"Already Alpha Bank is now offering 100% mortgages to Romanians with no deposit, based on 65% of an individual's net income, and these new applications add up to borrowing capacity going through the roof." 65% of 420EURO/month (white collar net income) annualised is 3275EURO allocated to interest repayments only. This corresponds to lending power to purchase a 65000EURO apartment. Already a huge proportion of net income is absorbed by interest repayments. Add in capital repayments and the above average Romanian buyer is quickly priced out of the market, despite the availability of 100%LTV products. Any higher wage inflation/ GDP growth will threaten economic viability (consider Latvia's present situation). Therefore, an impass is reached and affordability kicks in long before 100% LTV products become a factor. Does anyone agree? Nic

Nic I would tend to agree with you. The key factors to me would seem to be the size of the mortgage and, hence, the affordability of the repayments. Some thoughts... It seems to come back to this debate over the actual income of the Romanian family that are being targetted. As has been suggested before, the average figure is misleading as you might consider your target market is slightly higher than average. Also the recent article discussing this subject suggested you should consider dual incomes, overtime and cah in hand income also so maybe the net income should be set quite a bit higher than you suggested. I wonder whether there are other factors at play here - ex-pat Romanians sending home money to reduce the mortgage required or making the mortgage repayments and having much greater income (Spanish, Italian, US etc income) - therefore increasing affordability massively. I don't believe this factor has been investigated in any depth. The other things that shouldn't be ignored is the market impact of demand massively exceeding supply - whilst this situation persists, it would appear to me that property will be 'overpriced' because there is a premium attached when only a small percentage of the actual demand can be satisfied. When the supply/demand imbalance starts being addressed, I would imagine prices will level out or even drop - however, this doesn't appear likely to be addressed any time soon, not least as demand will only grow as wages continue to increase. Alex

These new changes are obviously good news for employed investors. I am self-employed and currently unable to obtain a mortgage in Romania.does anyone know of any plans to change this or any banks willing to lend to the self-employed.

Does anyone know of any plans to change this or any banks willing to lend to the self-employed.

Hi Nic I appreciate your point, but think you're missing several factors that we've actually covered previously. 1) The average salary in a broad category like the white collar sector in a country like Romania is fairly meaningless - incomes are so very disparate. This is a country of serious haves and have nots - so an average tells us little. 2) Locked in equity from existing panelaks - the country has a very high level of home ownership (ownership with no debt) and the gulf between the price of a new build and a panelak is not so much..yet. So, for a fairly modest loan, many of those people in Bucharest with a decent salary, can afford to trade up. 3) Family bonds - these are very strong in Romania - like those in Italy, and it will certainly be common for a family to assist in raising equity to allow a younger family member to buy a modern, aspirational apartment. Wage inflation is always something to keep an eye on, but it is, ultimately, a loss of competitive productivity that is a threat to economic viability, not how much money people are paid. The presence of loose credit, like that at 100% LTV, is always one of the most significant drivers of any property market, and there is no reason why Romania should be any different to Poland (or the UK) in this regard. I personally think the long term key to development in Romania - as with all CEE markets - will be the type of investment that is going into the country. Is it the kind of FDI that leads to the creation of high value, service-oriented jobs, or is it aimed at cheap manufacturing? If the latter predominates, any boom in the property market will have a ceiling because salaries, to remain competitive, will have a ceiling too - because there's only so much you can increase productivity by in this sector in order to compete with a potential rival (there's always some low skilled worker willing to make the same thing for less in another market). Regards

Hi, It depends to some extent on whether banks recognise cash in hand payments / black market sources of income. In Latvia banks turned a blind eye to this between 2004 and 2007 for nationals, and therefore generated a buying frenzy - affordability was sustained during that period. This has now (finally) been amended with tightening of the banking laws and the application process and only proven income being accepted. Perhaps someone can shed more light on the the banks application criteria in Romania. Andy