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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 50.8, which is very good.
Romania has a pro-business government that is committed to creating a favorable economic environment for foreign investors. Additionally, Romania is a country with a reliable legal framework, which provides a secure basis for investments.
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 2023 with a growth rate of 2.4%, which reflects the country's forward momentum. Concerning 2024, we're talking 3.7%.
Besides that, the economy will keep growing since Romania's economy is expected to increase by 15.2% during the next 5 years, resulting in an average GDP growth rate of 3%.
The expected sustainable growth rate in Romania is beneficial for real estate investors because it indicates that the economy is growing steadily and that investments in the country are likely to be profitable over the long term. Additionally, the growth rate can help investors to better understand the potential return on their investments in Romania.
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 1 for Romania. For interpretation, it's quite low.
There hasn't been significant change, considering that the BCI score, 12 months ago, registered at 2.
It's important to note that Business Confidence Index (BCI) is currently quite low in many countries, not only Romania. However, this doesn't mean that the Romanian property market lacks potential opportunities. A low confidence score often indicates a temporary period of uncertainty or caution, which is a normal part of economic cycles.
Before deciding whether it's the right time to buy property in Romania, we have to look at other metrics.
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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 2024.
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 2024.
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 2024.
Everything you need to know is included in our Romania Property Pack
In Romania, inflation will intensify
Positive
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 20.4%, which gives us an average yearly increase of 4.1%.
This data infers that Romania could experience inflation, resulting in rising prices. Therefore, it's worth considering buying property now as a potential opportunity.
Is it a good time to buy real estate in Romania then?
Time to conclude !
Despite some favorable signals, 2024 might not be the most opportune time for property investment in Romania due to a range of factors that warrant careful consideration. While the current stability Romania offers to investors is encouraging, it's crucial to recognize that a stable environment doesn't guarantee optimal property investment conditions. Other critical elements such as economic factors and market dynamics play a significant role.
The anticipation of substantial development in Romania is promising, but it's essential to examine the broader investment landscape. While development can create opportunities, it's important to assess factors like infrastructure, demand-supply balance, and regulatory stability to determine the feasibility of real estate investment in the country.
While the improving financial status of Romania's population is positive, other variables such as property demand and affordability need to be weighed. Additionally, slow property price increases could affect the potential for immediate value appreciation, impacting the attractiveness of property investment in the short term.
The combination of neutral signals from business owners, average rental yields, and the reduction in building permits paints a complex picture. These factors can potentially influence the property market's dynamics and investor returns. Therefore, despite some favorable aspects, a cautious approach is advisable when considering property investment in Romania in 2024.
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.
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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.
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