While I've no doubt you're description of Bucharest is accurate, Charles, do you not think that over the long term things will change? I mean, a capital city that hopes to become considered as dynamic as many other European capital cities will be forced to make changes.

I'm sure Warsaw, for example, was not the city is now 10 years ago. Your bullishness over Cluj is not without foundation, but to write off Bucharest (which is the capital after all, while Cluj is a second tier, if not third, city) so definitely seems a huge mistake to me.

I agree that right now Cluj looks the better investment location, but it won't be long before prices in Cluj reach a short to medium term ceiling will it? While Bucharest, despite its problems, looks to be quite a way away from it.

Dear Charles.

Your opinion is pretty biased, and you are only pointing out the negative issues without even mentioning something positive!

Every city has its problems, but the way you are talking about Bucharest (al though not even being Romanian myself) is far from the truth!

You are also overreacting with the 'extremely seriouys drug addiction problem'. I've been living in Bucharest for almost 5 years, and I've been in almost all parts of the city and there is no "extremely serious drug addiction problem"

Of course there is a drug problem in every major city, and of course Bucharest has its drug addicts, but unless you stay out of Ferentari (a poor Bucharest suburb), then you'll find a large number of drug addicts (but doesn't Paris, London, Madrid and other cities not have the same problems? I think their problems are more serious!)

Secondly, I think that the new mayor (mr Oprescu) is doing something much better to the city than his predecessor (mr Videanu). In due time we will see if the effects of the new mayor will turn out positive, but I am of the opinion that it will.

The only appealing factor in Bucharest is money? I am sorry Charles, but this is clearly not true. I'm living myself in Drumul Taberei (a nice and quiet part of Bucharest), and spend also a lot of time in the city center, which I find buzzing with excitement. There are beautiful parks, stunning architecture, great nightlife, lots of interesting pubs/bars/restaurants , shops or recreational activities to explore and it's not as 'dead' or disgusting as you might say.

You are right that there is a chronic traffic congestion problem which definately needs solving. On the other hand public transportation (subway) is fast, cheap and very reliable ...

I think your outline of Bucharest is extremely negative and biased, and does not reflect the current situation.

Charles,

Do you believe everything they write in the press?

A quote from the article

"Sato Imobiliare Real estate agency’s General Manager Liviu Ureche told Business Standard the decline in prices was some 5 percent for apartments in central Bucharest and some 15 percent at the city outskirts. “This trend could go on by the end of the year, unless Romania’s National Bank (BNR) comes up with regulations aimed to ease lending,” he said. However, the BNR is currently working at legislation meant to curb lending and it increased the key rate for the eight time in a row, up to 10.25 percent, which is likely to further deter population to contract mortgages"


The Romanian National Bank's key rate has NO AFFECT WHATSOEVER on contracting mortgages in Romania IF these mortgages are issued in EURO or CHF!

On the other hand for foreign currency mortgages, all Romanian banks have to hold a currency reserve at the National Bank for each foreign currency amount they borrow to their customers. This currency reserve percentage is not bound to be changed in the near or medium future (rather being reduced!)

The only effect the LEI interest key rate of the NBR has on the mortgage business is, that mortgages in Romanian LEI become less favourable (e.g. much more expensive) than mortgages in EURO or CHF.

By the way, more than 75% of Romanian mortgage are issued in ............yes, foreign currency! Therefore in interest increase of the NBR's key rate has no effect on mortgages in foreign currencies.

Furthermore in Bucharest there is no statistical data available from the land registry regarding average prices per m2 or prices per area, as they don't have this on file. They are (with the help of Dutch land registry experts!!!) trying to introduce a system which will hold this information in the forseeable future (> 2010)

The amounts or percentages mentioned in the article are based on the internal information of this particular real estate company, which can never reflect the market situation by simply quoting these numbers/percentages.

I do agree that the incease in prices in Bucharest will not be as high as it used to be, and and people demand more quality for their hard earned cash (or through credit) and therefore would prefer off-plan properties instead of the old communist blocs with high maintainence costs.

Prices for old appartments in the outerskirts of Bucharest did go down, but this was more in relation with quality demand (compared to off plan property) than it has to do with demand and offer in general. As the demand for properties is still 4-5 times higher than what is on offer. Not all Romanians have the purchasing power to buy property in Bucharest, but their income situation is quickly changing over the years therefore allowing them to buy a property possibly with a mortgage as well in the future.

Thirdly the credit crunch had hardly any effect on the Romanian mortgage market as interest rates / fees/ comissions remained almost unchanged for mortgage backed products for the last 12 months. On the contrary, many banks have cut their interest rates and offer improved and better products.

Again, an article in Standard.ro should be very well analized before getting to a certain conclusion, and the majority of the information in the article is not correct either or can be considered as untrue.

I forgot to add (if you allow me to quote another source)

According to Colliers International the prices of off-plan property (or newly built properties) decreased in Bucharest on average with only 0,05% (May 2008 compared to June 2008) ....

It is stated that these fluctuations are normal in the current market conditions and can not be considered as a decline in prices for these type of (off-plan and/or) new properties.

Hi again

A quick response to the recent contributions to the thread of what Liam started.

