Investors uncertain about real estate market despite rise in house prices

Home prices in Romania rose at the end of Q1 2022 by almost 40% compared to 2015 according to latest Eurostat data. It is a bit less than the average of the 27 EU countries which recorded an almost 46% increase.

Market commentary by eToro analyst for Romania, Bogdan Maioreanu

In the same period the rent price increased only 18% in Romania and 10% in the EU. The Eurostat data is showing that Romania is far behind neighboring economies like Hungary with rent increases of about 43%, Poland, 40%, Czechia, 21%. But the same economies showed an increase of house prices of over 136%, Hungary,110% Czechia and 60% Poland.

Despite these spectacular increases in prices Romania, Poland and Czechia show a common characteristic. Investors polled in the recent eToro Retail Investor Beat are showing a low trust in the current real estate market. 54% of the Romanian and Czech investors and 50% of the Polish investors show lack of trust in the real estate market. While 49% of the Poles and 44% of the Czech investors are seeing the real estate market getting worse in the next 12 months, Romanians are more positive, only 38% seeing the market going worse while 30% are seeing it getting better and 29% not seeing any change.

With Robor on the rise, the mortgage loans are becoming more expensive. In five months the rate doubled, reaching over 7% per year, making the installment of a 350.000 lei 30 years loan taken in July more expensive with about 760 RON than if the loan was taken in February this year.

The same phenomenon we are seeing in the United States. The rate for a 30-year fixed mortgage is now 5.65%, up from 3.29% at the start of the year. While prospective buyers are starting to feel the more expensive loans, the house prices are still on the rise. The June US median listing price for active listings was 450,000 dollars, up 16.9% compared to last year and up 31.4% compared to June 2020. In large cities, median listing prices grew by 13.3% compared to last year, on average. In the US, the typical home spent 32 days on the market in June, down 4 days from the same time last year and down 37 days from June 2020. The rents are starting to cool down. After an 11.4% surge over the past year, median rent for a two room apartment in the US rose just 0.5% in June, while median three room apartment rent fell 2.9%. Less buyers on credit entered the real estate market, mortgage applications fell to a 22-year low this month, according to the Mortgage Bankers Association.

Contrary to their European peers, 54% of the US investors according to eToro Retail Investor Beat survey still believe in the Real Estate Market and 40% are seeing a positive evolution in the next 12 months. Regardless of differences in opinion about the evolution of the Real estate market, 78% of the Romanian and Czech investors, 71% of the Polish investors and 69% of the US investors are confident in their overall investments.