage of the accelerated growth for the next 18 months while the mortgage market develops.

“For the long-term investor, Romania is a market offering extraordinary potential for exceptional capital growth and because we are seeing the mortgage market transforming, exceptional ROI as well”.

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