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Everything you need to know is included in our Romania Property Pack
Are you thinking of investing in property in Romania? Are you pondering if the prices are at the desired level?
Market timing is a topic that elicits various opinions from people. Your Romanian acquaintance might suggest that now is a perfect time to invest in property, whereas your spouse, who is originally from Bucharest, might have a different view and recommend waiting for more stability.
At Investropa, when we create articles or update our pack of documents related to the real estate market in Romania, we base our work on reliable data and statistics, rather than relying on subjective opinions or hearsay.
We have carefully studied official reports and statistics from government websites, and we now have a trustworthy database with important information. Here's what we discovered, which can help you decide if it's a good idea to purchase real estate in Romania.
Enjoy the article!
How is the property market in Romania these days?
Romania currently ensures a stable environment for investors
Positive
If you want to invest in real estate, prioritize stability as it fosters a thriving market environment. It is an information you need as a foreigner looking to buy a property in Romania.
Here's some positive information: Romania is a country with a stable environment. The last Fragile State Index reported for this country is 51, which is very good.
Romania provides a stable environment for investors due to its consistent economic growth, driven by a robust industrial sector and increasing foreign direct investments, supported by its strategic location within the European Union. Additionally, the government's commitment to fiscal stability and ongoing reforms aimed at improving infrastructure and reducing bureaucratic hurdles further enhance its attractiveness to investors.
A solid investment potential exists in this country. Now, let's review the economic outlook.
Romania will see substantial development
Positive
Before investing in Real Estate, look into the economic health of the country.
In accordance with IMF projections, Romania is likely to finish 2024 with a growth rate of 2.8%, which reflects the country's forward momentum. For 2025, we're talking 3.6%.
Besides that, the economy will keep growing since Romania's economy is expected to increase by 15.9% during the next 5 years, resulting in an average GDP growth rate of 3.2%.
The expected sustainable growth rate in Romania indicates a stable and expanding economy, which can lead to increased demand for real estate as more people and businesses seek properties. This growth can drive property values up over time, offering potential appreciation and returns for real estate investors.
That being said, there are other indicators to monitor.
Romanian business owners have a neutral outlook towards market conditions
Neutral
What is the perception of Romanians regarding their economy? The GDP forecast is not the only indicator to consider. Thankfully, in Romania there is an official metric that is consistently updated. We're lucky because this isn't true for every country.
Based on surveys and assessments of business leaders, the Business Consumer Index (BCI) is a metric used to gauge their confidence in the current and future economic conditions.
According to The Global Economy's analysis, the Business Confidence Index is at 2 for Romania. For interpretation, it's quite low.
There hasn't been significant change, considering that the BCI score, 12 months ago, registered at 1.
It's important to note that the Business Confidence Index (BCI) is currently at a minimal level in many countries, including Romania. However, this doesn't imply that the Romanian property market is devoid of potential opportunities. A minimal confidence score often reflects a temporary phase of uncertainty or caution, which is a typical aspect of economic cycles. Before determining if it's the right time to invest in property in Romania, we should consider other metrics.
Romania is dispensing less building permits
Negative
If you're thinking of investing in property in a country, an important factor to consider is the count of permits issued for property development. More building permits being delivered indicates a healthy and robust property market ecosystem.
Unfortunately, the number of building permits issued is declining in Romania.
Within the past 12 months, according to Institutul National de Statistica, the number of building permits granted by Romanian local institutions fell by 15%, from 51,560 to 43,851 units.
Without a doubt, this is a discouraging signal. Let's analyze more data.
But before that, keep in mind that if there is a reduction in building permits, it will result in a diminished supply of real estate. Consequently, there is a higher chance of property prices increasing in Romania in 2025.
Property prices keep increasing slowly in Romania
Neutral
Romania's home prices have increased by 29.1% in 5 years according to eurostat.
It means that if you had bought a villa in Bucharest for $650,000 five years ago, then it would now be worth around $839,000.
Recently, property prices in Romania have been steadily increasing at a slow pace. The market has shown a gradual upward trend, with property values slowly but consistently on the rise.
