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Bucharest - Cluj Napoca - and the greatest communist legacy.

There is no doubt that Bucharest and other Romanian cities, such as Cluj Napoca, are booming.

On my latest trip I read that the Romania national football team have already qualified for Euro 2008 – well ahead of you know who…

I also saw the first Bucharest store selling replica Romania football shirts and baseball caps – and I think we’ll have a lot more of that ‘in your face’ consumerism to come.

As some of the older readers of Property Secrets know, I have a personal hunch that football success and local property price growth go hand in hand. Now I know the wheels came off this theory during the last world cup – but it is significant and important to note new EU countries national teams (Croatia and Poland included) are doing better and better…

… now of course, my football and property theory is not perfect, as Arsenal’s 7-0 victory of the main Prague team showed last week – but if you look at the general trend you can see a clear pattern emerging.

In addition, during the trip I made last week, a further commercial tenant was announced for the Nokia Village of Jucu in Cluj Napoca. A large Finnish printing firm is going to invest €40m and is creating lots of jobs.

In fact, the project manager for this new Nokia led industrial / business park is predicting a similar announcement every month for the next 6 months or so!

Last week I travelled with a number of colleagues and investors who were making their first trip to the city.

They consistently remarked that they were

'constantly surprised that….

or that

Bucharest is like Spain 15 years ago, although it is going to develop much faster than Spain'

Yes, absolutely, I couldn’t have said it better myself.

The problem with most Brits or even Spanish or Irish investors who have never visited Romania is that they struggle to imagine the speed at which Romania is developing.

Just because the UK took 200 years to industrialised and urbanise doesn’t mean that other countries need to take that long too.

Just because Spain’s ex-dictatorship and EU entry economic miracle took 30 years – doesn’t mean that Romania – or any of the Central European countries will take as long.

In fact, I would imagine that the same development will take around 10 to 15 years. Half of the time it took in Spain and up to 20 times faster than in the UK.

Hence, it isn’t surprising that many investors who have not experienced Romania still have trouble coming to terms the nature of the property investment opportunities in Bucharest and Romania and second cities like Brasov and Cluj-Napoca.

The serious advice I heard was that when you visit Romania you should wipe your mind of your prejudices and start again!

Why? Because Romania is not what you expect. The phrase most commonly used was ‘I was really surprised…’

So, why is this? Why does Romania have the potential to develop so much faster than Britain did or even Spain did?

Two answers really.

1.) Firstly, the global financial markets allow much much more money to be focused on booming economies and so create an avalanche of economic development.

I heard a report yesterday that said that China’s economic development had slowed to just over 11% but that the country wasn’t over heating because inflation remained at around 1% and that 40% of the growth was due to investment spending!

11% growth isn’t happening to the booming economies of CEE (more like 6 to 10%) but growth is happening in a similar way – ie. rapid growth due to investment spending, followed by substantial leaps in exports and then (or in parallel) the development of domestic consumption.

2.) Secondly – and this is the big reason – the population of central and Eastern Europe is a lot smarter than you’d think. There are a substantial number of remarkably well educated and qualified people.

This means that once an idea catches on – or a new way of doing business is introduced, the local population are remarkable well qualified to pick it up and run with the opportunity.

I think this explains why foreign expat managers don’t stay long in New Europe – because they aren’t needed once they’ve handed over the core skills and work practices.

I was again impressed by the range and calibre of business people I met in Romania and I can see no reason why Property Secrets, as an international business, shouldn’t source relevant business services from this country. I would say that I am confident that in Romania we are able to contract with well qualified and smart people – who get business and offer services at affordable rates.

So, how is this transformation taking place? I believe it is on the back of a highly developed educational system.

The legacy of communism is a dedication to education. Therefore, it is my personal experience that the levels of education are far higher then the current GDP would suggest.

And that this implies that the GDP will grow rapidly – not that education levels will decline.

I believe this is one of the key reasons for foreign investment – and the great thing about investment in skilled work forces is that it tends to be the type of investment that benefits the wider economy and so creates a virtuous circle.

Let me finish off with a story.

Last month, my colleague was travelling on the Sofia metro and he started speaking to a 55 year old lady. The lady was very knowledgeable and, of course, spoke perfect English. When my colleague complimented her on her English and asked if she had travelled a lot, she said yes – meaning she regularly used the Sofia metro.

So he asked her more directly if she had travelled or worked in the UK. ‘No’ she said, ‘I’ve only ever been to Sofia’.

The English was learned locally and is an indication of the levels of education and equally, another reason to see economic development in this region as sustainable and inevitable.

So, if education is the great communist legacy, then curiously this communist legacy is proving to be a key catalyst for growth and equally, the development of the residential property market and hence investment opportunities for investors.


Ps. I have rumours that the Romania’s are regarded as the smartest foreign IT engineers (after the Indian’s). Anyone know where that rumour started? Or, indeed, if it holds any truth?

TAGS: Romania Property, Cluj-Napoca Property, Bucharest Property, Brasov Property



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