Romania Investment Growth

Interest in investment property in Romania has never been greater: according to the Romanian Agency for Foreign Investment (ARIS), Romania is one of the main recipients of foreign direct investment in Eastern Europe, having doubled its FDI receipts from January to April 2008, compared with the same period in the previous year. As a result, construction in Romania has undergone rapid expansion in recent years, and EU membership has greatly accelerated this trend.

The commercial sector in particular has entered a period of dynamic growth, with the assistance of substantial EU financial support. International investors now see Romania as an opportunity to expand their activities, assisting local companies who, as yet, fall short of the technical expertise required to serve all the necessary EU infrastructure projects.

Less widely publicised than many of the other emerging property markets, so far Romania has somehow escaped the limelight in the property investment world. However, increased accessibility via budget airlines, immense foreign direct investment and surging economic activity all mean Romania has much to offer investors.

Overwhelming demand for new property means that growth can be expected for those investors who act now. The fact that real estate prices still remain a good deal lower than in most other EU locations indicates room for substantial growth, as does the wider availability of local mortgages. Indeed, the future looks bright for the Romanian investment property sector and Romania as a whole, inviting much optimism for today’s timely buyers.

Growth Predictions

In Q1 2008, economic growth in Romania was no less than four times greater than the EU average, according to the Romanian Press Agency, AGERPRES, indicating a relatively positive economic climate in which to invest.

Investment property has seen high profits in the last 12 months, producing capital appreciation of as much as 40% in 2007. While this growth has, of course, leveled off drastically in the current economic downturn, property prices, particularly in the capital, are still expected to continue rising to bring significant profits from investment in high demand locations.

Investors in tourism related real estate are optimistic: Romania’s tourism Master Plan of 2007 now aims to achieve an annual target of 10 million visitors by 2016 and this is reflected in the wave of international construction projects now underway to accommodate these tourism figures. The World Travel and Tourism Council (WTTC) forecasts that the country will boast the sixth fastest growing tourism sector in the world, expanding some 7.9% per annum from 2008 to 2016.

All types of investors are drawn by Romania’s low property prices and living costs. In addition, they are attracted by its opportunities for strong rental yields alongside growth within this still emerging real estate market. As a general guide, in 2008, some apartments in central Bucharest have been producing yields of around 5.5%, while larger units of 250m2 or more can generate higher yields of around 6.25%.

At a time where the global economic crisis seems to be at its worst, such high demand for property both in tourist and city locations bodes very well for growth forecasts in Romania. In fact, based on Price Waterhouse Coopers (PwC) data,” A Place in the Sun” ranks Romania as number one in its “20 Best Places to Make Money” listing.

Romania Economy

The Romanian economy grew by 8.2% in Q1 2008, representing the highest jump in the first quarter of every year since 1990, according to the National Statistical Institute. By comparison, the average economic growth in the EU was just 2.4% in the same period, according to Eurostat. The National Prognosis Commission (CNP) forecasts that economic growth in Romania will drop to 6.5% at the end of 2008. On average, experts predict that inflation will drop greatly to 3.8% in 2010, from this year’s forecast of 7.4%.

Foreign direct investments (FDI) may reach 7.8 billion Euros in 2008, thanks to increased industrial investments and privatisations, demonstrating that Romania is regarded by investors as a location offering significant business potential.

Reasons why Romania is an intelligent property investment location:

• Demand greatly outstrips supply, thereby pushing prices steadily upwards
• The commercial sector is booming through soaring demand for modern office premises
• Strong buy-to-let market in prime city and tourist locations fuelled by fresh international activity
• Flourishing and growing tourism industry - the latest Master Plan initiatives
  aim to attract an annual 10 million visitors per annum by 2106
• Major European recipient of foreign direct investment
• The central bank (BNR) will be implementing 100% mortgages, pushing up property prices by a predicted 15%
• 4th fastest growing tourism sector in the world with a growth projection of 7.9% per annum from 2007-2016
• New international airport set to open in Brasov by late 2009, serviced by budget airlines such as Ryanair and Easyjet
• WizzAir will begin operating budget direct flights from Cluj to Paris in December 2008, connecting consumers in Western Europe. A new WizzAir base will be set up in Romania in 2009
• Low property prices and living costs – up to 50% lower – compared with the rest of Europe
• Beneficial exchange rate with the Romanian leu (RON) means even greater buying power for investors
• GDP 5.5% in first quarter of 2008
• NATO member
• EU member

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