Investment Strategies For Romania

The real estate market in Romania has been growing alongside a huge increase in commercial and tourism related activity since EU membership in January 2007. With demand greatly outweighing supply in many sought-after city and rural locations, investors are acting now to profit later from today’s low prices.

General Factors

As an emerging market, Romania has until now largely escaped the attention of overseas real estate investors. However, times are changing and since EU membership, the country has experienced surging economic growth, which even now totals some four times the EU average. This factor, combined with the recent introduction of local mortgage facilities, means real estate buyers are taking a closer look at Romania as a promising investment location.

Romania offers a wide arena in which to explore and identify real estate opportunities: it not only provides investors with a huge demand for city property, both commercial and residential, but tourism related accommodation is also in short supply in the country’s sought-after tourist locations, particularly its beach and ski resorts.

The increased presence of multinational companies in Bucharest brings with it strong rental demand and ready sales and rental markets or properties in quality new developments. Increased foreign investment and resultant economic activity means that Bucharest could double its population (now approx. 2.5 million) within the next ten to fifteen years, according to the World Bank – all good news for investors.

Economic Factors

Since EU accession in 2007, Romania has opened itself up to dramatic economic growth and optimism, and attracted overwhelming interest from overseas investors. It continues to be under close scrutiny by the EU commission to ensure that it meets its membership obligations in all crucial areas.

There is clearly an immense under-supply of property to cater for such growth and Romania is currently undergoing immense activity in both the commercial, residential and tourism sectors. Real estate investors are spurred on by the ongoing potential of this relatively new EU nation.

According to the Romanian Agency for Foreign Investment (ARIS), foreign investment from January to April 2008 increased by over 100%, compared with the same period in 2007, making Romania one of the main recipients of foreign direct investment in Eastern Europe. In fact, Romania is now a very attractive developing nation for foreign investors, with 55% of FDI centering on Bucharest.

All types of investors are drawn by low property prices and living costs, and the strong opportunity for rental yields and growth within a still emerging real estate market. The April 2008 Ernst & Young SEE Attractiveness Survey reveals that Romania is regarded as the most attractive European country in which to invest, beating Turkey and Greece.

As the country grows in terms of availability of professional work, higher wages and mortgages, many Romanians can now afford to buy their own homes. As the nation’s economy develops, its working population is becoming more qualified and wealthier by the year. With mortgages now available, home ownership is no longer an otherwise unobtainable dream for many Romanians, and real estate buyers will find a ready local market to fuel their investments.

Political Factors

Since January 2007, Romania has been a member of the EU and, after its depressed Ceausescu days, it is now a fiercely democratic state, encouraging EU unity and NATO integration. The transition to a market economy has been undeniably slow and left-overs from a Communist regime are gradually being eradicated.

Romania is a constitutional republic with a multi-party parliamentary system. A four party government coalition is made up of liberals, democrats, conservatives and the Hungarian minority. In December 2006, the conservatives departed from teh coalition, leaving a minority government. Currently, the liberal Prime Minister, Calin Popescu Triceanu, runs a liberal/Hungarian minority government which won a confidence vote in April 2007. The democrats are now in opposition, while the next general election is due by December 2008, with the next presidential elections scheduled for 2009.

Natural Factors

As the largest of the Balkan countries, Romania offers dramatic mountain scenery including popular ski resorts, in addition to the magnificent beaches of its Black Sea coast. For nature lovers, the Danube Delta hosts 98% of the European aquatic fauna - more than 3,400 species in all – some of them unique on the entire planet.

Romania also comes with rich historical charm, tales of Count Dracula and a unique culture. In addition to the country’s endless natural beauty, tourists come to enjoy the Old Town centre of Bucharest, now undergoing some 30 million EUR worth of renovations to museums, art galleries, a concert hall, jazz clubs and nightclubs. With the World Travel and Tourism Council (WTTC) forecasting that the country will become the sixth fastest growing tourism sector in the world, expanding some 7.9% per annum from 2008 to 2016, it is clear that Romania now offers much potential for tourism related construction projects.

