Romanian Real Estate Market and the International Financial Crisis

If you haven’t lived under a rock over the past 2-3 years, then you probably know by now that most part of the international economy has been affected by a severe financial crisis, which unfortunately hasn’t ended yet. In Romania, as well as in other regions of the globe, the real estate market was the first to suffer the effects of banks becoming more selective with giving loans and mortgages. As real estate transactions are in a significant degree driven by such financial arrangements, less loans automatically led to less transactions, because less people afforded them. Add on top of that the fact that many businesses had to shut down operations, thus affecting the rentals sector, and you’ll have a picture of the troublesome period Romanian real estate companies are crossing these days. Many individuals who commuted for their job to another city had the rent paid by their employer. With those employers struggling to survive, such arrangements became more infrequent. Average apartment rental prices were too high to be afforded by people earning average wages, so the blockage occurred very soon. If Bucharest still offers opportunities for better paid jobs, in cities like Ploiesti or Brasov the decline was steeper. Lots of homeowners had their apartments on the market for rental, but potential customers weren’t able to pay the prices, so the transactions volume decreased a lot. The natural consequence was a price decrease, but still there are many areas in Romania where the cost of renting an apartment is comparable to the one in other European countries, yet the purchasing power of Romanians is significantly lower than the one of other EU citizens. Like in other Eastern European countries, prices were the first to go up when they joined the European Union, but salaries didn’t keep pace with that increase, thus causing a big part of the population to experience a downshift of their living standards.

Such discrepancies can be noticed even at a smaller level, let’s say, inside of a Romanian county such as Prahova. Apartment rental prices in Ploiesti, or as we use to say in Romanian, “inchirieri apartamente Ploiesti“, would vary with the location, with the building type and age or with the interior decoration and furnishings quality. Neighborhoods like Democratiei, Ploiesti Nord or Ploiesti Vest are cheaper than areas like the Ultracentral, Central or Republicii. The expensive neighborhoods in such cities have rental prices which are similar to the ones in average zones in Bucharest, yet there are fewer families who earn as much money as to afford to pay the rent and still have enough for the daily expenses. Under such circumstances, there’s no wonder that real estate agencies are affected, some of them being forced to shut down their operations, because they simply aren’t able to make ends meet anymore, so they either need to take loans to survive the crisis period or to close and find another method of making a living.