Property in Romania through Investment Solutions Group

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Market Segments

”The real estate market continued its development with an increasing interest from local and international investors and growing prices on all properties. All segments have seen an energetic development, with the retail and industrial markets being the most dynamic. The residential market has seen the first signs of interest from professional developers looking for large scale developments that will have an impact on the medium and high end markets. As residential prices are still low compared to the region, this sector has probably the biggest opportunity in terms of future growth and development” Colliers

The Romanian market is rapidly expanding due to the huge interest that it has attracted from foreign investors, both private and institutional. It is estimated that the investments in real estate will grow by 20% per year, whilst the price of land for construction will grow by 25 to 60% per year.

The Romanian property market is providing opportunities for capital growth that are unmatched throughout Europe in the following market segments.

Land investments
Residential developments
Tourism developments, due to its privileged geographic resources: the Carpathian Mountains and the black Sea;
Industrial and office property

The Romanian Market segment comprises the more affluent middle class sector that will influence the increase of the local demand for more up market property development projects.

The Bucharest real estate market has undergone a massive shift in the last three years from predominantly local market where funding was mainly provided from private sources to a global market supported by mortgages and institutional funds.

The rapid growth of the Bucharest city together with the existing limited supply of quality accommodation provides significant opportunities for investment in residential land and developments. High prices and limited land available within the city limits, together with the requirement for improved living conditions, has resulted in a reorientation of the residential developments towards the outskirts of Bucharest

Bucharest real estate market overview

Residential

Current stock: 785,000 units
Market still dominated by old apartment blocks
Existing new premises focus on the high end of the market
Current focus on medium class, with apartment developments
Market dominated by local developers
Quality of construction and project infrastructure is poor
Types of properties are becoming investment opportunities, which are attractive for private equity funds because the real estate returns are higher than capital gains.

Land

The demand for land has undergone a fundamental change from speculative transactions to real estate developments
The current supply for land within city limits is dominated by small individual plots (1,000-5,000 sq m) and former industrial premises (10,000-50,000 sq m) which are suitable for residential and retail developments.
Land prices in Bucharest have increased on average by 25-50% in the last year as demand has significantly increased
The eastern and southern areas are becoming more and more interesting for residential and industrial investments, due to decreasing land supply in other areas of the city.
The demand on residential market will continue to develop especially on the medium-income segment.

Prognosis for 2007

The market will continue to develop especially for the medium-income segment and purchasing power will be stimulated by improving of National Bank’s norms concerning mortgage and real estate loans. Several projects are expected to be completed in the next 24 months. Rents and sale prices for luxury properties will continue to attract developers and investors due to optimistic expectations regarding the country’s membership of the European Union.

Source: CB Richard Ellis report

The Bucharest market is now officially on the map of most of the important real estate funds in the world, an awareness that translates into a large volume of money trying to identify opportunities on a market that is still relatively scarce in investment grade products.