Where is the best place to invest in Romania in 2008?

Is Bucharest still the first choice for capital growth over the next 3 to 4 years, or with such rapid growth in 2007 does it make more sense to look at other cities?

Does the ripple effect mean there is now more potential growth outside Bucharest, or is sticking with the capital the safest bet?

I personally think Brasov and Cluj have great potential, but will they out perform Bucharest?

I would be interested to hear other peoples opinion on the Romanian market.

Hi

We are forecasting high capital growth to continue in Bucharest for 2008. The city continues to attract large amounts of investment. Affordability is increasing with the creation of more highly paid jobs in the city. As a capital city it will enjoy sustained growth over the next few years.

Brasov and Cluj as secondary cities in Romania offer great potential for investors. The Brasov property market took off at the start of 2007 and we have seen great growth over the last year. Cluj is undoubtedly developing as the second city in the country and house prices are increasing to reflect this.

We are also watching the 3rd tier cities in the country before the housing market takes off as it is in the earliest stages of a property market that we see turbo-charged growth. We have identified the city of Baia Mare as the next emerging city in Romania and are currently offering an investment opportunity there called Autumn Residence. The development is the first Greenfield residential development in the city and in the words of our local partner in Romania this is like investing in Bucharest 4 years ago or Brasov 12 months ago.

Romania is one of the best investment markets in the CEE – whether you invest in the capital city, secondary cities or emerging 3rd tier cities will depend on your current portfolio, attitude to risk etc. but in my opinion there are great returns to be had from the Romanian market currently.

Noreen

Hi Noreen et al,

I certainly agree that Brasov and Cluj as secondary cities offer outstanding potential and on current forecasts are only slightly behind Bucharest. The reasons for growth in both cities are well documented by Charles Bell and myself, but I think you will find that Brasov took off long before the beginning of 2007 when PS discovered it. There is a distinct lack of good quality new builds in Brasov with a huge demand from locals wishing to trade up and take advantage of credit which is becoming more flexible. On the land side I have seen rapid price growth as developers are snapping up prime locations with a view to building the next big thing. All these factors are symptoms of a market which has seen huge growth over the last 4-5 years.

Somewhat surprised at the focus on Baia Mare which is definately third tier (only just) when there is still outstanding potential in the second Tier cities which are somewhat more advanced along the development cycle. Sibiu for instance was the European city of culture in 2007, in a better location and experiencing huge inward investment and well placed to offer growth in the next 2-3 years whilst Baia Mare would seem to be longer term. That said there are many other cities which fall into the Sibiu category....Oradea, Pitesti, Arad to name just a few.

Hi Al

I certainly agree that markets such as Sibiu, Arad etc show great potential for growth. We are monitoring all the markets in Romania. However, having identified a market that we believe is a good investment location we will wait until we can source an excellent investment opportunity. This is what we have done with Baia Mare - we maintain this is a great investment location and we have sourced, what we believe is an excellent deal in the city.

Noreen

Hello Al and Noreen

I guess you were waiting for me to get in on this and I just cant resist. For me I will overlook Baia Mare and consider it a diversion from the focus of FDI flowing into Romania but I will make a fewc points.

The pics show the construction being built with white bricks. White bricks are cheap and are not liked by Romanians which may be reflected in the price and/or the fact that there are no Romanians buyers as yet.

I've posted caveats about the Romanian economy before. The latest financial crisis has proved me right. To buy one Euro you have to pay 3.79 RON or thereabouts which is the highest rate for a very long time. This has led to increases in interest rates and it is recognised that Romania has been hit worst out of the CEE countries.

I've also argued that FDI and economic development should be analysed in both macro and micro terms...some cities in Romania will slowly die whilst others (especially Cluj, the best place in the world to invest) will continue to flourish. Cluj professional salaries (IT workers, accountants, marketing, professionals in construction etc ) are near European levels with low tax.

