One of the big questions for everyone everywhere, of course, right now is how will the whole credit squeeze and a US recession affect everywhere else?

It's not so much will it happen anymore, is it? It's how much.

Important, then, I think, for investors to keep their eye on the ball, not be to distracted by the short-term and consider the picture a little further down the line.

Each time I go to Romania to source Romanian Property deals, I come back even more full of the place than the last time.

The key thing though is that I'm not alone. Every investment magazine I pick up, every business newspaper I look at, there Romania is - it really is one of the top global property investment hotspots.

And these massive votes of confidence and declarations of intent to invest huge amounts of capital are despite and since the credit crunch and fears about a period of downturn in the developed world.

Here are some recent titbits that caught my eye and which I think are very insightful.

Here's the first, from an interview this month in Commercial Property News. I'm quoting it because I honestly couldn't put things better myself.

It's an interview with one of the founders of the Washington-based D4 Investments, Don Rosacker, a U.S. government relations specialist and business executive.

D4 is has just opened an office in Bucharest - its regional HQ - and is about to invest its first €100 million into Romanian commercial real estate.
This is a guy who knows his onions! He was asked about the Romanian economy:

'They're booming. The money is pouring in because it's the right time, there is a need for growth and infrastructure. They've got strong leadership from the government.

'The leadership (the prime minister) is setting has been very pro-growth. They're stepping up. The economy is moving forward and doing well. That's part of the reason we are stepping in.'

And where will D4 be investing? Where should we go to follow the money?

'We're looking across the country, within Bucharest and literally to the borders. We've toured the country and see different things that look exciting. We've looked at different properties that might need demolition or environmental cleanup that can be repositioned into different industrial and commercial uses.'

Everywhere, basically.

And that's how I feel - this is a country with almost limitless opportunities.

Here are some more facts that caught my eye.

How will Romania and CEE be affected by a downturn in the developed world?

I've seen few hard forecasts. But Banca Comerciala Romana - the country's largest bank, certainly understands this market well, and he's what they have to say:

They forecast the country's economic growth will actually accelerate this year - powered by the boom in construction.

GDP will probably grow at over 6% for the year, from an estimated 5.7% in 2007.

Pretty much the Goldilocks scenario then - not too hot and not too cold.

``Construction is expected to maintain a high level in coming years, considering strong demand for residential buildings and the imperative need for infrastructure modernization,'' the bank reports.

Construction boomed in 2007 - growing by more than 30%. And payrolls increased by 13%.

The bank, which is part of Austria's Erste Bank AG, also forecasts that inflation in Romania will fall to 6% by the end of this year from 6.8% in December 07.

Another fact - €6.6 billion of FDI flowed into the country in the first 11 months of 2007. OK, so that figure is down on 2006 by 20% - BUT, 2006 was, firstly, the run up to the country joining the EU and, second, 2007 was really when the credit squeeze began.

And, even more importantly, 2006 was a record year in which FDI jumped by 74% on the previous year. A truly startling statistic, I'd suggest.

As is so often the case, then, we need to look at figures like these over a few years rather than just one in isolation. And, when we do that, we can see the FDI growth is massive.

Add that to the huge amounts of cash that Romanians send home every year - the World Bank estimates they repatriated the astonishing figure of €7 billion last year - and you can see that phrases like 'staggering amounts of money' are not an exaggeration.

Ford is spending €1 billion in the country. Nokia - the biggest mobile phone company in the world - has just closed its German operation and relocated lock stock and barrel to Romania.

It will produce a phone every five seconds, incidentally. More importantly, it'll employ around 3,500 people in and around Cluj.

Now, at the risk of becoming overly factual, here is just one more piece of data that I think is very telling about earning power in Romania. And it's one that reveals the true picture behind those misleading stats that talk of national averages and miss the grey market and the huge discrepancies between cities and rural areas.

Last year new car sales in Romania surged by 23%!

Why?

Increased wages and the boom in consumer credit.

Car sales were up to 315,621 vehicles from 256,364 a year earlier, the Bucharest-based Association of Automobile Producers & Importers revealed.

This is all about private debt, which rose an annualised 55% in November of 07, as interest rates came down and wages rose.

Net monthly wages rose an annual 23.5% in November and unemployment was at a 15 year low. And, remember, that salary growth figure is an average!
See, I have been busy collecting data!

