BR ANALYSIS. The real estate value of Transylvanian cities: Where to invest to maximise profit

Razvan Zamfir 23/01/2019 | 08:42

Besides being a great tourist destination or a place for IT and industrial investment, Transylvania is also becoming a real estate target that is starting to attract investors almost as much as Bucharest. And that isn’t surprising. The quality of life in Transylvania’s cities is above other cities in the country, including the overcrowded Bucharest, and that is why a large number of westerners choose to buy properties in the villages in the area.

Furthermore, in recent years we had the first corporate transactions in Cluj-Napoca and Timisoara, with Romanian entrepreneur Ovidiu Sandor being the pioneer in this area, as he developed the almost 60,000 sqm The Office in Cluj-Napoca (he owns 50 percent, and the rest was acquired by NEPI Rockastle) and City Business Centre from Timisoara, with the same players involved.

Last year, the Maestro Business Center in Cluj-Napoca was bought by British First Property Group.

And Cluj-Napoca or Timisoara are not the only cities where investors have shown interest. Sibiu, Oradea, or Arad are also either investment destinations or simply right for people looking for a property in villages that are still close to nature and keep old habits and traditions.

But which cities offer the highest real estate value for investments?

Cluj-Napoca

The initial investment in residential units, apartments or houses, is larger because the asking prices are higher – around EUR 1,555 per sqm in December 2018. A 50-sqm apartment costs around EUR 77,700, and it is pretty hard to resell it with a profit considering the fact that prices have started to drop in the last month. Even though the drop was only 0.1 percent compared with November, and the growth compared with December 2017 was 6.7 percent, it is getting harder to sell.

A better idea is probably renting it, especially since rents are higher than even in Bucharest, as a 50-sqm two-room property is around EUR 500/month, the investment might be recovered in around 12 years.

Land prices in Cluj-Napoca are between EUR 25 and EUR 500 per sqm, the lesser value generally being for agricultural land. The most expensive land in the city seems to be a 21,200 sqm land plot in the Marasesti neighborhood, for which the owners want EUR 7 million, but it has been on sale for two years.

So real estate in Cluj-Napoca is expensive, but it seems to be lacking buyers.

The city probably offers the highest quality of life in the country, but, on the other hand, it has started to get crowded and expensive.

Timisoara

The south west regional city, has, like Cluj-Napoca, a high quality of life, which is definitely better than Bucharest.

The price of a residential unit is a lot lower than in Cluj-Napoca, around EUR 1,207/sqm, according to imobiliare.ro, so a 50 sqm apartment costs EUR 60,350. On resale, the investor has to keep in mind that the demand prices have dropped 0.4 percent compared with November 2018, while compared with December 2017, prices have increased by 4.8 percent.

On the rental market, the demand for a two-room apartment is between EUR 350/month and EUR 420/month, so the recovery of the investment will take around 15 years.

Land prices in Timisoara are between EUR 18 and EUR 400 on sqm, agricultural land generally being the cheapest. The most expensive land plot in the city seems to be a 58,200 sqm land plot near the centre, at EUR 24 million.

An IT center not as developed as Cluj-Napoca, Timisoara is rather an logistic and industrial hub, thanks to the proximity of the western border of Romania.

Brasov

Known especially for its tourist attractions, Brasov has become a real estate investment hub in recent years, with offices, malls and residential projects already developed or in development, and looking like the best investment destination.

Prices have grown, but not exploded and haven’t gone down in the past few months.

The average price for a 50 sqm residential unit is around EUR 55,000 at EUR 1,102/sqm – up 1.9 percent in December 2018 compared with November 2018 and 9.4 percent compared with December 2017, so reselling can provide a relatively quick profit.

On the rental market, the average rent for a 50 sqm two-room apartment is between EUR 250/month and EUR 300/month, so the recovery of the investment takes the same 15 years as it would in Timisoara.

Land prices are between EUR 12/sqm for agricultural land and EUR 180/sqm for construction land close to the city center.

Secondary cities

Cities like Arad, Oradea, Sibiu or Alba Iulia can also become real estate destinations. With the special air of Transylvania, the smaller towns are attractive for developers, especially for those in retail and residential, whose projects can be a source of investment.

Prices are lower than those in regional cities, so the investment is lower and the demand for residence remains relatively high, due to industrial investments attracted by the motorways recently built in the area and the proximity to the border, which eases transport.

So it might prove efficient to invest in these cities, sometimes even better than in a larger one. The market is still relatively empty, so the return, while possibly lower, would be secure.

Even though Cluj-Napoca seems to be the best destination for real estate investment, the city’s real estate market is tired. It still retains opportunities, but rather for bigger investors with a lot of financial power; the same can be said about Timisoara.

So, smaller investors should look to smaller cities. Sooner rather than later, these areas will explode and follow in Cluj-Napoca’s footsteps.

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