Romania's culture is part of the European Latin culture and the Romanian language originates from ancient Latin. English, French and German are widely spoken, making communication with Romanians an easy process.

Logistical Factors

By Air

The most popular way to reach Romania is by air. The country is easily accessed using a wide variety of budget and scheduled flight services from many European airports. For a full list of airlines serving Romania, follow the links below.

WizzAir will begin operating budget direct flights from Cluj to Paris in December 2008, connecting more consumers in Western Europe. A new WizzAir base will be set up in Romania in 2009 creating a bright future for budget air travel to the nation.

Romania’s 11 International airports:

Airport IATA code
Arad ARW
Bacau BCM
Baia Mare BAY
Bucharest-Henri Coanda OTP
Bucharest Aurel Vlaicu BBU
Cluj-Napoca CLJ
Constanta-Mihail Kogalniceanu CND
Iasi IAS
Sibiu SBZ
Targu Mures TGM
Timisoara TSR

A new international airport is set to open in Brasov by late 2009, and budget airlines such as Ryanair and Easyjet are preparing to offer their services to the airport.

By Rail

Interestingly enough, the original Orient Express train ran from Paris to Bucharest.

Today, international express trains connect the main central European capitals with Bucharest, then onwards to the Black Sea coast and some main cities. Romania is a member of the International Railway Tariff System, RIT, and Inter Rail.

Bucuresti North is the main train station at Bucharest (Gara de Nord, Blvd. Garii de Nord 2, Tel: 9521). The station is located just three miles from central Bucharest, and connects with both national and international cities throughout Europe.

By Road

Modern highways are normal in Romania and meet EU regulations in terms of engineering standards, signage and road safety.

The principal highways into Romania are:

E81 - from Berlin, Warsaw, Budapest-Petea
E60 - from Vienna, Prague, Budapest-Bors
E64 - from Nadlac E64
E671- from Varsand E671
E70 - from Trieste, Belgrade-Moravita, Portile de Fier
E85 - from Athens, Tirana, Sofia-Giurgiu
E87 - from Istanbul, Sofia-Vama Veche
E580 - from Moscow, Kiev, Kishinev-Albita
E85 - from Warsaw, Kiev, Chernowitz-Siret.

Short Term Investment Strategy

Key Opportunity

Construction in Romania still struggles to keep up with demand levels. Carefully selected off-plan properties in sought-after locations are likely to provide strong potential returns for today’s investors.

The real estate market in Romania has been growing alongside a huge increase in commercial and tourism related activity since EU membership in January 2007. Buyers are choosing between state-of-the-art commercial and residential properties in major city centres, and quality apartments and chalets in the country’s favourite mountain and coastal tourist destinations. The star of Romania’s city property market has to be Bucharest, but interest is also spreading to the country’s second and third tier cities. Real estate in Brasov, Cluj-Napoca and Constanta is now attracting attention and significant increases in capital growth are being witnessed.

With property prices lower than in many other European Union destinations, property in Romania promises rewards for those who act now, before prices inevitably rise. Despite current global economic uncertainty, Romania comes on top when it comes to economic growth, which is well above the current EU average, while investment property is still seeing investment returns, albeit somewhat lower than the average 40% p.a. in 2007.

Buying off-plan in Romania means that the investor is assured of the top quality, so sought-after by both local and international buyers and renters. Off-plan developments are generally built to the very latest of construction standards and use up-to-date construction materials (additional insulation, triple glazing, natural parquet flooring, high security etc).


Investors in Romanian off-plan developments factor in between 18 and 24 months for construction, from reservation to completion stages. Short term investors normally look to profit from a carefully selected, promising market, selling on their unit to mid or long term investors approximately 8 to 12 months after making their initial reservation, regardless of whether or not the project is yet completed.

