Romania’s housing prices rising but still among lowest in Europe

Romania is still one of the cheapest European countries when it comes to buying a house. According to the 2022 Deloitte Property Index, conducted in 23 countries and 68 cities, Romania ranks second among the European countries with the cheapest housing, after Bosnia and Herzegovina, with an average price of EUR 1,266/sqm, calculated using data from the country’s main cities and towns. Compared to the previous year, the average price is 7.3 percent higher.

By Aurel Constantin

One Floreasca City, among the most expensive apartments in Bucharest

The list of countries on the continent with the lowest average prices also includes Serbia (EUR 1,520/sqm) and Portugal (EUR 1,537/sqm). The report does not include data for Bulgaria and Norway. In the ranking of cities, the most expensive in our country is Cluj-Napoca, with an average of EUR 1,940/sqm, followed by Bucharest (EUR 1,573/sqm) and Brasov (EUR 1,348/sqm).

In terms of the affordability of housing, calculated as the number of average gross annual salaries required to buy a standard dwelling (70 sqm), Romania ranks seventh out of the 19 countries for which this indicator was calculated. On average, Romanians need 6.3 annual salaries to make such a purchase. According to the study, the hardest-to-reach housing is in the Czech Republic, where 13.3 average annual gross wages are needed for a purchase, while the most affordable homes are in Ireland (3.1 average annual salaries), Norway (4.4), and Belgium (4.5). "The real estate market is seen as a barometer of the economy, and it is influenced by several factors, such as the availability of land for real estate developments, the supply of raw materials and other products, construction costs, the energy market, etc., but also by the population’s purchasing power and the financing conditions. This year, accessibility and the cost of credit will be important factors, strongly influenced by inflation. In 2021, the annual average interest rate for RON denominated mortgage loans dropped below 4 percent, according to central bank data, but it is expected to increase this year amid generalised inflation. On the other hand, real estate investments are considered to be a class of assets that protect the value of the investment over time," said Alexandra Smedoiu, Partner at Deloitte Romania and Real Estate Industry Leader.

THE MOST EXPENSIVE COUNTRIES

The United Kingdom ranks first in the list of countries with the most expensive housing, after an annual growth of almost 21 percent to an average price of EUR 4,905/sqm. Austria, with a 7.3 percent rise, ranks second, with an average of EUR 4,782/sqm. Prices above EUR 4,000/sqm were also recorded in France (EUR 4,639/sqm) and Germany (EUR 4,600/sqm).

Hungary leads the price increase category, with an annual advance of 21.5 percent in 2021 compared to 2020, closely followed by the UK (21 percent), Slovakia (19.5 percent), and the Czech Republic (18.4 percent). Overall, house prices rose last year in 18 of the 21 countries for which this indicator was calculated. At the same time, price decreases were recorded in Spain (8.5 percent), Slovenia (3.8 percent), and Latvia (1.3 percent).

The ranking of the European cities with the most expensive dwellings is led by Paris, with an average price of EUR 13,462/sqm for an apartment, followed by Munich (EUR 10,500/sqm) and London (EUR 8,426/sqm). Among the cities where houses are more

expensive than those in the country's capital are Barcelona in Spain (EUR 6,251/sqm), Antwerp in Belgium (EUR 4,050/sqm), Milan in Italy (EUR 3,844/sqm), and Cluj-Napoca in Romania (EUR 1,940/sqm). "Romania is among the analysed countries where the prices of dwellings in major cities exceed the national average, and Cluj-Napoca stands out with a difference of over 50 percent, while prices in Bucharest are only 25 percent higher. The regional disparities also impact the real estate market, both at the transaction price level as well as in terms of investors' appetite for residential developments. The West region has a clear advantage from this point of view, while urban concentrations are also expected to emerge in the other regions along with the modernisation of infrastructure which will favour economic development," said Marius Vasilescu, Financial Advisory Director at Deloitte Romania.

PRICES IN BUCHAREST ON THE RISE IN Q2

Asking prices for new apartments in Bucharest remained on an upward trend in the second quarter of this year compared to the same period of last year, as revealed by a joint analysis by Premier Estate Management and Imobiliare.ro. The analysis looks at asking prices for apartments built between 2019-2022 based on 7,831 listings on Imobiliare.ro. The average increases for the mass-market, medium, medium-high, premium, and luxury segments were between 10-22 percent. "Contrary to expectations, prices for apartments have not dropped, but stagnated, as shown by the comparison between Q2 2022 to Q1 2022. We attribute this fact both to construction costs, which haven’t yet stabilised, as well as to the increase in the standard of living for most of the population. As for the next quarter, we expect adjustments for projects located in less accessible areas," said Andreea Comsa, Managing Director at Premier Estate Management. The affordable (mass-market) housing segment, with prices between EUR 1,250 and 1,600 per net sqm, saw the highest price growth in the second quarter of this year compared to the same period of last year, i.e., 22 percent. Compared to the first quarter of 2022, there were small corrections in certain areas, but the average increase in asking prices was around 5 percent. Significant increases in asking prices could be observed in Bucharest’s District 6 (Militari, Drumul Taberei, Apusului), with differences from 13 to 35 percent. The areas analysed in the mass-market segment included Apusului,

Berceni, Crangasi, Drumul Taberei, Pacii, Pantelimon, Theodor Pallady, and Titan.

As for the medium-level housing segment, with asking prices between EUR 1,650 and 2,150 per net sqm, there was a 10 percent price increase in the second quarter of the 2022 compared to the second quarter of 2021 and a stagnation compared to the beginning of this year. The areas analysed in this segment included Iancului, Mihai Bravu, Eroii Revolutiei, Dristor, and Bucurestii Noi.

In the April-June period of this year, the asking prices for the medium-high segment (between EUR 2,200 and 2,500 per net sqm) saw a 20 percent increase compared to 2021 and a stagnation compared to the first 3 months of this year. The areas analysed in this segment included Timpuri Noi, Carol Park, Baneasa, and Tineretului.

The premium segment, i.e., homes whose prices per net square meter fall between EUR 2,500 and 2,700, experienced a 10 percent price increase in the second quarter of this year compared to the same period of 2021 and a stagnation from the previous 3 months. The areas analysed in this segment included Aviatiei, Dacia, Dorobanti, Eminescu, Floreasca, Universitate, and Victoriei. As for the luxury segment—properties with prices exceeding EUR 2,900/sqm—there was a 20 percent appreciation compared to last year and a stagna-

tion in the April-June period compared to the previous three months. The areas analysed in this segment included Aviatorilor, Herastrau, Kiseleff, Nordului, and Romana. "The residential market is in search of a balance, and it takes time for the market to accept the new paradigm: higher prices and a rising cost of financing amid high inflation. Even if certain corrections are inherent in the short term, especially for the mass-market segment, Romania is still among the countries with the most affordable housing in terms of purchasing power. For the medium and long term, there is only one possible scenario: apartment prices in Romania's big cities can only go up," said Daniel Crainic, Director of Marketing at Imobiliare.ro.