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Real Estate: BNR: Housing prices continue to grow in Romania
The price of houses in Romania went up by 5.5% in quarter 1, 2024, over the EU and euro zone average, recording a less pronounced evolution compared to similar economies in the area, said Floring Dragu, head of the Financial Stability Department of the National Bank of Romania (BNR).
“Housing prices continue to grow in Romania. This dynamics ia above the EU and euro zone average, but we see a less pronounced evolution compared to similar economies in the area. Practically, in Romania we have a 5.5% dynamic in quarter 1, 2024, while in countries like Poland the rate is 18%, in Bulgaria 16% and in Hungary arounf 7%. Thus dynamic is determined mainly by the evolutions of the new houses segment , where the growth rate is about 12%, while at the level of existing houses prices went up by 2%,”said Florin Dragu at an event organized at Bucharest Real Estate Salon at Parliament Palace.
About house accessibility he said that the average price for new houses in Bucharest is at the lowest, compared to other European capitals.
“This average price ia about 1,700 euros per square meter. We notice a lower difference compared to the national average, the price being about 1,500 euros/sq.m. In comparison, at the opposite pole, in Paris, the average price per square meter exceeds 14,000 euros. Here we have a higher difference compared to the national average, around 4,500 euros. This rising dynamic of prices is determined by factors of offer and demand, as mentioned before. For offers, the rising construction costs is an important factor and we see a 10% increase in the past year. On the other hand, the construction volume dropped by 13% and new buildings recorded a 3% drop. As for demand we see a growing tendency mainly determined by salary evolutions. The average net monthly salary income has grown by 13% per year. We also see a rising interest measured by searches for apartments for sale. Here the rate is 14%, while the number of transactions went up by 11% annually,”Florin Dragu explained.
He mentioned that there is a concentration of those transactions, 60% of them having in view the six main regional centers and in each of them we see important ascending dynamics, of 9% in Bucharest, 50% in Iasi and 14% in Cluj.
In point of accessibility, Dragu added that the price/income indicator shows an average purchase period ofr a typical house at 8 year, with important heterogeneity at regional level. For Bucharest, this average duration is 6-7 years, while in Cluj we see an average duration of 11 years, in conditions of lower salaries compared to the value of houses, which is the highest in the country.
As for access to the credit market, it remains rather easy, in the opinion of the central bank representative.
Florin Dragu also spoke about the rate of owing a house in Romania which is the highest at EU level, 96% of Romania's population owning a house, compared to an average level of 69% in EU. 2% of all owners have active mortgages, compared to 25%, the EU average.
On the other hand, in past years, the share of credit purchases even exceeds the European average, reaching 30%. According to the source, Romania has the highest number of people who do not have tubs, showers, in-door toilet, that is 21% compared to 1.5% in EU and also a high degree of over-crowding.
“We see a rissing awareness level among people, the prospects of climate change implications and the orientation toward green houses. About 19% of credits granted in the first half of the year have this climate destination. The volume of loans with green destination have a rising rate of 62%. However, we still have a rather low share of these types of financing, around 8%. From this point of view the banking system is ready to back the development of financign intermediation, even from the perspective of green transition,” Dragu pointed out.
As for the credit risk, BNR sees a constant situation, in conditions in which credit risk is low at the level of mortgage portfolio, with a performance rate of 1.6%. Currency risk dropped significantly and there is a share of only 13% of hard currency credits, compared to 72% in 2015. “If we consider the mortgage flow per year, hard currency credit is below 1%, the BNR representative says.
At the same time, the central bank sees a reduction of the interest risk rate, on the background of credit share increase with a fixed interest rate from 18 to 35%, while there is still a relatively high share of credits with variable interest .
In perspective, BNR sees the people's robust capacity to pay back mortgages. For the following year, BNR prospects show a relatively constant 0.2% probability of non-refund.