If your main goal is to make a significant profit when you sell your Romanian property in the future, then it's not a favorable sign. However, if your priority is to find a secure investment opportunity, it's a positive indication.
You can find a more detailed analysis of the real estate prices in our property pack for Romania.
Everything you need to know is included in our Romania Property Pack
Romania's population is getting significantly richer
Positive
When considering a real estate purchase, pay attention to population growth and GDP per capita because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Romania, the average GDP per capita has changed by 13.9% over the last 5 years. It is well above the average seen worldwide.
This means that, if you purchase a charming villa in Transylvania and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, the demand for rentals is expected to increase in Romanian cities like Bucharest, Cluj-Napoca, or Timișoara in 2025.
Rental yields are average in Romania
Neutral
Rental yield is a common measure in real estate investing.
It helps you understand if the property is a good investment by showing the percentage return you can expect from renting it out.
According to Numbeo, rental properties in Romania offer gross rental yields ranging from 2.6% and 5.3%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Romania.
It means that your income potential is relatively moderate.
As previously discussed, it's possible that housing prices could rise (because there will be a limited supply of available homes). However, on the other hand, there will be a significant increase in the number of wealthier tenants interested in renting. Consequently, rental yields will probably remain stable in Romania in 2025.
Everything you need to know is included in our Romania Property Pack
In Romania, inflation is projected to remain minimal
Neutral
Simply put, inflation is the ongoing upward pressure on prices.
It's when your favorite sarmale dish costs 25 Romanian lei instead of 20 Romanian lei a couple of years ago.
If you're planning to invest in a property, high inflation can offer several benefits:
- Property values often increase over time, leading to potential capital appreciation.
- Inflation can lead to higher rental rates, thereby increasing the cash flow from the property.
- Inflation decreases the real value of debt, making mortgage payments more affordable.
- Real estate can serve as a hedge against inflation, safeguarding the value of the investment.
- Diversifying into real estate provides stability during periods of inflation.
According to the IMF, over the next 5 years, Romania will have an inflation rate of 1.0%, which gives us an average yearly increase of 0.2%.
This data infers that Romania is expected to have near-zero inflation then. Unfortunately, buying a property now may not lead to significant price increases or high profits in the future.
Is it a good time to buy real estate in Romania then?
Time to conclude !
2025 could be an excellent time to consider buying property in Romania, thanks to the stable environment the country currently offers to investors. With a solid foundation for economic activities and investments, Romania is becoming increasingly attractive to those looking to invest in real estate. The country's commitment to maintaining a stable environment means that investors can expect a certain level of predictability and security, which is always a plus when making significant financial decisions like purchasing property.
Moreover, Romania's economy is on a promising growth trajectory, with an expected increase of 15.9% over the next five years, translating to an average GDP growth rate of 3.2%. This sustainable growth indicates a stable and expanding economy, which can lead to increased demand for real estate. As more people and businesses seek properties, this demand can drive property values up over time, offering potential appreciation and returns for real estate investors. It's a classic case of supply and demand, where a growing economy can lead to a thriving real estate market.
Interestingly, Romania is currently issuing fewer building permits, which could mean that the supply of new properties might not keep up with the growing demand. This situation can lead to a gradual increase in property prices, making it a potentially lucrative time to invest before prices rise significantly. Additionally, as Romania's population becomes wealthier, there is likely to be an increased interest in purchasing properties, further driving demand and potentially increasing property values.
Finally, rental properties in Romania offer attractive gross rental yields, ranging from 2.6% to 5.3%, according to Numbeo. This makes Romania an appealing option for those looking to invest in rental properties. Coupled with the projection that inflation will remain minimal, investors can expect their returns to be less eroded by inflationary pressures. All these factors combined make 2025 a potentially opportune time to invest in Romanian real estate, offering both stability and growth potential.
We genuinely hope this article has been helpful and informative to you!. If you need to know more, you can check our our pack of documents related to the real estate market in Romania.
-Will real estate prices go up in Romania?
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.