Just like gold-seekers in the Wild West were running after precious metal with desperation, so are foreign investors taking assault on the Romanian real estate market. We’re not saying this ourselves, rather two consulting firms that carried out two independent studies at the request of foreign investors considering the Romanian investment market. The conclusions of the study ? In real estate Romania is the best…in the world.
Competition between developers grows
The conclusion of the two consulting firms, PriceWaterhouseCoopers and Colliers International takes a similarly optimistic view of the market.
According to PriceWaterhouseCoopers, Romania has the most interesting investment market in real estate. Colliers International positions Romania "only" number two in the world. Colliers states that, in this field, Romania is beat only by Americans in real estate with..New York. At the same time, according to the studies realized by PriceWaterhouseCoopers, investments in buildings, homes and land in Romania could prove to be the most profitable, in the long term, in Europe. Both studies remark that the Romanian real estate market will mature rapidly, with the demand continually growing in all segments of the real estate market, from offices to commercial spaces to industrial opportunities and houses. It is assumed that the demand will grow side-by-side with the availability of offers, many projects being announced or in the process of realization, with a delivery date of 2010. This will spark competition among developers. Due to this reason, Colliers foresees a fall in the rate of profit of up to 6.5%, in the coming years, however without having any important effect on the market.
Profit growth of 5-10 times
According to the study by PWC, if a foreigner would invest now, in the Romanian real estate market, 100,000 Euro, within a maximum of 10 years it would grow in value at least 5 times. With all of this taken into consideration, analysts appreciate that not all segments of the real estate market can offer this rate of profit.
However, there exist segments of the market that could grow more then 500% in 10 years, such as agriculture where the growth should reach 1,000%. At the same time, according to the studies of PWC, other segments of the market will register stagnation or even a decline in value, an example of this being apartments constructed before 1990. In fact, this has happened in all former Communist countries, a good example being the capitol of Poland, Warsaw. There, after the integration into the European Union rental costs of apartments in such blocks fell drastically some 10 times.
Likely, the same thing will happen in Romanian, especially in Bucharest, where, at this moment, one square meter in a “Communist " apartment block can be sold at 1,000 Euro. The conclusion of specialists is that Romania has a real estate market with much room for expansion, especially due to the big deficiencies in the market and at the same time because of the of prices considered small in comparison with those in member countries of the European Union.
36,455 authorizations for Constructions
That the Romanian real estate market is constantly expanding, we learn immediately from the numbers. According to the National Institute of Statistics (INS), in the first 10 months of last year, 36,455 authorizations for constructions of residential buildings were issued of which 35,755 were from individuals buildings with a single residence. For construction of apartment building blocks only 97 building permits were issued. Also from the statistics we find that from last year, 243 authorizations for office buildings, and 8,389 authorizations for other buildings were issued.
For residential building space 36,7999 authorizations of construction were issued.. According to INS, the most authorizations for constructions for individual buildings with a single residence were issued in rural zones, with 21,164 authorizations, the other 13,591 for constructions in town. At the same time, for office buildings in villages and small towns there were issued only 19 authorizations and 224 requests in urban areas. The total surface for of which authorizations for construction of buildings with single residence were 5,4 million square meters from which 2.6 million square meters were in towns and 2,48 million square meters in the rural area. In the third trimester of the year 2005, there were finished 8,187 , from which 6,604 were funded from private funds and the reset, with budget supplements. In urban areas there were 4,075 residential buildings constructed of which 2,813 were from private funds and 1,245 from the State budget, while in the rural area 4,112 residential buildings were constructed of which only 40 came from the budgetary financing of the State.