The first half of 2007 has seen prices explode in Bucharest.

The average price psm for a 2 bedroom apartment, built between 1980 and 1990, has increased by 27% on average in the first six months of 2007.

The data, recently compiled by leading Romanian financial newspaper Ziarul Financiar, shows that a typical 2 bedroom apartment on the resale market moderately close to the centre has risen from €80,000 - €90,000 to €110,000 - €120,000. This makes the average cost of such an apartment €1,564 psm.

This research is backed up by comments from other Romania property agents: "Whereas a square metre cost €1,300 in central areas in December, it has now reached €2,000. At the same time, in the areas in the outskirts of the city, the price per square metre has gone up from €600-€700 to about €1,300," said Clara Nicoara, general manager of Romania Real Estate Agency.

Where the strongest growth is to come

Looking at a breakdown of the different areas of Bucharest we can see where the growth has been strongest and which areas have been sleepy and therefore have the potential to record better growth rates in the next six months.

The Militari district grew by 38% (this is the district where the Property Secrets deal West Park is located).

The districts of Vitan and Mihai Bravu grew by an impressive 39% (this is where our Platinum Towers deal is located).

The Lacul Tei district grew by 42% (where Emerald Residences is located.)

And the Colentina district grew by 40% (where Rose Garden and Blue Tower are located).

Interestingly in the Titan district, prices have risen by a more modest 22% in the last six months and more specifically in the 1 Decembrie area (where our Citadella project is located) prices rose by only 16%. This is also close to the area where the Property Secrets development - Pallady Residence - is located.

This equals very encouraging potential for faster growth in future.

Our own man on the ground and Romanian property expert, Tavi Bota, comments: "Whilst some other areas of Bucharest have grown more rapidly in the last six months than the Titan district, I believe the district is just taking a little more time to wake up, and in the next six months we will see even stronger relative price growth in this area than in the last six months.

"By buying into this area today, it's a sure fire way to take advantage of the strong capital growth we expect in the Bucharest market in the second half of this year."

Not only is this price growth astronomical but it is extraordinary that this growth has taken place in old style communist buildings built before 1990!

New build prices have also been growing apace.

Conservative estimates place the growth in property prices in Bucharest at 30-40% per year currently; though, by choosing the right project, returns can be even higher.

A major driver to this growth has been a huge imbalance between supply and demand.

Supply deficit

Supply is very restricted due to a huge supply of poor quality housing and developers simply not being able to build sufficient numbers of units quickly enough.

It is estimated there is a deficit of 150,000 units in Bucharest alone.

Demand has increased rapidly since Romania joined the EU and locals have a new found confidence. Furthermore, the Romanian economy is growing rapidly and outperforming expectations, unemployment is very low (around 2.6% in Bucharest) and wages are rising strongly.

These factors, combined with the relaxations in lending criteria, has meant ease of access to mortgage credit for more and more Romanians. This extra money is having a direct effect on driving housing prices upwards.

Further sweeteners to market have been the fact that the RON has strengthened against the euro making property priced in euros cheaper to the average Romanian earning in RON.

Prices outside Bucharest

Prices are still rising in other parts of the country too, just not at quite the same rate as in Bucharest.

For example, prices in Cluj-Napoca have gone up by around 10-20% over the last six months.

This has been partly stimulated by the relaxed lending criteria of the banks and the decrease in the size of down-payments needed to secure a property off-plan.

Prices are expected to rise by a similar amount in the second half of 2007, which would be a very healthy growth rate indeed!

If prices of old style panelaks are rising at such a strong rate, this can only be having a positive effect on new build prices.

As the prices of old buildings rise, new build prices will seem relatively more attractive and thus demand will shift to new build increasing prices.

Furthermore, as an owner of a panelak whose value has gone up substantially it makes it very easy to then sell on this property. Remember most Romanians own their homes outright. And this releases a large amount of equity, which can then be used to purchase a new build property that are currently priced at not much more of a premium.

Overall, this evidence of price rises is very positive for the Romania market and is something we at Property Secrets have been saying would happen for the last year.

We forecast that this growth rate will continue apace over the next year and now is a great time to buy before the market moves onwards and upwards.