A recent ad in the Financial Times' House and Home supplement advertises a seminar on buying Romanian property. The ad is placed among announcements for Spanish, American, Provencal, and French Riviera properties for sale. The British are learning about Romania and its residential profits, after having learnt and bought in Spain and France.
British buyers make up to 46 percent profit on Romanian residences
A 35-year-old London-based IT consultant bought an apartment in April this year in Stella Residence, Bucharest, and has so far achieved a profit of 46 percent on his investment. A 40-year-old British solicitor chose to buy an apartment in Tampa Gardens in Brasov in July and his investment's profit is now at 15 percent.
These are just two examples of foreign buyers' take-up of Romanian off-plan apartments. The two did not wish to disclose their names and the sums invested as the buyers are trying to stay as low profile as possible
Wendy and Alan from Wigan, in the UK, visited Romania before buying an apartment in Brasov. Now, having already furnished their first apartment, they are looking forward to their next investment. “We were very apprehensive when purchasing our first overseas property and more so when buying in Romania, as we knew little of the country apart from information we have gained through research and the internet. We gathered information about a few properties in Romania from several companies, one of them being ARD,” the couple said. Anglo Romanian Development (ARD) is a company which specializes in intermediating sales of local apartments to British people
Real estate tourism emerges from high residential profits
The British interest in Romanian properties, along with Bulgaria, Montenegro and Morocco, has led to the birth of what industry specialists call real estate tourism.
Prior to investing in Romania, British people come to the country first, to talk to people who have bought apartments here and do some sightseeing. Afterwards they are usually convinced to overcome their initial reluctance. Tourism agencies in the UK have already started to offer such packages, in partnership with real estate consultants. “I admit as a first-time investor in land, and being cautious by nature, I had a number of preconceptions about investing in Eastern Europe and I needed to know more to assess the risks and look at the time frames involved,” says Yvonne Jackson from London.
ARD makes between 10 and 30 sales per month, depending on the month and time of the year. “We have sold a few hundred properties in Romania since 2004, when we began our activity,” says Mihaela Costin, ARD's country manager in Romania.
The British residential shopping spree in Romania started in early 2006, when it was almost certain that Romania would become an EU member from 2007 and expanded even further after January 2007, says Alex Pintea, managing director and owner of ARD. The firm is based in the UK and addresses the British and Irish markets, so the majority of its clients are British (over 90 percent), followed by Irish, Spanish and French.
Pintea, who has been living and working in the UK since 1996, says the vast majority of the company's clients, up to 95 percent, have never been to Romania or had contact with the country before.
“I first visited Romania when I signed up for a viewing trip,” says Matthew from Yorkshire. He had bought a property in Romania and the apartment value increased even before he had paid the first installment.
British buyers prefer to get properties in smaller projects, as the profits are bigger in this case than if they bought in a large-scale residential project.
Wealthy British buyers not moving in, just buying
None of these buyers intend to live in Romania, so a British spree in the country shouldn't be expected on these grounds. “The buyers' interest is exclusively in investment,” says Costin.
Who are these British buying in Romania? Wealthy individual investors, usually over 35 years old, either senior managers, directors in large corporations or highly skilled professionals primarily in the IT, medical, legal and financial sectors; these are the people with enough money to buy off-plan apartments. They provide the initial financing for residential developments and they are likely to be the sellers once these apartments are ready.
Their average spend per transaction here in Romania is between EUR 125,000 and 150,000 for Bucharest properties, while in the rest of the country, the average value stands at EUR 70,000 to 90,000.
“The highest transaction we have made so far involved a residential development in Bucharest's downtown area and it amounted to several tens of millions; the buyer was a British investment fund,” says Costin, without disclosing the name of the fund, as its representatives prefer not to go public.
The company she represents is advising two British funds actively looking to purchase residential and commercial and office property, land, as well as joint venture partners for residential development in the country's major cities.
Investment funds usually buy more than one property in the same project, while individuals start with one, wait and see how much its value has increased in time and then go for the next investment.
New residences in Bucharest and in Transylvania are the most sought after, but some invest in offices and even in land. Although land investments are not a frequent type of transaction, buyers go for either land inside the major cities, land ready for construction or land on the outskirts of the major cities with a long-term investment strategy, explains Pintea of ARD.
“I had missed out on other Eastern European countries, so I am not going to miss out on Romania. I purchased land […] and in the short space of just seven months the value is up 31 percent,” says Marcus de Maria, also from London.
Developers target immigrants in their home countries
Another phenomenon seen on the international market, besides wealthy individuals from Western markets buying in real estate paradises, is that of companies from Western countries building for immigrants. These developers are building homes in immigrants' countries of origin and selling them directly in their country.
A good example is Spain, a country which has many Romanians working there as strawberry pickers. The immigration phenomenon, along with the fact Romanians are sending money home, usually to build a new home, has been picked up on by Spanish development companies. For example, developer Hercesa, which builds homes in Bucharest, is making some of its sales for the Romanian apartments in Spain. Spanish citizens might be attracted, but so too will Romanians who are working there. “As much as 25 percent of the sales volume for the apartments is in Romania and covered by immigrants. Presently we are promoting in Spain Vivenda Residencias, 1,400 homes east of Bucharest,” said Juan Jose Cercadilo Calvo of Hercesa International. Legal immigrants who are clients of Spanish banks can buy houses in Romania with mortgages.
Romanians offered cheaper apartments abroad
While foreigners are buying new houses in Romania, Romanians are being offered old apartments in Germany and new ones in Bulgaria. At a recent housing fair in Bucharest, a real estate agency was offering apartments in east Germany at prices under EUR 30,000. A 67-sqm apartment in Leipzig was on sale at EUR 15,000, with renovation costs reaching EUR 1,800. The cause of these low prices is the migration of such areas' inhabitants to locations in Germany where the salaries are higher. While the cheap apartments in Germany may look like an opportunity, especially since rents there are similar to those in Romania, there is an issue to be consider. Who will rent those apartments, if the Romanians buying them aren't moving in and are buying only as an investment opportunity?