Early in 2004, when Romania was joining NATO, but was not a European Union member yet, average three-room apartment prices in Bucharest stood at about EUR40,000 starting from EUR30,000 in Berceni and Dristor (south and southeastern Bucharest) and going to EUR77,000 on Unirii Boulevard and EUR87,000 in Piata Victoriei (both locations in central Bucharest).
The five years that followed came with a growth of 130% of Romania’s gross domestic product from EUR60 billion in 2004 to EUR140 billion in 2008, and the trebling of the average price of old three-room apartments in Bucharest from EUR40,000 to some EUR140,000.
In those five years (2004-2008) foreign direct investment that Romania attracted stood at more than EUR36 billion or more than 60% of the entire amount attracted from foreign investors in the last two decades (EUR59 billion). A significant part of this money went to real estate, where a wave of developers and speculative investors caused prices of land and homes both old and new to skyrocket.
The party ended abruptly in 2008 and Romania lost more than EUR20 billion of its GDP in a single year, 2009. GDP might return to the 2008 level this year, but its structure is different, more reliant on exports, which rose by more than 35% from EUR33.7 billion in 2008 to some EUR46 billion estimated this year and less on consumer spending.
Owners have adjusted their asking prices by about 50% in the past five years, to an average of EUR77,000 for a three-room apartment, according to ZF’s Real Estate Index or EUR972 per square meter according to imobiliare.ro real estate portal.
“Homes in Bucharest were the most affected by the waves of price drops during recession. The three-room apartment segment coped best: the new ones dropped 52% in price (from EUR2,573 to EUR1,228 per square meter) and the old ones 53% (from EUR2,075 to EUR972 per square meter),” imobiliare.ro representatives say.
Average asking prices have stabilized somewhat in the last two years, going down by about 5% a year. Now that the First Home scheme has been amended so as to allow banks to only grant government-secured mortgage loans in lei instead of offering a choice of either lei or euros as possible until July, new fast-paced price declines are expected.
Banks granted some 2,000 mortgage loans in lei via the First Home scheme in August and September, as interest on loans in domestic currency fell to about 7% a year. Loans in lei remain approximately 20% more expensive than standard loans in euros, but they are only available to customers who can come up with a 25% down payment.
(English version by Loredana Fratila-Cristescu)