Many experts have predicted that that Romania will be the property hotspot for the next 10 years. Channel 4’s a place in the Sun believes returns of 414% are possible.
Here are the economic reasons why they might be correct:
Demand heavily outweighs supply
There are over two million Romanians living in Bucharest and last year 8,800 homes were built across all sectors and demographics. City planners believe there is a need for 200,000 extra homes specifically for the emerging middle classes. (National Housing Authority, Romania 2006)
EU accession
Romania’s accession occurred in January 2007 and has set off a gold rush like never before. EU development funds are pouring into the country.
Equity rich locals
The fall of communism in 1989 has had lasting effects on this beautiful country. Every Romanian citizen was given their home and the main benefit of this is that 89% of the population own their homes without any mortgages. They are equity rich and not afraid to use it.
Emerging middle class
There are now 100,000 Bucharest residents we would consider to be in the middle class. They enjoy luxury goods and prestige sports cars. Porsches and Range Rovers are astonishingly common.
Emerging mortgage market
The market in Romania is in its infancy. Mortgages have only been available since 2003 and account for only 1% of GDP compared to 49% in the UK. Romanians are allowed borrow 75% Loan to Contract.
Unrivalled Foreign Direct Investment
Romania received nearly $11 billion USD in 2005 and this will be dwarfed by the rush to invest now that EU accession has been guaranteed. Romania attracts such huge investment due to the cheap labour market and the availability of hard working locals.
Builders focused on commercial
Up until 2005 Romanian developers had been focusing on commercial developments as the demand from Praktiker and Carrefour had been great. As a result the commercial aspect of Bucharest is quite advanced offering huge hypermarkets that are kick starting the redevelopment of the city.
Economic Growth factors
Romania tops the table when it comes to growth in the emerging markets of Europe. 2004 saw GDP growth of 8.5%, 2005 was 6% and 2006 is predicted at 5.2%.
Already attracting large multinationals
Large corporations including KPMG, Orange, Oracle, Toyota, IBM, Alpha Bank and ING Bank already have a presence in the city. This type of foreign investment brings employment and increased wealth to the local population, increasing salaries and the spending power of the locals.
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