Business Forum • 19 June, 2024 at 3:51 PM
The intention to buy a home in the next 12 months is approaching the levels seen between 2006 and 2008, according to a recent Colliers analysis based on Eurostat data for the Romanian real estate market. This indicates a significant resurgence in public interest in residential property, similar to the period before the global financial crisis. The residential market started 2024 on a strong note, with an 18% increase in residential transactions in Bucharest in the first quarter compared to the same period last year, while the rest of the country saw a slightly higher increase of 19%.
Although the housing market has become less accessible, especially for those relying on bank financing, and the number of transactions has declined, Romanians' interest in buying property has remained steady, even in more difficult economic conditions. This shows a sustained demand for real estate, rooted in the Romanians' cultural preference to own their homes.
“At the beginning of each year, Colliers conducts a detailed survey in Romanian cities and the latest data reflect the trends observed by Eurostat at national level. The intention to buy a home in Romania has been influenced by several economic and social factors. Looking at the last decades, economic growth has played a crucial role, with periods of economic expansion being associated with significant improvements in the interest to purchase real estate. Although the intention to buy is at a high level, similar to the period 2006-2008, the Romanian real estate market has strengthened and offers a different context compared to the period before the 2008 crisis. Accessibility, salary levels, prices, the number of homes delivered and the diversity of projects have evolved significantly. The rapid increase in house prices in recent years, especially for new homes, has increased the fear of missing out (FOMO) among potential buyers. Recent experiences are influencing customer behaviour, as they fear further price increases that could make homeownership even more difficult", notes Gabriel Blăniță, Associate Director Valuation & Advisory Services at Colliers Romania.
Source: Colliers based on Eurostat data
Eurostat has recently updated the confidence indices for Romania. The data on intentions to buy a house in the next 12 months show values almost as high as the peaks of 2006-2008 and are the highest recorded for Romania since 2001.
Between 2006 and 2008, Romania experienced a real estate boom. Accession to the European Union in 2007 brought a large influx of capital and investment, stimulating the property market. Banks then offered mortgages with low interest rates and favourable terms, making financing more accessible to many buyers. In addition, rapid GDP growth boosted consumer confidence, leading to higher demand for housing.
After 2008, the global financial crisis severely impacted Romania's real estate market. The collapse of the financial market caused a severe economic recession, reducing the intention to buy homes. Romania's economy saw a significant decline, and unemployment rates rose, diminishing purchasing power and interest in real estate purchases. Moreover, banks became much stricter in granting loans, further limiting access to financing for potential buyers.
Between 2011 and 2014, Romania's economy began to recover, but slowly. The intention to buy homes remained below the historical average, reflecting a gradual economic recovery. Home prices stabilized, and confidence in the real estate market began to grow gradually. Constant wage growth improved purchasing power.
From 2013 to 2017, Romania's GDP grew steadily, boosting consumer confidence and the intention to buy homes. Government programs, such as "Prima Casă," helped young people and first-time buyers obtain loans more easily. Low interest rates made mortgages more accessible, stimulating the real estate market.
Between 2017 and 2020, Romania's real estate market was very active, with rapid increases and temporary declines influenced by various economic events, temporary policies, and legislative changes.
The COVID-19 pandemic had a significant impact on the economy and the real estate market. Initially, the uncertainty caused by the pandemic reduced interest in buying homes, but it was followed by a strong recovery due to economic stimulus policies. Social distancing and working from home changed consumer priorities, increasing demand for larger homes or those in less crowded areas. This increase in demand, combined with limited supply, led to rising home prices.
“The outlook for the residential market remains positive due to current trends in the intention to buy. However, global and local economic developments, as well as changes in credit policies and conditions, will influence the market's direction. Buyers should pay attention to credit conditions and interest rates, assess job stability, and consider economic fluctuations. It is also essential to monitor market developments and the impact of government programs on financing access. Developers can take advantage of the increased demand for homes, especially in metropolitan areas where people seek more space and proximity to nature. Investments in homes that meet new consumer needs, such as home offices and green spaces, can offer competitive advantages”, concludes Gabriel Blăniță.