Romania: Property prices start to soar
Romania has one of the fastest growing economies in Europe - and house prices are rising, says Zoe Dare Hall
Wednesday, 21 March 2007
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Romania used to conjure up just one thing - the dark days of dictatorship under Ceauscescu. Even during the decade following the fall of Communism in 1989, the eastern European country had the worst standard of housing in Europe - and property was worthless as no one had any money to buy it.
But Romania in 2007 is quite different. The economy is one of the fastest growing in Europe, with 7 per cent growth forecast this year. Inflation has halved in a year to 4.87 per cent. Foreign direct investment of £5.5bn was the highest anywhere in Europe, apart from Russia, and property prices have increased by up to 40 per cent since early 2006, with agents predicting 20 to 30 per cent increases this year.
"EU membership has already brought enormous benefits , with £20bn of EU money being poured into improving roads, airports, hospitals and schools," says Darren Goodson from estate agency Goodson & Red.
"Prices of city-centre apartments are currently around 35 per cent lower than other Eastern European cities, but every Eastern European country that joined the EU in 2004 has seen property price increases and there is no reason that Bucharest will be any different."
There's a vibrant yet relaxed atmosphere, with glamorous young professionals packing out coffee shops at lunchtime and clubs at night. The main source of woe is that the traffic crawls and many roads are basic, though that problem may be partially eased when 2,000 roads are repaired in the coming year.
"There's a lot of wealth in Romania as it has phenomenal natural resources including gas, oil and gold and the younger generation appreciate the value of getting a good education, speaking English and doing international business," says Mark Applebee from The Right Move Abroad.
Off-plan properties provide the greatest opportunities for rental returns and good capital appreciation. Investing off-plan also saves paying 19 per cent VAT.
With strong local demand from a growing middle class, buyers can also be reassured of a good domestic resale market.
The Right Move Abroad's developments are setting a new standard for Bucharest. At Planorama, in the north of Bucharest and ready in summer 2008, apartments cost £37,000-£78,000, and will be set in three 17-storey towers with retail space and a fitness centre. On a prime central plot near the vast Unirii Square, they are about to launch off-plan apartments in a similarly groundbreaking development from £40,000 with valuable parking spaces from £7,000 and possibly a helipad on the roof.
Rental incomes for such developments are not yet known as there are no direct comparables, but central one-bedroom flats in older buildings command around £700 a month, two bedrooms from £1,000.
Even the old communist blocks have a place in the new-look Bucharest. Romanians moving into the capital are buying in these blocks to get on the property ladder, so they now command £1,500 per sq m - compared with an average £900 per sq m throughout the city.
"Romanians tend to live with their parents until they marry, but now with mortgages available they can buy their own places with a small down payment," says Robert Wileman from Bucharest-based Sterling Capital Group, who expects to see major European banks offering competitive mortgages deals for foreigners within six months.
The most salubrious district is Aviatorilor, whose huge, multi-million euro historic mansions are popular with ambassadors.
Investment company Ready2Invest prefers southern Bucharest, where it has spotted the potential of a community of 518 houses near the forest. Forest View Villas cost from £50,000 for cash buyers or £68,000 for those who need finance. There is also an optional 6 per cent annual guaranteed rental.
Ready2Invest are also selling nearby land with outline planning permission for as little as £5,000 for a 540sq m plot, based on taking out a 70 per cent loan.
"Middle-class property development only emerged in Bucharest in 2005," says Ready2Invest's Alise Crossick. "There is a great need for affordably priced properties within commutable distance."
Bucharest has come of age. The dark days are over.
The Right Move Abroad (01606 888 886; www.therightmoveabroad.com)
Ready2invest (01273 627 900; www.ready2invest.co.uk)
Goodson & Red (0871 271 5120; www.bucharestproperty.com)
Ingenious Investments (020-8423 6682; www.ingenious-investments.com)
