Situated in the south eastern corner of Europe, Romania was for many years very heavily dependent on the Soviet Union. Since the demise of the Soviet Union slowly but surely the country is starting to show signs of genuine growth although there is still much to do.

In line with the move to become more involved in Europe, Romania joined the European Union on 1st January 2007. The country is the 7th largest in the EU with a population in the region of 22 million, but by land mass it is ranked 9th. The history of Romania is heavily influenced by the surrounding countries of Hungary, Serbia, Ukraine, Moldova and Bulgaria although the country does have vital access to the Black sea trade routes.

Introduction To Romania

The country itself is divided into 41 separate counties, although overall control of the country is based in the capital Bucharest. The terrain is a mixture of mountains, hills and lowlands which are spread fairly evenly throughout the country. The massive Danube river flows into the Black Sea on Romanian territory, creating what is the largest delta in the world.

After the overthrow of the communist regime in 1989 the country went through a very difficult transitional phase which saw the economy crash and widespread poverty. Changes were introduced in 2000 resulting in a major improvement in the economy which has continued for some time. Now one of the more vibrant economies of Europe, Romania is starting to leave behind the shadows of communism and its chequered past. Slowly but surely, times are changing and the spread of wealth is moving throughout the country.

Property Market in Romania

Romanian property has recovered at a quick pace since the demise of communism and the introduction of free market policies. Many experts are expecting at least a four fold increase in property prices over the next 10 years, a performance that would be head and shoulders above any other property market throughout the world.

However, there are short term concerns the market may currently be experiencing a bubble effect where prices rise far too quickly. In a property market so young and under developed it is inevitable that we will experience some high and low patches throughout the expected rise over the next few years. The economy of the country will play a major part in the performance of the property market, and the fact that the average house price is only in the region of £17,000 will attract substantial investment from overseas parties.

While entry to the EU has only just been confirmed, the benefits are already starting to show in the shape of massive subsidies to help improve both the unemployment rate as well as the somewhat out dated infrastructure. As with so many new entrants to the EU, the rural areas are the last to benefit although the amount of new investment being pumped into the country can only benefit the country as a whole. The range and variety of housing available will ensure there is something for everyone, and the beautiful untouched rural areas are already starting to attract the attention of tourists.

Buying Property in Romania

There are also a number of direct costs to consider when buying property in Romania which include stamp duty, which can range from 0.5% to 3% depending on the amount in question. Investors will also need to appreciate income tax considerations when renting out a property, which start at 16%, property tax, starting at 0.2% and the potential to pay capital gains tax upwards of 16%.

Like most countries which have recently joined the EU, European residents will soon be afforded the same rights as Romanian nationals, which will include the right to buy both buildings and land in their own names. This is a standard pre-condition for entry to the Union, and access to the masses of outside investment which has the potential to revolutionise both the country as a whole, and the property market in particular.

Future Property Market

Like so many new entrants to the EU, the key to long term success will depend upon the performance of the economy. The initial benefits of entry to the Union are already showing through in what is commonly referred to as a “honeymoon” period. There are those who study emerging markets who believe that Romania actually has the potential for long term substantial economic growth.

We are continuing to seeing a dramatic fall in Romanian inflation while economic activity is continuing to prosper. Growth rates in the region of 7% have been experienced over the last 12 months, and while there is little chance of such high rates of growth continuing in the long term, the economy is still expected to grow significantly. 

The country seems to have shaken off the shackles of communism and embraced the ideals of a free market, within the enlarged EU economy.  This can only benefit a country which has been subdued for so long, and finally the Romanian people may well be in a position to benefit themselves.

While the prosperous economy will directly benefit the Romanian employment market, it will also attract substantial overseas investment. Any increased overseas presence will also add to the demand for property, ensuring that prices remain firm for the foreseeable future.

While the market is not without risk and may will experience a fair amount of volatility in the short term, cities such as Bucharest are prime candidates to see the first influx of foreign investment, and then slowly but surely it will start to spread across the rest of the country.   The next few years should be very interesting for Romania.