I skimmed the investment report and read the Romanian financial press at breakfast. Where is the hard EVIDENCE oeconomic development in the north...figures for the Italian furniture factory have already been challenged as a result of researching different figures in Nine O'Clock News. How many employees from Baia Mare earn sufficient salaries to be able to afford Autumn residence prices...which will surely rise because now the constructor has had his promotional offer taken up and is finacially secure leaving him the option to sell the remaining units at a higher price...usual Romanian strategy.

I also have to challenge the suggestion that proximity to the Ukranian border is a positive factor. Now those of you in the UK know about attitudes to protecting UK borders and immigration. In general migrants have to be highly skilled or allowed to work in the country on a time limited and low cost basis. Romania is the EU's border and has imprtant responsibilities to protect the EU from a flood of illegal immigration. The border and access to employment in Romania will be rigorously controlled. The legitimate employment of Ukranians will be in those locations where jobs desperately need to be filled....Cluj again...note my recent Press notice about 4000 or so of Cluj's vacancies expected to be taken up by Ukranians or Turkish.

I cant see hordes of Romanians in Italy coming home...sure they buy land but they build themselves houses in their rural dream. They want Euro in their pockets. They are largely unskilled and if they returned to work in Marmures their incomes wouldnt go very far.

But Maramures is a beautiful place and certainly has tourist potential. But its only expensive TAROM and carpatair which fly into the airport as far as I know so my money stays in Cluj and in land which I hope to sell to big fat German wallets come the spring.

Charles

....and SIBIU I agree with entirely. Its got culture, classical architecture to rival any in Europe, its got or will have roads, its got industrial development, low wages, low unemployment....its Saxon, its Transilvania and its got a GERMAN MAYOR. I could almost say that the fact that it wasa European Cultural capital last year has overshadowed its other advantages.

So in this order I would go for Cluj, Bucharest, Sibiu with Craiova a dark horse because of Ford.

Below you will find the Cluj News for the last few days:

23.1.08

Romania enters World Top 10 for beer consumption. German beer factory for Cluj might not be so far off the ‘mark’.
http: / /www .zf .ro /articol _157722 /romania _enters _global _top _10 _for _beer _consumption .html


Anti-European Germans on the march +Romanian Press wakes up to the fact that Nokia plant is being constructed by a German company
http: / /www .nineoclock .ro /index .php?page=detalii &categorie=business &id=20080122 -511691

Cluj anticipates 4000 workers from Moldova, Ukraine, Turkey and China
(Visit the German built Nokia site and you will already find workers from such countries providing {low}cost effective labour! CB)
http: / /www .clujeanul .ro /editoriale /efectul -nokia -sau -moldovenizarea -clujului -2341760


American concern D4 Investments to pump 100 million Euro into residential projects in Cluj and Timisoara
http: / /www .informatiacluj .ro /index .php?id=12 &tx _ttnews[tt _news]=4368 &tx _ttnews[backPid]=7 &cHash=79a2594887


New French owners of Banca Transilvania Insurance inject a further 16 million Euros
http: / /www .zf .ro /articol _157726 /groupama _injects _16m _euros _into _bt _asigurari .html

Deloitte TR planning to establish offices in Cluj
http: / /www .ziuadecj .ro /action /article?ID=7731


The potential for Cluj to become a major banking/finance centre bringing up to 10,000 jobs
http: / /www .clujeanul .ro /cluj /marile -banci -si -fonduri -de -investitii -din -lume -sunt -asteptate -la -cluj -2345428



First test drive on a section of the Transilvania Highway
http: / /www .clujeanul .ro /cluj /clujeanul -a -testat -autostrada -transilvania -2344939


Wizzair to account for 50%+ of Cluj air traffic …note new route Cluj – Dortmund (Germany) commencing at the end of next month
http: / /www .informatiacluj .ro /index .php?id=12 &tx _ttnews[tt _news]=4295 &tx _ttnews[backPid]=7 &cHash=f947c052b2

Swiss axe-man wants to rape Cluj of it’s forest. Will the Mayor put a Bloc on it?
http: / /www .ziuadecj .ro /action /article?ID=7630



Six million Euro to be spent converting former Hotel Continental in downtown Cluj to luxury commercial centre and gallery within a beautiful and historical building
http: / /www .zf .ro /articol _157641 /hotelul _continental _din _cluj _va _fi _transformat _in _galerie _comerciala .html


