In every economic crisis, someone inevitably emerges as a winner, and the explosion of the real estate bubble in Romania seems to have already generated the first winners. Before them, however, many developers were forced to lower prices, after the aggressive increase in the price of mortgage loans and the sudden decrease in the number of transactions.
The best solution for developers in 2023 seems to be building properties intended for long-term rental from the start. This is the conclusion of the consulting firm Savills together with the law firm DLA Piper, after an analysis of the built-to-rent residential sector in Central and Eastern Europe. Fascinatingly, this business perspective is not yet very developed in Romania, a country where the obsession with property and the fixation to buy a home, no matter how small, has made many victims. It is about the people who could no longer pay their loan for the apartment or house.
What is happening with real estate
At the moment, in Romania, the area of real estate created for rent is still in its infancy, we are talking about less than 1000 units delivered in Bucharest and about 700 units planned or under construction.
Even so, the rental sector is becoming increasingly interesting, in the context of months of inflation and difficult access to credit. Currently, the balance seems to be tipping in favor of rents, the study shows: the income/mortgage ratio per capita for a two-room apartment in Bucharest is 2.3 compared to an income/rental cost ratio of 2.7, according to Economedia.ro.
For reference, if the whole concept is foreign to you, when we talk about such projects, the homes still remain under the management of the owner or a specialized property management company, and the concept already works very well in North America and Western Europe. With timid steps, the same philosophy is starting to be adopted in Eastern Europe, but it took several decades and will take longer.
Of course, over 90% of citizens of former communist countries own the apartments or houses they live in, with Romania occupying the first place, with a home ownership rate of 95.3% in 2021. In this ranking, Romania it is followed by Slovakia (92%), Hungary (92%) and Croatia (91%).
“Although it is unlikely that in the former communist bloc countries the presence of PRS will reach the level of Central and Western Europe, recent economic changes, as well as a change in the mentality of Eastern European residents, have created an opportunity for this market”, analysis shows.
In countries like Romania, the problem is also due to the fact that although Romanians own their homes, most of them are overcrowded, approximately 45.1%.
“Given the nature of the rental market in Romania, apartments owned by individuals are often located in old buildings and are of substandard quality. In addition, tenants are usually vulnerable to sudden price changes, often having to cover the costs of repairs, which exposes them to early terminations in the absence of a formal contract. Thus, the existing PRS projects have been successful so far mainly because they offer a superior standard of living, come with a wide range of amenities and guarantee security to tenants.
A large part of the demand for such housing comes from expats and multinational corporations, but in recent years more and more Romanians prefer this alternative, the easy relocation process and offering a higher standard of living being the main reasons why PRS is becoming an alternative ideal for living in Romania as well”, says Oana Popescu, Head of Residential, Crosspoint Real Estate.
