Will economic growth in 2013 help boost the Romanian property market?
By Danny Bance

Will economic growth in 2013 help boost the Romanian property market?

Romanian property could find itself in demand this year, with experts forecasting economic growth for the country throughout 2013. According to the Erste Group Bank Equity Strategy Q1 2013 report, the "country's fundamentals remain[ed] robust" throughout 2012. "Conclusive progress" was also noted in the consolidation of public finances, which enabled the government to better finance its deficits.

Consequently, it is expected that by the end of the current year, the budget deficit will stand at 2.7 per cent, while GDP will grow by 1.1 per cent. Erste claim this is a "systematic improvement in the fiscal balance since 2010" and those in the property market will no doubt heave a sigh of relief: A stable economy is integral to stimulating real estate activity.

Nevertheless, to ensure the economy continues its upward momentum, fiscal consolidation must continue. This will be helped by the country's new agreement with the International Monetary Fund, the European Union and the World Bank. The document is expected to be signed in April for another one or two years and has been agreed in principle by the president, the ruling coalition and the Central Bank.

Monetary policy easing and real economy improvement is, however, viewed as unlikely in the immediate future, thanks to depreciation pressures, lack of purchasing power in households, and non-performing loans in the banking sector. This means that despite growth improvements, "the Romanian economy will still be trailing behind its potential in 2013," according to Ernst.  Therefore, house prices are unlikely to return to pre-recession highs any time soon.

The Global Property Guide reported in September that Romania's real estate market would remain in the doldrums throughout 2012, with the average selling price of apartments in the country falling by 6.21 per cent during the year to August last year. Nonetheless, signs of economic improvement are still good news for the country and once stability returns, property activity is likely to pick up once again.
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