Report: Romania has among the most accessible mortgages in the European Union

Romania has among the most accessible mortgages in the European Union, considering the average net wages at a national level and the costs of buying a one-bedroom apartment through a 25-year mortgage loan, reveals a market report issued by SVN Romania | Credit & Financial Solutions, the financial consultancy and mortgage lending company within SVN Romania.

Thus, the average installment for buying a one-bedroom apartment in Bucharest held, at the end of last year, a percentage of 43% of the average net wage at a national level, Romania having the best value of this indicator at a regional level and among the bests in the European Union.

In SVN Romania’s analysis, the purchase of a one-bedroom apartment was taken into consideration, with a net surface of 50 square meters, delivered for at least 30 years and located outside the central and semi-central areas of EU’s capital cities. Also, a 25-year mortgage was considered, 15% downpayment and a fixed interest rate in the first five years, without including the associated costs, such as fees, taxes and insurances. To determine the average interest rate, the mortgage loans with fixed interest rates from the top three banks in each analyzed country were considered.

If SVN’s indicator has a value of 43% in Bucharest, the average installment for buying the same apartment in Budapest reaches 80% from the national average wage in Hungary, while the installment for buying a one-bedroom apartment in Warsaw holds a percentage of 83% of the average wage in Poland. At the same time, the least accessible capital city from Central and Eastern Europe is Prague, where the average installment surpasses the average wage, the indicator having a value of 115%.

”The interest is not the only relevant indicator: even if Romania has higher interest rates compared to Europe’s Western countries, the total costs of a loan are significantly higher in the other EU member states, due to higher home prices but also because of the associated costs (fees, taxes and insurances), which can amount to tens of thousands of Euros. 2024 started with much more positive premises for the local mortgage market and we estimate that the interest rates will continue to decrease, with the following months bringing the first fixed yearly interest rates below 5.5%,” said Alexandru Rădulescu, managing partner SVN Romania | Credit & Financial Solutions.

Smaller values for the installment / wage indicator are being registered in Berlin, where the average installment holds a percentage of 44% of the average wage at a national level, in Rome, where the average installment reaches a level of 46% of the average wage, and in Madrid, where the installment represents 52.5% of the average wage at a national level. The least accessible capital cities in Western Europe are London and Paris, both with an installment / wage indicator of over 80%.

The 43% level from Bucharest is being registered in a context in which over 60% of homes sold in Romania in 2023 were bought with cash, without a bank loan, according to SVN’s calculations based on the data of the National Agency for Cadastre and Land Registration and the National Bank.

Cash transactions continue to hold the majority of home transactions in a context in which the SVN’s home buying accessibility index, calculated as a ratio between prices and wages, reached its best value in the modern history of the local residential market, considering the 15.1% annual growth of the average wage at a national level and the home prices growth, which amounted to only a few percentage points in the last 12 months.

Thus, one needed under 83 average wages at a national level (or a period of 6.9 years) for purchasing a one-bedroom apartment in Bucharest, compared to 96 average wages (or a period of eight years) at the beginning of 2023, or 101 average wages (or 8.4 years) in January 2022. The peak was registered in 2028, with a level of 393 average wages, or a period of almost 33 years.

NBR’s most recent data shows that a total of EUR 5.7 billion new mortgage loans were granted in Romania in the first eleven months of 2023, up about 27% compared to the same period from 2022 – please take into consideration that these volumes also include the refinancing loans.

SVN Romania | Credit & Financial Solutions brokered in 2023 the granting of mortgages that amounted to approximately EUR 80 million. SVN Romania is one of the main real estate consultants active in Romania and the company with the most extended activity on the residential segment. SVN International Corp. has over 200 offices in eight countries and regions, with over 1,600 consultants and staff.