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Close to one-half of foreigners invested their money into commercial properties, while 34 percent chose office buildings and just 8 percent tourism-related real estate. While in the first half of 2007, Austrian investors dominated the market, this trend shifted in the second half of the year, with the appearance of French, German and Dutch businessmen. Despite this, a slight slowdown was experienced in the first quarter of this year in the rise of residential real estate prices in Bucharest.
While on an annual level, prices usually rose around 50 percent in recent years, this is not expected to exceed 20-30 percent this year. In the period between 2004-2007, it was not unusual for the price of a property in the Romanian capital to as much as triple within one or two years. However, prices increased by just one percent in the fi rst three months of this year, the lowest rise in the past four years, in which prices grew by an average 4-5 percent a month.
Huge potential in expanding residential market
Driving booming prices - aside from the gradual increase in construction material costs and the lack of developable land - is indubitably the rise in demand, with which supply is unable to keep up despite its growth. New flats are essentially sold well before completion, and potential buyers also have to contend with investors who are buying more and more real estate in expectation of further rising prices.
In the Romanian capital, for example, there would be demand for 35-40 thousand flats per year, while in the past 15 years the number of new flats delivered on average did not exceed one thousand. In comparison, the number of new apartments completed in Budapest, which has as maller population, averages around 10-15 thousand per year. As a result, used home prices in Bucharest are not much below new home prices per square meter, reaching as high as 1500-3000 euros depending on the location and the flat's size. The most popular properties are the ones near the Herastrau park in the city's northern section, where square metre prices can reach 3500 euros, even more than the 2600-3000 euro prices characteristic of downtown real estate.
Luxury market doubling
At the same time, demand is also increasing for penthousetype real estate. Of the around 2000 flats completed in Bucharest last year, the number of luxury properties was between 80-100. The price of penthouses, occupying the top floors of residential parks, starts at 600 thousand euros and can go up to one million euros depending on their size. As a result, the total value of the 80 penthouses sold last year is estimated at around 65-70 million euros. Property market experts expect the market of luxury real estate to double this year. According to optimistic opinions, of the total around 8-9 thousand flats to be completed in 2008, some 200-250 will be in the luxury category, and more
than 80 percent of these are expected to be sold.