Highly beneficial finance structures are often in place and, depending upon the development, investors need pay only around 20% of the purchase price in the form of a deposit, while the rest is payable when and if they complete. In the case of selling on their contract prior to completion, short term investors will have made a relatively small capital outlay, while receiving potentially steady returns on investment, whilst never having paid the full purchase price.

Of course, the earlier the investment is made, the greater the investment returns. As importantly by entering the project at the earliest possible stage, investors get the best choice of units which will always be first to attract buyers in the future.

Level of Complexity

Short term strategies offer the lowest level of complexity as the purchase has not yet been officially made; therefore, no property taxes or maintenance or management charges are due. This is a simple capital investment, often with no need to proceed to Purchase Contract, or make any mortgage finance arrangements. Remember to check with the developer if there are any charges made to “flip”, or reassign your contract, and at what stage you are permitted to do so, before you proceed

Foreign off plan investors are party to the same laws and regulations as Romanian nationals and are free to rent or sell their Romanian properties.

Risk Assessment

All investors must carefully assess the particular project and units in which they wish to invest. In many cases, a wide range of other projects will be under construction and a choice will need to be made. This is based on how a particular development or project will outshine its competitors in terms of appearance, location, on-site facilities and the unit itself. Investors will also need to consider issues such as the number of other units available within the particular development, predicted demand as well as competition for the type of property they wish to invest in.

To curb risk, a short-term investor should normally seek to buy the best possible unit, ie. a corner unit, a penthouse or ground floor unit with a private garden, which will always sell in preference to a standard first floor unit.

Investors need to be clear how their exit strategy is to run. How will the unit be marketed and by whom? How much will the selling agents charge in commission? Should a buyer not be found prior to completion of the property, investors must be confident they can cover payment to completion of the unit and adapt their strategy if necessary.

Short term “flip” investments are undoubtedly more risky than longer term strategies, but, with careful research and planning in place, off-plan purchase in well located French projects offers a sound investment with lucrative returns.


Although current capital appreciation will not reach the levels it did in 2007, current economic indications demonstrate a smoothing off to more sustainable levels, comparing very well with many other EU countries today.

Shrewd investors reach the highest figures by selecting prime locations at pre-release pricing levels, allowing them to invest at below market value. Growth in Romania is expected to be at its highest in some of Bucharest’s newest developments, both within and near the city centre.

By reserving at pre-release stage, investors profit from discounted prices and, in many cases, these are subject to successful planning applications, allowing for additional pricing uplift. Reservations on this type of project allow for full refunds if necessary and secure escrow accounts are in place to protect investors’ funds. The earliest possible reservation of course affords maximum returns on investment on any given project.


The short term investment strategy is purely based on capital outlay as mortgages cannot generally be raised against property that is not yet built. In order to cover all eventualities, investors MUST be confident they can complete the purchase if necessary, even if using a buy to flip strategy.


Purchasing off-plan property and then re-selling prior to completion is a tax-efficient way to invest as it allows buyers in Romania to avoid property transfer taxes and other taxes when selling on the contract prior to project completion.

Medium to Long Term Investment Strategy

Key Opportunity

As a result construction in Romania has undergone rapid expansion in recent years, and EU membership in 2007 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.

Overwhelming demand for new property means that growth can be expected for those investors who act now. The fact that real estate prices are still 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 optimism for today’s timely buyers.


Average construction time from project sales release to completion of construction, is approximately 18-24 months. Mid to long term investors look to hold onto their units after construction, normally for at least 18 months from initial reservation, either to rent it out and/or benefit from capital appreciation upon eventual resale. Many long term investors use hotspot locations to generate significant and reliable rental income over a period of time, as sustained rental returns are their main focus, followed by capital appreciation over the years.

Capital appreciation is expected to perform well over the next 5 years and the longer investors are able to leave capital in their purchase, the higher their potential long term returns will be. Increasing numbers of visitors to Romania and a growing demand in the city for quality rental properties means investors can reap solid capital growth from their properties, all the while supplementing this income with high rental yields in many prime locations.

