We have launched our first study : Analysis of the residential market in Romania in Q3 2022
The Concept launches its first proprietary market study – Residential Real Estate Market Analysis in Romania in Q3 2022. The study aims to combine relevant factual data into aggregate indicators that bring greater clarity to the housing market and its potential future evolution.
The indicators tracked are the evolution of prices adjusted for inflation, the evolution of prices adjusted for the net average salary, the purchasing power index, the percentage of individual units purchased with cash vs. credit, and the average gross return on residential investments, all calculated quarterly.
The data that provided the report’s conclusions were processed by The Concept based on public data provided by INS, BNR, ANCPI, and Imobiliare.ro.
EVOLUTION OF PRICES ADJUSTED FOR INFLATION
In absolute figures, property prices in Romania have been steadily increasing since 2015, with an acceleration of growth in recent periods. However, looking at the evolution of prices through the lens of inflation, the growth percentages indicate a stabilization of the market in recent years and even a relative decrease recorded in the period Q3 2021 – Q3 2022.
Adjusted for inflation, the national average price of residential properties decreased by 0.9% in Q3 2022 compared to the same period last year.
Furthermore, in real value, adjusted for inflation, the average price of housing in Romania has decreased by 46.1% compared to 2008, the peak of the previous real estate cycle, and has appreciated by only 38.1% compared to 2014 (practically in 8 years), 2014 being the minimum level from which the new real estate cycle started.
The Concept’s estimate for the evolution of this indicator in Q3 2023 compared to Q3 2022 is a 4.1% decrease due to high inflation and a moderation of price growth in absolute values.
EVOLUTION OF PRICES ADJUSTED FOR THE AVERAGE NET SALARY
From the perspective of the evolution of residential property prices adjusted for the average net salary, things are even more different from the current perception of the population. In the period 2014-2022, residential properties depreciated by 11.1% nationally in real values adjusted for the evolution of the average net salary in the economy. The decrease is even more evident if we take the reference period 2008-2022 (practically from the peak of the previous real estate cycle until today). In this period 2008-2022, the price of residential properties decreased by 58.8% (!) if we adjust the evolution of average housing prices with the growth of the average net salary.
The decrease is evident in Q3 2022 compared to the previous quarter, where we have a decrease of this indicator by 1.9%. In practice, in the last quarter, housing has become more accessible in relation to the evolution of the average net salary in the economy, a trend that we will probably see in the following quarters as companies make efforts to increase salaries in line with inflation.
I.P.C. (PURCHASING POWER INDEX)
In the third quarter, the Purchasing Power Index reached 2.13 at the national level, approximately 2.5 times lower than in 2008, at the peak of the previous real estate cycle. The lower the value of this index, the more affordable housing is relative to the average salary in the economy. So we can say that, in relative terms, housing is about 2.5 times more affordable than in 2008.
The capital city remains on the same note: 1.63 now compared to 4.08 in 2008, while Cluj is about 1.6 times more affordable now than it was in 2008, again in relative terms compared to the local average salary.
CASH VS. CREDIT RATIO
The cash vs. credit ratio in residential purchases at the national level increased in the first 3 quarters of this year to 55%-45%, compared to 51%-49% in the same period last year. Cash purchases continue to account for over 50%. The decline of credit in favor of cash may paradoxically be a sign of resilience for the real estate market in a moment of high interest rates and lower customer eligibility for financing.
THE AVERAGE GROSS YIELD OF RESIDENTIAL REAL ESTATE INVESTMENTS
The average gross yield of residential real estate investments in studio apartments has increased in most major cities in Q3 2022, reaching values between 4.01% in Cluj and 6.03% in Bucharest.
The average gross yield of residential real estate investments in two-room apartments has also increased in most major cities in Q3 2022, reaching values between 3.94% in Cluj and 5.68% in Constanta, with Bucharest at 5.49%.
The average gross yield of residential real estate investments in three-room apartments has also predominantly increased in the same studied cities in Q3 2022, reaching values between 3.94% in Cluj and 5.74% in Constanta, with the capital city at 5.34%.
The analysis was conducted by the Market Research department of The Concept.
The data and conclusions of this study can be further used by mentioning the source as The Concept, based on publicly available data provided by the organizations mentioned under each of the graphs in the report.
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