Market in Depth

Romanian housing market robust, but there are storm clouds ahead

January 22, 2018

Romania's house prices have been rising strongly for two years, due to rapid economic growth, higher wages, relatively low interest rates, and the "Prima Casa" programme.  But a surging budget deficit, a rising trade deficit and rising inflation will likely cause problems ahead. 

The average selling price of apartments in Romania surged by 11.97% (9.17% inflation-adjusted) to €1,169 (US$ 1,385) per square metre (sq. m.) during the year to November 2017, based on the figures from During the latest quarter, house prices rose by 3.84% (3.52% inflation-adjusted) in Q3 2017.

All major cities in the country saw sharp house price rises during the year to November 2017:
  • In Bucharest the average selling price of apartments soared by 12.58% (9.75% inflation-adjusted) to €1,271 (US$ 1,506) per sq. m.
  • In Cluj-Napoca, Romania’s second most populous city, apartment prices sharply rose by 16.41% (13.49% inflation-adjusted) to €1,447 (US$ 1,715) per sq. m.
  • In Timisoara, the average selling price of apartments went up by 9.36% (6.62% inflation-adjusted) to €1,133 (US$ 1,343) per sq. m.
  • In Brasov, the average selling price of apartments increased by 10.99% (8.2% inflation-adjusted) to €1,000 (US$ 1,185) per sq. m.
  • In Constanta, the country’s oldest city, apartment prices rose by 13.4% (10.56% inflation-adjusted) to €1,083 (US$ 1,284) per sq. m.

After banks reduced down payment requirements to 15% to 25% towards the end of 2016, mortgage financing became attractive again to potential home buyers.

"Residential development benefited last year (2016) from a good market environment, including growing salaries (+12%), low interest rates (ROBOR 3-month < 1%) and increasing demand," says Activ Property Services. "Developers showed an active approach in expanding and starting new projects across the markets that are provided with optimal levels of purchasing power."

Coldwell Banker Romania notes that about 37% of the supply in Bucharest and its surrounding areas (about 4,500 units to be completed in 2017) are classified as middle market units, demand for which has increased due to the continuous rise in potential buyers' incomes, and demand for housing located in Bucharest's key districts.

Romania house pricesThe Romanian economy grew by 4.8% in 2016, following economic growth of 3.9% in 2015, 3.1% in 2014, and 3.5% in 2013. The country's robust growth streak is expected to continue this year, with growth of around 5.5%, according to the IMF. 

There are no restrictions on foreign nationals acquiring dwellings in Romania. Ownership of land is tricky, but companies incorporated in Romania as well as resident foreign nationals and non-resident EU citizens can acquire land.

Analysis of Romania Residential Property Market »

Rental Yields

Moderate to good rental yields in Bucharest, Romania

Houses and apartments are not expensive in Bucharest, at around 1,500 euros per square metre (sq. m.).

  • a 120 sq. m. apartment in Bucharest will cost around 190,000 euros
  • a 70 sq.m. apartment in Bucharest will cost around 105,000 euros

The purchase price of apartments in Bucharest is around 1,550 euros per sq. m..

How much can you earn?  Bucharest's rental yields are good:
  • a 120 sq.m. apartment can rent for about 950 euros per month, earning a rental yield of 6.1%.
  • a 70 sq. m. apartment can rent for about 550 euros per month, earning a rental yield of 6.1%

Please note that our prices primarily represent very well-maintained apartments. We have used the “useful area” instead of the “built area” when we computed for the sq. m. prices because we only included old apartments in our survey. When one buys an old apartment in Bucharest, one buys the useful area. But when a developer sells an apartment, he sells the built surface. Therefore, the buyer becomes co-owner of the conjoint spaces.

Currency risk: over the past four years the Romanian Leu has remained largely stable against the euro.

Conclusion:  Bucharest is a bargain. In only a few European countries are homes less expensive than in Romania.  Even more important, Romanian price to rent ratios are very low.  Romania is growing rather rapidly, so there is upside potential. But, well, it very much depends whether you want exposure to Romania given that gross rental yields are good, but not extraordinary.

Round trip transaction costs are moderate in Romania. See our Romania transaction costs analysis and our Residential property transaction costs in Romania compared to other countries.

Read Rental Yields »

Taxes and Costs

Rental income tax is moderate

Rental Income: Net rental income earned by nonresidents is taxed at a flat rate of 16%.

Capital Gains: No tax is levied on the capital gains realized by individuals from selling real property; however transfer tax is levied on the transfer of immovable property in Romania.

Inheritance: Inheritance tax is imposed at regressive rates from 2% to 0.50% depending on the value of the inheritance.

Residents: Residents are taxed on their worldwide income. Residents may deduct personal allowances and allowances for dependents.

Read Taxes and Costs »

Buying Guide

Buying costs are moderate in Romania

Roundtrip transaction costs, i.e. the total cost of buying and selling a property, are around 8.44% to 16.20% of property value. The greatest cost is the real estate agent’s commission of 6%, half paid by the seller and the other half by the buyer. Stamp duty can reach up to 3%.