Level of Complexity

In the case of off-plan purchase, a deposit of approximately 20% is payable, simply followed by the balance upon construction completion. Sometimes small stage payments will be required, but these will vary according to the developer.

For mid to long term investors, all costs will be applicable, while ongoing costs such as maintenance, community fees and utility bills will also need to be factored into the strategy finance plan. Bear in mind it’s advisable to open a Romanian bank account in order to pay for the property’s utilities and other ongoing expenses.

Beneficial arrangements are often to be made with local property management and rental companies that are usually conveniently based on or near the site. These ensure that such ongoing costs are covered and that your unit is rented out regularly. Managed properly, maintaining a property abroad can become no more complex than an investment closer to home.

Key Risks

A medium to long term investment strategy entails much lower financial risk than a short term plan which relies on finding a buyer within a very short time frame. Provided the right investment is made on a quality, well located project with multiple facilities, establishing a rental market and eventually a buyer for your investment should not be difficult. However, as with any investment, patience and money is sometimes required until the end user is found.

The Romanian government recognises the importance of foreign investment in this important time of growth. With many foreign companies becoming established in Romania, they are to make an ongoing contribution to the property sector, boosting the country’s economy. On the one hand, this situation indicates a stable environment in which to buy or rent, but it also brings with it intensified competition on the other. For now demand levels in Romania are such that this is unlikely to happen for the foreseeable future.

Bank guarantees are commonly given by developers will always be protected by local or overseas bank guarantees.

By appointing independent legal representation, the client can be sure that all the necessary paperwork is in place before signing the purchase contract.

Property ownership in Romania is mostly freehold, leaving no room for ownership disputes.


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.

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%.

The growing Romanian middle-class is another key indicator of the returns investors are set to see. With average salaries increasing, many locals are now, for the first time, able to leap onto the property ladder. Such ongoing, popular demand will doubtless increase prices over time.


Although mortgages are relatively new to buyers in Romania, you can now obtain capital and repayment mortgages for 35 years or until age 70.

Minimum loans are normally for 5,000 Euros, while maximum loans can reach 500,000 Euros to finance 75% LTV. In order to qualify, your total debt should currently not exceed 35% of your income. However, times are changing and the Central Bank’s (BNR) decision to reduce minimum down-payments for homebuyers is paving the way for 100% mortgages and increased affordability for both local and international buyers. This move is of course expected to boost the real estate market, gradually pushing prices upwards by as much as 15%.

Many off-plan developments in Romania offer installment plans over between 12 to 60 months. The charges applicable vary according to developer and repayments are usually index linked. The developer can often offer the most competitive finance options to investors and these are certainly worth considering when looking at mortgage alternatives from their own countries.


VAT: 19% VAT is applied on the full price of the property and is charged if the seller is VAT registered (i.e. a company). However, with transfer from one VAT payer to another, or the transfer of a business by way of a share sale, VAT is not charged.

Individual Income Tax and Corporate Tax: Rates for both taxes in 2008 are flat at 16%.

Capital Gains Tax: for companies and individuals is charged at 16%. For individuals, the tax rate for gains from the sale of real estate is 2% - 3%.

Inheritance Tax: If the inheritance procedure is finalised within two years from the death, no tax is due. If this is not the case, a 1% is payable on the total value of the inheritance. No tax exists on gifts or wealth.

Property Tax: is set at 0.5% to 1% of the property value. In case of a building owned before 1 January 1998 and not revalued after this date, local taxes range from between 5% and 10% of the recorded cost of the building.

Rental Income: is subject to a 16% flat tax rate; however, a 25% notional deduction is also available.

Double Taxation: Romania is signed up to a Treaty for the Prevention of Double Taxation with many countries all over the world. A Double Taxation Prevention Treaty, in principle, enables you to offset tax paid in one of two countries against the tax payable in the other, thus preventing double taxation.

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