But the reason I'm citing these figures is to give the lie to the central question I hear repeatedly - that Romanians can't afford to buy into the new build residential market in their country.

Well, sure, many can't afford to. But the important fact for property investors is that thousands and thousand can afford to! And that number is increasing all the time.

And it's fuelled by two key things: FDI that is creating more and better paid jobs AND borrowing power. Debt is still new in this country, but it is catching on fast.

Private banking has already moved in.

Here's something else that I think may surprise you.

I was talking to some officials on my recent trip and even I was amazed to learn that Raiffeisen has started private banking, for clients with a minimum of €100,000 income - they clearly know the business is there.

Another bank official told me that they have a client base of thousands and 3000 of those clients have portfolios under management of €600,000!

So, yes, it is debt that is key to understanding the Romanian property market and it is the low, low levels of debt that allow me to say with 100% confidence that we have still seen nothing yet from this market.

Mortgage debt in this country was a mere 2.3% in 2006 (the latest figure available) - up over 50% on the previous year. Growing fast then, but a tiny amount relative to its potential.

We've had great growth already, but there is a great deal more to come - I'll tell you how much I think there is in a moment.

But let's just spend some more time on this affordability issue.

Right now we are seeing €1400 psm price tags for panelaks in Bucharest. In fact, in some parts - notably in central north Bucharest - we are seeing prices of €2,500 psm!

Why is this?

Two reasons really.

One, there is a huge shortage of new build product on the market. Last year some 2,500 units came to market in Bucharest. Over the next three years, a further 25,000 will be sold. That is a drop in the proverbial ocean for a city of 3 million. Supply will take years to catch up with demand.

Two, people can afford to trade at high levels for panelaks because they already own them, locking in serious amounts of equity.

This allows someone in Bucharest to trade up to a new build, when one is available, for a minimal amount of debt - probably being able to manage comfortably with an LTV of just 20%.

This is how it works. You get a good job - and a good job now in Bucharest is one that easily pays €1,000 month. A senior manger in the capital will earn around €25,000 a year - compared to a figure of around €80,000 in the UK.

(And that puts both the spending power of the Romanian worker AND the cost effectiveness he offers in perspective.)

Someone earning €12,000 p/a, who owns a panelak and who borrows, say €50,000 at 10% - which is all they would need to trade up to a new build - will be spending around 60% of their net income on a mortgage. And that's someone on a pretty average wage for a good job in the capital these days!

This is why all new builds sell as soon as they hit the market place.

Ok, so what does all this amount to for a property investor?

Well, the opportunity is absolutely clear. And I think there are two issues to consider here.

• What about finance?
• And what should your strategy be?

Finance first

There's no doubt that the quality of finance for investors has not matched other, more developed markets. But that's been the price you pay for plugging into a market that is much younger and so offers fabulous capital growth.

That is changing fast.

There are already products available for sure. Volksbank has one, for example. I was talking to them last week and they will now even lend to self-employed investors, so long as they have a company and that company has something of a financial track record.

At 8.5% it's not a great rate. But when you run the numbers, it's pretty easy to see it easily does the job!

The buzz is that there will be big developments in the mortgage market in June. At that time a great many new and more flexible products will come on line.

But, as I say, it works even now.

Look at Quadra Place. It's €150,000 for a one bed flat now. Our investors bought the same unit for €80,000. So, 40% growth. The ROI is huge!

Now, strategy.

So, do you buy into this fantastic level of growth and then sell out fast, taking quick profits, or hunker down for the longer haul?

Really, it's your call.

But my analysis is this: sooner or later, just as in any market that undergoes the first phase of hyper-growth, an affordability ceiling will be reached, as has happened in Warsaw, for example, and as happened a while back in Prague.

I have no doubt that we are still two or much more like three years away from that ceiling, which means up to three years more of super growth.

My view - and I have a portfolio in this market as I've said before - is that the kind of jobs being created now mean that a mature and long lasting rental market is forming and that a long term hold is a great strategy.

Consider that Quadra Place is already delivering yields of 6% to 7%.

So, the choice is yours.

Take the profits in the short term - and I wouldn't blame anyone for doing that.

Or buy for the long term into the Romanian Property marekt for what I canonly describe as the most exciting property market in the world.