After the relative calm of the decade of the 1990s, since 2002 Romania

Romania

Romania is a country located at the crossroads of Central and Southeastern Europe, on the Lower Danube, within and outside the Carpathian arch, bordering on the Black Sea...

 has experienced a dramatic increase in property prices. Between 2002-2007 the median

Median

In probability theory and statistics, a median is described as the numerical value separating the higher half of a sample, a population, or a probability distribution, from the lower half. The median of a finite list of numbers can be found by arranging all the observations from lowest value to...

 price for an old communist-era apartment rose by a factor of 10 (x 1000%), from around €

Euro

The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...

10,000 to circa €100,000. Today some apartments in central Bucharest

Bucharest

Bucharest is the capital municipality, cultural, industrial, and financial centre of Romania. It is the largest city in Romania, located in the southeast of the country, at , and lies on the banks of the Dâmbovița River....

 have prices comparable with those of properties in Paris

Paris

Paris is the capital and largest city in France, situated on the river Seine, in northern France, at the heart of the Île-de-France region...

 or London

London

London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...

, and in virtually every small town the median housing price rivals that of similar towns in the European Union

European Union

The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...

.

The Romanian market is also atypical compared with other Central European countries. By contrast with Hungary

Hungary

Hungary , officially the Republic of Hungary , is a landlocked country in Central Europe. It is situated in the Carpathian Basin and is bordered by Slovakia to the north, Ukraine and Romania to the east, Serbia and Croatia to the south, Slovenia to the southwest and Austria to the west. The...

, Poland

Poland

Poland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...

 or the Czech Republic

Czech Republic

The Czech Republic is a landlocked country in Central Europe. The country is bordered by Poland to the northeast, Slovakia to the east, Austria to the south, and Germany to the west and northwest....

 subsequent to joining the European Union (where prices remained stationary), when Romania joined the EU in 2007, housing prices jumped by some 20%.

In 2009, Internet surveys indicated that Romania is the country with highest house price to income ratio in the world.

Causes of the rise in property prices

The following are the most-often cited factors that have contributed to this increase in prices:

• The growth of the banking system, which made affordable mortgages possible (mortgages were almost impossible for Romanians to obtain before 2002);
• Almost 2.5 million Romanians are working abroad (mainly in Italy
  Italy
  Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
  
   and Spain
  Spain
  Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
  
  ), enabling them to save up for an apartment in Romania;
• The growth of the economy
  Economy of Romania
  Romania has a developing, upper-middle income market economy, the 11th largest in the European Union by total nominal GDP and the 8th largest based on purchasing power parity...
  
   (by approximately 6% annually since 2001), and the growth in average net monthly salary (from 100 euros in 2002 to 350 euros in August 2007);
• The poor supply of properties coupled with high demand; between 1989-2005, almost no new apartments were built in Romania. Some suburban development took place, but poor infrastructure (utilities, roads, public transportation) kept it from increasing the supply enough to prevent prices from increasing.

Criticisms

It has been argued that some of the above-mentioned potential causes of Romania's rising property prices are not significant.

• Although credit is part of every bank's product portfolio nowadays, few Romanians are actually creditworthy, and their average salary is too low to enable them to purchase a home;
• The vast majority of the Romanians working abroad have low-income, low-grade jobs as construction workers, au-pairs etc., and it would be almost impossible for most such workers to save enough to buy a property in Romania;
• Demand is not as high, and is not increasing as fast, as the market optimists estimate: the population of the country keeps falling as Romanians continue to emigrate abroad en masse (since January 1, 2007 Romania has been a Member State of the EU, which has made it easier for Romanians to travel to France, Germany and the UK);
• The ceausei generation (the product of the 1970s baby boom resulting from the policies of the Nicolae Ceauşescu
  Nicolae Ceausescu
  Nicolae Ceaușescu was a Romanian Communist politician. He was General Secretary of the Romanian Communist Party from 1965 to 1989, and as such was the country's second and last Communist leader...
  
   era) has now reached maturity, and many already own a home;
• Future foreign worker
  Foreign worker
  A foreign worker is a person who works in a country other than the one of which he or she is a citizen. The term migrant worker as discussed in the migrant worker page is used in a particular UN resolution as a synonym for "foreign worker"...
  
  s arriving from poorer countries to meet demand in Romania's job market will be too poor to buy a house in Romania.

Popular beliefs

Besides the official technical and economic factors, ordinary people in Romania believe that the rise in property prices was also caused by:

• The money-laundering requirements of the various politicians, corrupt business men etc.; however, some regulations adopted after 2004 make money-laundering very difficult;
• Inflation due to the activities of real estate agents; before 2002, very few real estate agencies were operating in Romania, but today there are approximately 10,000; since they are unregulated, and because there is also no code of ethics for real estate agents (in fact, anyone can claim to be one), many ordinary Romanians believe that the agents are artificially increasing the prices demanded by sellers.

External links

• Romania and the Property Market Article by Antonis Loizou, FRICS
• Romania: property prices to rise by 414 %
• Romania: property prices start to soar