Ben is asking me to look into a crystal ball and I really cant so far as Bucharest is concerned. However having travelled through and occasionally lived in that place I can recall the first time when syringes appeared on Boulevard Unirii (at the time perhaps the most desirable place to live). Before that - apart from glue - there was effectively zero drug use in Bucharest. Now it is rampant, see this report from the expat publication, The Diplomat, albeit as long ago as 2006 This is a quote:

“In the last five to seven years intravenous drugs users increased from 3,000 to 30,000 in Romania,” says Sartori. “Drug dealers who sell in Romania won’t launder their money here.”

For the full article go to http: / /www .thediplomat .ro /reports _1206 _1 .htm
. It makes interesting reading...and I'm not the author.

I hope that in the long term things will change but at present social care is not a government priority. Drug Prevention services are present but proving ineffective, treatment and rehabilitation services are extremely limited...not keeping up with the scale of the problem and difficult to access. Romania is on the drug traffiking route into western European markets. European Drug and Drug Addiction stats raise concern that there is high usage amongst the 16 -25 age group...exactly the same age group where unemployment (24%) is alarmingly high. Paris, London and Madrid do have their problems but they have services in place which Bucharest doesnt. P,L and M have a stable drug problem...Bucharest's is mushrooming.

Sure Bucharest is the capital but that's just about its only asset. Cluj - the second city of Romania with its population expected to expand perhaps to 2 million in a decade - has historical and cultural links with not only Hungary but also Austria and Germany. These links are also linguistic and ethnic and of course including that drive from Cluj to the border (which is currently being bridged by the Transilvania Highway) the infrastructure that allows you to drive from Cluj - Calais in 24 hours is in place. I did it last week. This culural diversity of Cluj is recprocal with Cluj Napoca (Roman) also being known as Kolosvar(Hungarian) and Klausenburg(German).

The article from the Standard was quoted because it was published this week. Those who read th Romanian Press online whilst sipping a cup of English tea will appreciate that the Standard article is an example of what is regularly being reported these days. The National Bank has once again (this week) raised interest rates to 10.25% because it is fearful of inflation. Romania has high food prices anyway because too much is imported and not produced economically at home. Romania has oil but rights to its production are owned by a foreign company. White goods prices are 40% more than Bulgaria. When I drive back from the UK to Cluj I'm doing a big shop in Tescos in Hungary. Romania not only has to live with factors particular to itself; it has to live with the impact of the international food and oil crises coupled with the process of harmonising (I'm not sure that's the right word) with mainstream European prices. Inflation and excessive addiction to imports are the Achilles heals of Romania.

You will find no stronger supporter of Romania than I. But borrowing in Euros or Swiss francs is not the answer with the Euro exchange rate being at 3.51 RON to the Euro yesterday as opposed to 3.62 a couple of weeks ago. What that actually means is that property is becoming more expensive for the Romanian pocket which may, in part, account for any local decline in Euro prices.

Charles

Hi to all. I have a question to participants in this debate. It has been said that there is oversupply in many locations in Romania, such as in areas in or around Bucharest and Cluj, while at the same time people say that many developments have not been finished on time, are still being eagerly waited for etc. And also that demand still is so much stronger than supply in Bucharest - how does that go with oversupply??

Plus what qualifies as "strong demand"? Many people willing and able to buy units in new developments? Or many people dreaming of a home they can't afford??

Can anybody clear my confusion?

Greetings, multumesc in advance,

Sacha.

Hi All,

Neil made the point that PS kept away from Floresti - and went to Jucu instead.

Which is fair enough, PS are entitled to invest wherever they feel is best.

However, there are no services of any kind in Jucu - its a field 15km from Cluj and across from the new Industrial Estate where Nokia have set up. Its gonna take years for the place to take shape.

Furthermore the flats were unfinished, so you have to fork out more money to get it to a rentable standard.

People did not seem to be over the moon about investing in JUCU when I went to Cluj twice last year.

People thought Floresti is quite nice and is in a nice, green setting, plus a lot of people will be working in city centre of Cluj which is not far from Floresti really. It has big malls like the Polus Centre right next door.

Not everyone will be crossing to the other side of the city - and the new junction with the Transylvanian motorway is near Floresti which is also a good point!!! Lets be honest here 30,000€ to 50,000€ must be just above construction costs!!

Maybe I would agree that Floresti won´t boom until the infrastrucure is put in, there has been talk of a new underground for cluj and other transport. The fact is that Floresti has already happened and this needs to be sorted before other projects spring up in other areas.

Bucharest is also a good city, i would have invested there if i had had more money cos capital cities are always the most expensive per square metre and areas near the centre can be transformed in just a few years.

I think good used flats in good buildings in the centre of bucharest are also a good investment cos u have good rental return and the best location, i have already given my views on bucharest in my article last year and I think Bucharest is undervalued compared to other European cities. You can buy a great flat in bucharest for 250,000€ which you´d get for 500,000€ in other cities in EU. See my article about Bucharest below:

http: / /www .propertysecrets .net /article /away _from _home _in _dynamic _bucharest /1763 .html

Cheers,

Liam Deasy