Read Buying Guide »

Landlord and Tenant

Romanian law is pro-landlord

Rent: Rents can be freely negotiated. Progressive annual increases can be stipulated in the lease contract.

Tenant Security: The agreement automatically terminates at the end of the contract and no further notice is necessary. The landlord can terminate the lease before the agreed term only if the tenant did not pay rent for three consecutive months and if the tenant did not comply with the contractual provisions.

Read Landlord and Tenant »


Romania's strong growth continues; but budget deficit likely to exceed 3% ceiling

Romania gdp inflationRomania's economy has been on a rising trend for the first three quarters of 2017. In Q3 2017, the country's GDP recorded 8.8% y-o-y growth, its highest expansion since Q3 2008, according to the National Institute of Statistics (NIS). This followed robust annual growth of 6.1% and 5.7% in Q2 and Q1 2017, respectively.

The International Monetary Fund (IMF) recently raised Romania's economic growth forecast for 2017 from 4.2% to 5.5%, making it, along with Iceland, the fastest economic growth in Europe this year.

In 2018, Romania's growth is expected to be 4.4%.

Romania´s consolidated national budget deficit was RON 10.2 billion (US$ 2.62 billion) or about 1.21% of GDP during the first 11 months of 2017, according to the finance ministry, which expects the deficit to each 2.96% of GDP, just below the EU's 3% limit. However, the European Commission (EC) expects Romania's deficit to hit the 3% limit in 2017.

The increased deficit was mainly due to the country's expansionary fiscal stance. Some of the government's recent measures include:
  • Reduction of VAT from 20% to 19% beginning January 1, 2017
  • Elimination of the 1% special construction tax
  • Ratification of the unified wage law (UWL), raising all public wages by 25% in January 2018
  • Lowering personal income tax from 16% to 10%

As a result of fiscal easing, the EC expects that Romania will exceed the EU's limit and reach 3.9% of GDP in 2018 and 4.1% of GDP in 2019.

In October 2017, Romania's unemployment rate was 4.9%, significantly lower than 5.6% recorded in the same month last year, according to the INS.

Annual inflation in Romania was 3.2% in November 2017, based on the figures from the NIS. In past two years, the country suffered deflation at -1.6% in 2016 and -0.6% in 2015, following a 1.1% inflation rate in 2014.

On November 13, 2017, the Romanian Leu (RON) recorded a new historic low against the euro since 2012, with the exchange rate at around RON 4.6495 per euro. The currency depreciation is attributed to the country's ongoing political tensions, as well as to the fear of an overheating economy due to a rising trade deficit, rising inflation, and rising public spending. As of December 28, 2017, the exchange rate was at RON 4.6507= €1, according to the BNR. 

Official toleration of corruption is raising the political temperature
Romania is poised between future and past.  Does Romania want to be a modern state, in which politicians are elected on the basis of policies and are prosecuted and imprisoned for corruption?  Or does it want to be a clientilist state, in which politics is about who you accept money from?

The two most prominent voices of the progressive future are president Klaus Iohannis, elected in November 2014, and Laura Codruta Kovesi, head of the country´s National Anticorruption Directorate (DNA).

Iohannis was elected President in November 2014 on an anti-corruption platform. Since Iohannis´ election there have been a series of arrests for corruption, and increased support for the DNA, which has charged or convicted no less 18 ministers from governments that have been in power in Romania since 2004, as well as thousands of lower-level politicians, media moguls, judges and businesspeople.

However progress was set back by the Social Democratic Party's (PSD) triumph in the December 11, 2016 Parliamentary elections. The PSD´s support is strong among the poor, whose perception is that almost all Romanian politicians are tainted, so why seemingly target the PSD?

The PSD appointed the relatively clean Sorin Grindeanu as Prime Minister.  But the real power is the PSD´s Liviu Dragnea, convicted of bribery and ballot-forging during the 2012 parliamentary election and thus barred by law from becoming prime minister.  One of the Grindeanu government´s first steps was to pass Emergency Ordinance 13, effectively decriminalising official misconduct in which the financial damage is less than 200,000 lei (£38,000) - clearly a step towards Dragnea becoming prime minister.

This unleashed a storm of popular protest and mass demonstrations.  The demonstrations had their effect.  Ordinance 13 was repealed and justice minister Florin Iordache resigned, a scapegoat for Ordinance 13.

Just six months after becoming a premier, Grindeanu was ousted in a no-confidence vote with the PSD and its coalition partner ALDE in June 2017.  Grindeanu was reluctant to resign, accusing Dragnea of seeking to "concentrate all the power in his hands". In June 2017, former Economy Minister Mihai Tudose took over as Romania's Prime Minister, as designated by President Iohannis.

On December 18, 2017, a group of PSD senators and deputies submitted a draft bill setting lower penalties for corruption offenses and decriminalizing some of them. Similar to Ordinance 13, the draft bill suggests to decriminalize abuse of office with financial damage worth EUR 200,000 and below, arguing that criminal sanctions should apply only when the damages are "substantial". The bill also propose perpetrators to serve only three years of jail time, and those with severe illness or are over 60 years old to be allowed to serve their sentences at home.

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