Avalanche of money to hit Romanian property market

Due to simple economic and the rules of supply and demand, the Romanian property market is set to be utterly transformed in the next few months, which will result in a huge surge in price growth say investment experts Property Secrets.

Due to the availability of 100% mortgage by numerous providers in Romania, there will be much more money available to Romanians who will be chasing a very limited supply of property, which will have a dramatic effect on property prices in the country.

Simon Blakebrough, Investment Broker - Property Secrets, comments: “Well, the mortgage market is set for a major and rapid expansion that will see the number of lenders approved by the central bank to offer 100% mortgages rocket from precisely one to double figures.”

“In fact, as many as 15 more banks are likely to win 100% LTV approve from the National Bank. That’s how many applications are still up for approval.”

“What we’ll see is a further aggressive drive among mortgage lenders to win market share in the increasingly competitive Romanian market. I think what we’ll actually see mortgage rates driven down to near margin as lenders compete for business.”

The obvious effect of this increased lending in Romania will mean there will be increased affordability for the emerging middle classes who are now really starting to grasp the concept of buying off-plan.

The queues are forming around the block when a new development comes to market at the off-plan stage. Romanian’s now have the buy.

But supply still remains limited.

For example, officially Bucharest has a population of 2.8 million but, in reality, this is more like 4 million – and yet only 3,000 new units were built in 2006.

And in the last few months there has been a noticeable surge in interest from buyers. Once this kind of expansion takes place in the mortgage market, there is most definitely going to be a phenomenal property price growth to follow.

Simon adds: “We are right at the beginning of an incredible growth spurt in this market in which demand far, far exceeds supply and the consequent effect on price is clear.”

“We’ve long said that, in many ways, we see the Romanian market as a reflection of the Polish market several years ago.”

“One of the biggest factors in the rapid expansion of the Polish market was the liberalisation of the mortgage market – increased LTV’s, gradually coming up to 100%, lots of competition, borrowing rates driven down. The same pattern we’re seeing in Romania.”

When people talk about how expensive a market is, they often overlook borrowing capacity. In Romania, the mortgage market has only taken its first faltering steps on a journey that will power the property market at a staggering rate over the next few years.

We’re already seeing the effects of this growth in the mortgage market on demand for new property.

Just released is The Old Bread Factory in the Titan district of Bucharest, which has 500 reservations for only 200 units. The New Town development, close to Platinum Towers in Vitan, has 460 people who have pre-registered for just 220 units.

With this kind of demand it is getting even harder for foreign investors to get good deals.

People are walking into developers’ sales offices with pockets full of cash, handing over full deposits and even agreeing to multi-stage payments so they can secure a unit.

Simon adds: “We tried to get units at both The Old Bread Factory and New Town but we lost out, not to other foreign investor groups, but to the local market. We simply couldn’t negotiate the kind of terms that meet our own standards, so we had to walk away.”

Simon concludes: “Just as we have predicted, and as we have seen in other cities such as Warsaw and Krakow, where prices have shot up in value, the Romanian property market will go Ballistic.”

“The supply is just nowhere near enough to meet demand and it isn’t going to be for many, many years at the current rate because new units aren’t coming on to the market fast enough.”

“I believe that this forthcoming development in the mortgage market really represents the start of Romania property taking off in quite a spectacular way.”

“Good deals are going to become increasingly rare and harder to negotiate, so there is a genuine urgency to get into this market for any investor who can see the obvious potential.”

“For me, it’s clear as day – if you can find a good offer grab it otherwise you’ll be locked out of the market as the quality deals begin to dry up.”

For further information, visit propertysecrets.net.