The Advantages of Real Estate Investment in Bucharest

Romania continues to defy economic expectations, with the European nation enjoying significant growth in various sectors of its economy over the past 20 years. Even with a downturn due the global economic crisis in 2008, the Romania economy has gone on to recover impressively, with its economic growth outpacing many other European nations.

One of the strongest economic sectors in the Romania is in real estate. Both commercial and residential properties are increasing in value throughout the country, with the capital city of Bucharest being home to significant investment opportunities.

For example, the average selling price for apartments in Bucharest increased in 2016 by 5.34%, and the entire nation saw house prices rise on a quarterly basis throughout the year.

Furthermore, the Romanian economy is expected to continue to grow in 2017, albeit at a slower rate, by 3.8% according to the IFM.

Needless to say, Romania provides a great opportunity for real estate investment for any foreign national looking to invest in the Bucharest property market.

Large Institutional Investment Continues Throughout Romania

If there is ever a sign of a strong, growing economy, its institutional investment. Romania is seeing this on a national level, although the capital city of Bucharest is certainly one of the biggest benefactors of this.

This is little surprise given the fact Bucharest is home to much of the country’s industry and contributes a large percentage of Romania’s GDP. The city is seeing constant residential and commercial real estate investments, as well as investments towards the infrastructure and various industries present in the city.

The government is also doing its part to attract as much foreign investment as possible, with very limited restrictions on foreign nationals, when it comes to purchasing Romanian property.

Real Estate Prices are Constantly Increasing

Bucharest’s property market is in great condition, with commercial and residential real estate prices continually on the rise. For example, in 2016 the price for an apartment per square meter is between 800 and 1300 euros – 2 years ago, it was only between 600 – 800 euros.

Furthermore, property prices remain some of the more affordable in Europe, although this won’t last with such continued growth, making it an incredibly lucrative investment for any investor looking to get in on the action.

Investment Trends Highlight the Strength of the Property Market

With widespread investment on real estate and other economic sectors in Romania, there are notable trends that highlight the great investment opportunities for foreign nationals.

Current trends include purchasing both land and property, with the intention on seeing the value increase as the property market continues to growth. With frequent investment developments emerging in and around Bucharest, you can expect to make a profit when making shrewd investments in the city’s real estate market.

As a whole, property investment in Romania saw a significant increase in 2016, jumping by an impressive 35% to 890 million euros. The was actually fewer transactions in total compared to 2015, meaning the overall price of each transaction has increased.

Bucharest saw close to 70% of the overall property investment, highlighting the growing strength of real estate in the city.

Rental Yields Highlight Investment Opportunities

Buying and selling property isn’t the only way to take advantage of Bucharest’s real estate, with rental yields showcasing another viable investment opportunity.

As it stands, Bucharest posts moderate to good rental yields at around 4-7%, which is helped by the fact many apartments and houses are available for affordable prices.

For example, a 120 sqm apartment in Bucharest costs approximately 190,000 and can rent for around 950 euros, resulting in a rental yield of 6.1%.

Again, as the property market continues to rapidly grow in Romania, you can expect rental yields to increase over the coming yields, so investing sooner rather than later will help create a larger profit margin.

Favorable Tax Rates

Any foreign resident will be taxed on their income from Romanian sources, meaning landlords can expect to pay a flat income tax rate of only 16%. Also, a fixed deduction of 25% of gross income is permitted for any income-based expense.

When selling property in Romania, owners are liable for a transfer tax fee, which is levied on sale proceeds. The rates can vary depending on the length of ownership for the property and the overall value of the property.

For example, transfer tax for property owned for less than three years is taxed at 3% up to the value of 44,000 euros, while anything valued over this price and owned for the same period is taxed at 2%.

With property that is owned for at least three years or longer, transfer tax rates are 2% for property valued up to 44,000 euros, while a 1% rate applies to those valued above this price.

Value Added Tax (VAT), is currently calculated at a fixed percentage of the sale price. This can be either 5% should the property be compliant with a selection of provisions, otherwise it will be the standard rate of 24%.

However, this will be refunded upon the transfer of the property, as the VAT is paid by the buyer of property Romania

Process of purchasing an apartment in Bucharest

When purchasing property in Romania, such as an apartment in Bucharest, you need to follow the process for all non-Romanian citizens.

Any foreign citizen is permitted to by an apartment or any other residential property in Bucharest, although the main restriction is that they do not own the land on which it was built upon. So, while you purchase the property, it only includes the right to use the land rather than owning it outright.

Therefore, its highly advisable to hire a lawyer knowledgeable on the processes of foreign citizens conducting real estate transactions.

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