24.1.08

Dacia enjoys highest sales growth rate amongst Europe’s car manufacturers
http: / /www .standard .ro /articol _26896 /dacia _enjoys _europe _ _ _s _highest _growth _rate _in _2007 .html

But new registration tax arrangements in Romania may lead to 20% drop in domestic sales
http: / /www .moneyline .ro /articol _14544 /dacia _could _witness _a _20 _ _drop _in _sales _this _year _due _to _the _car _registration _tax .html

…the new registration tax arrangements have been a matter of some dispute with the EU…are they custom built for the German economy?. For those who are not aware many Romanians go to Germany to buy second hand cars at a lower price thereby indirectly assisting with new sales in Germany but even so German new sales in Romania is almost like occupation…..but it’s BMWs etc and not tanks! CB

German Porsche pumps 60 million Euro into Romanian sales network….more German investment again!
http: / /www .moneyline .ro /articol _14548 /porsche _romania _invests _ _ _ _60 _mln _in _2008 _to _expand _sales _network .html

Sales of German BMW up 65% - new sales centres to open in Cluj
http: / /www .ziuadecj .ro /action /article?ID=7775

Charles

I appreciate the time and effort you have put in with supplying us with this information.

This is greatly appreciated.

Regards

Sanj

Me too. Great reading.

Charles...what type of place is Floresti?
A lot of the Cluj advertised off-plan properties seem to be here.
Wikipedia describes it as a "commune of Cluj county" and quite a few sites seem anxious to promote that the Mayor has now signed documents to make Floresti an administrative part of Cluj-Napoca.

Many thanks to Charles, Al & Noreen

Your responses have been very informative and interesting. I am a new investor and have already purchased a Bulgarian unit in the Selene development and as I have finance for one other property this year, I see Romania as the place to be.

In many ways I wish I had discovered the property investment and the Romanian opportunities 12 months ago. However it is easy to be clever afterwards but the key to me is finding high growth locations to kick start a long term plan of rapidly growing my property portfolio. The insiteful information which has been given particularly helps a newer investor like me to make the right decision.

Thanks again and happy investing,

All the best,

Marcus

Hi

Although I have interests in Floresti I am not a fan of it...in fact it is a disaster particularly on the Tauti side of a street called Eroilor. It suffers from extreme planning blight...and the potential scenario is that when all that is being built is occupied (Tauti side) when the lights go on at 7 in the morning and all are in the bathroom the electricity wont cope and the streets will flood with sewerage. The Tauti side is like a rabbit warren and neither the Council or the constructors (mostly cowboys) will take responsibility for putting decent roads in once all construction is completed.

Floresti to the Gilau side of Eroilor has been built in a planned way although I know some developers who have built an extra floor which did not receive planning consent. That means a low price cos you wont get a loan from a bank on an apartment that officially does not exist! The best development on this side was launched in August at a very favourable propotional price (lots of green area, more parking than apt.s and completely finished...and 200 metres from the bus stop so no swimming in mud or choking in dust). That particular development is now selling (what's left) at 100% more than the promotional price..so the profit has already been taken.

Floresti will sell and in October as previously reported a decision aflls to be made about changing a military hospital to a civil one. That should boost demand.

If you go to the Cluj napoca City Council website one of the most read pages is a page dedicated to expressing views about the scandal of Floresti. two years ago on the Tauti side people were buying 500 sm plots of land to build their dream house. Then the constructors came along and built huge blocks...I know one example where the roof of a block will actually overhang the roof of the neighbouring house.

So my advice is to keep clear of Floresti. Floresti may appear cheap but something is cheap for a reason. I hope I have given some of those reasons to you.

Jucu apartments were cheap too...but are being built with red brick and not white. They were cheap because the constructor had vision and needed finace to see the project through. Buy Jucu rather than Floresti any day of the week. Buy a central apartment at twice the price and you will do no wrong. Buy land and play with it and you will do even better!

Kind regards

Charles