An Expat Guide to the Romanian Property Market

Added: (Sun Aug 22 2010)

Pressbox (Press Release) - The Romanian property market has been a roller coaster over the last few years, and nowhere more so than in Bucharest. In 2005, PricewaterhouseCoopers commissioned a survey to evaluate the property market of 25 European countries. Romania was, by far, at the top of the list for projected increase in property value, with an enormous 442 percent growth forecast. This turned out to be massively over-optimistic and the property market deflated sharply shortly afterwards. Now some areas of Bucharest have started to sell properties at base cost as empty residential developments languish and stagnate, yet other areas have reported an increase of as much as 160 percent on their 2005 values.
The 2005 projections turned out to be an over-valuation due in part to the subsequent global economic downturn, but also due to incorrect evaluation methods.

Speaking in an interview, Raluca Pandele, Move One’s Country Manager for Romania, explained the situation leading up to the crash. “Before the credit crunch, off-plan properties were getting bought in Bucharest, which were then sold on for inflated prices right after completion. Theses were then sold furnished at more inflated prices, and so on. This all effected how the property prices were being analyzed. Each property was being given a false reading, evaluated at the cumulative value of all the transactions, rather than real individual property price.”

After the crash, whoever had the property on their hands at the time were effectively the losers, a situation exacerbated by many developers having agreements with investing banks not to sell the developments below a certain price per square foot. At the height of the over-valuation, the buying of property and land was described by Pandele as ‘hysteric’, with parcels of now useless dirt land being bought up well beyond the city limits for exaggerated prices.
Those areas most popular with expats are predominantly in the northern parts of Bucharest, with the local population living in communist era blocks in the south. Areas with convenient access to the airport north of the city usually attract the biggest expat population, along with the most developed housing projects. Areas such as Baneasa have the American and British schools, and therefore command the highest prices. The expat community in Bucharest is predominantly comprised of families, so houses with garden are the most in-demand kind of property. Before the downturn, a miniature industry revolved around the renovation and modernization of the town houses to American and British standards. However, as it became increasingly a buyer’s market, the clients got more selective, and as such, only those properties with the very best and most complete infrastructure and transport connections were sold. Developments that did not have fully finished telecoms or road connection could not be sold and thus the infrastructure was never completed, leaving otherwise attractive houses isolated in areas that stagnated. Housing caught in these dead pools are down an average of 50 percent of their value, and are increasingly being sold for cost as banks recoup whatever losses they can. The properties that have solidly held their value and even increased have been in the immediate vicinity of the foreign schools or further out around the Ibiza Golf developments. If you don’t have any kids and don’t mind stretches of unfinished road, great homes for comparatively little money can be found.

Other areas popular with expats include Herastrau Park, which is a beautiful 400 acre green area at the heart of Bucharest with an expansive lake. The properties overlooking the lake are particularly highly valued, including some highly desirable 19th century neo-classical and 20th century art nouveau buildings.

Pipera is one of the oldest parts of Bucharest, which along with old villas in the local style has an increasing number of new developments along with the Dorobanti area – a center of pubs, cafes and restaurants. This area is an interesting mix of urban living within parkland, and whilst it has some of the highest density living in Bucharest, it is also one of the greenest and most tree-lined in town.

Nordului is the most modern residential district in the whole of Bucharest. As little as 15 years ago it was nothing but rolling corn fields, but modern tower developments shot up at the time of the boom, some being built before there were even real roads to get there. By now the infrastructure is complete and the area has started to come to life. Shops and cafes have started to open in the ground floor units whilst the ultra-modern apartments are beginning to fill up, thanks to its easy access to the financial district.

During the Middle Ages, the Lipscani district was the commercial center of Bucharest, and as such, traditionally had some of the most splendid homes. During the communist era the buildings were crudely split up into numerous small flats, and eventually fell into a state of neglect. Today they are being reintegrated into single large residences, and restored to some of their former glory. Large parts of the district have also been given over to pedestrians, making it a quiet and very attractive neighborhood for urban living for those expats who do not need a car.

The feeling amongst those familiar with the Bucharest property market is that the market is right about now bottoming out. Developments are being sold for no more than the cost of the building materials, and at the same time areas that had become stagnated from bad infrastructure are now getting properly connected. The worst pinches of the credit crunch are beginning to abate and as soon as the local population get a little breathing room they will start to move in to the flats and houses originally constructed for expats, meaning that there is a limit on how long the window of availability will last. For those more interested in investment rather than settlement the houses and properties are of good quality, but the land itself is also still going for greatly reduced rates.

Its worth noting that expats are not actually personally allowed to purchase and own land in Romania, but this can be easily circumvented by the formation of a company or trust to own the land for you. Whilst Bucharest is no longer the explosive market it once was, it has been projected by The Economist Intelligence Unit to enjoy an average annual GDP growth of 4.12 percent between 2010 and 2013, and there is currently nil rate CGT.

To access a complete video guide created for expatriates relocating to Bucharest, please visit the Move One City GuidesTM website, or contact relo@moveoneinc.com

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