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Market context

Market Context

The local residential market went at full speed in 2021 and registered new record numbers in the modern history of the market, taking into consideration the number of transactions closed, the delivery peaks, and the best level of accessibility, both for purchasing a new home and for accessing a mortgage.

The beginning of the year was an exceptionally good one in terms of the mentioned indicators, continuing the excellent results registered in the last quarter of 2020. Despite the Covid-19 pandemic, 2020 brought a record in residential units delivered, an 11.6% increase in the number of closed transactions, and an overall improvement in accessibility, all mainly due to the results registered in the last months of the year.

The second and third quarters of 2021 brought other excellent results on the residential market, not only compared with the similar months from 2020 – when the Covid-19 pandemic had a significant impact on the market – but also compared to previous years. Thus, every month in 2021 brought a record month in the number of dwellings sold, according to official statistics from the National Agency of Cadastre and Real Estate Advertising (ANCPI).

Over 150,000 individual units were sold at a national level in the first 10 months from 2021 – the last available data at this moment – up 65% compared with the same period from 2020.

The result is also the best registered in the recent history, 2021 setting thus a new transaction record. The 2021 residential transaction result is even more exceptional if we consider the fact that it follows another increase of about eight percent registered in 2020.

Covid-19 had a positive effect from this point of view, 2019 and 2018 ending with annual decreases in the number of residen­tial units sold at a national level, according to official statistics.

The 65% annual increase in closed transactions in the first ten months of 2021 was surpassed by the figures registered in some of the main regional residential markets from Romania.

For example, in Brasov, a 78% annual increase was recorded in the first three quarters from 2021, in Iasi a 150% increase was registered while in Constanta 166% more individual units were sold in the mentioned period.

These records in closed transactions were possible in a context in which deliveries were at the same level as the peaks registered in 2020 when a post-1989 record was set up.

In total, 67,816 new dwellings were delivered in 2020, a slight in­crease compared to the 2019 result, setting thus a new record for the last three decades, according to the National Institute of Statistics (NIS). The previous record was established in 2019 when 67,512 residential units were delivered at a national level, slightly higher compared to the 67,255 level registered in 2018.

The first six months from 2021 brought an increase of 5.3% in deliveries at a national level, to 31,335 units, according to the latest statistics from NIS. Out of this, a share of 62.2% was delivered in towns and cities.

The most significant increases in deliveries were registered in the North-East region (Bacau, Botosani, Iasi, Neamt, Suceava, and Vaslui), approximately 39%, and in the West region (Arad, Caras-Severin, Hunedoara, and Timis), of 21.6% compared to the first half from 2020. The only region that registered a decrease in deliveries was the Centre (Alba, Brasov, Covasna, Harghita, Mures, and Sibiu).

Urban deliveries were influenced by the results registered in the main ten regional residential markets in Romania: Bucharest – Ilfov region, Cluj-Napoca, Timisoara, Constanta, Brasov, Sibiu, Iasi, Oradea, Pitesti and Craiova.

SVN Romania’s data show that the absorption rate registered at a national level was over 75% until project deliveries, with rates of over 85% in some regional markets, such as Brasov and Cluj – Napoca.

These satisfactory degrees of absorption were obtained in a context in which one of the main Covid-19 pandemic effects was represented by the better awareness of housing conditions.

In addition, 2021 brought the best level in the accessibility of purchasing a new home and applying for a mortgage loan.

This level was registered in July 2021 according to the profile index calculated by SVN Romania.

Thus, a buyer needed almost 99 medium wages at a national level–or 8.2 years–for purchasing a one-bedroom new apart­ment in Bucharest (50 square meters net surface).

For comparison, 2021 started at a level of almost 100 medium wages, or a period of 8.3 years.

Price increases, caused by significant increases in construc­tion material prices but also the inflation rate, which reached 8% in October, led, for the first time in the last five years, to a quarterly worsening in the affordability of purchasing a new home.

Thus, in September 2021 were necessary 102 medium wages at a national level for purchasing the same apartment – or a period of 8.5 years – a level last reached in June 2020.

For comparison, in January 2020, just before the Covid-19 outbreak, 104 medium wages were necessary – almost 8.7 years – thus, we are still at this moment at a better level compared to the pre-pandemic period.

The slight deterioration in the affordability of buying a new home registered in Q3 2021 was caused by the slower pace of wage increases registered in 2021, of almost 6% compared to 8.4% registered in 2020. Thus, inflation surpassed the national wage increase.

However, the present level of accessibility is superior to the one registered in recent years.

For example, 105.7 medium wages were needed in January 2019, or 8.8 years, while in January 2018 117.5 medium wages were necessary – 9.8 years; please consider the fact that the medium wages in Bucharest are about one-third higher com­pared to the national level.

The peak was registered in 2008, in January, when no less than 393 medium wages, of a period of almost 33 years, were necessary for purchasing the same new one-bedroom apart­ment in Bucharest, according to SVN Romania’s calculations.

Thus, the affordability of purchasing a new home improved by over four times in the last 13 years. Better accessibility is one of the main pillars of the residential market and one of the most important explanations for the record results registered in 2020 and 2021.

October 2021 also brought the first annual decrease in the number of closed transactions at a national level – and in most regional residential markets, except Brasov and Constanta. This difference can be explained by the new Covid-19 restrictions and the excellent results registered in the last three months from 2020.

On the other hand, inflationary trends and rising residential prices are the main risk factors, with an influence on the number of closed transactions.

However, the local residential market showed resilience in 2021 and registered, as we estimated at the beginning of the year, excellent results. The satisfactory level of affordability and low-interest rates were the main pillars for these results.

Taking into account the current market conditions, we esti­mate that 2021 will close with an approximately 50% increase in the number of closed deals at a national level, which will make 2021 the best year in the modern history of the local residential market.

At the same time, 2021 could bring new records in deliveries in some regional markets, depending on the Q4 results and the speed with which developers and authorities will carry out the legal procedures.

2022 has at this moment the premises for satisfactory results: the residential market is based on much more solid founda­tions compared to 2008 and the quarterly worsening in the accessibility and the rising interest rates will not lead the market to a worse moment compared with 2019 or 2018.

The soundness of business plans, the perfect adaptation to the target and sales strategies will be, as usual, the factors that will make the difference between success and failure, between results of over 95% of units sold until project delivery or much worse results.



Bigger prices 

The year 2021 brought the highest price increase rhythm since 2008, caused mainly by increases in construction material prices. Also, inflation reached 8% in October. We estimate the inflationary trends will continue in the immediate period.

New transaction record

2021 also brought the biggest number of residential units sold from the modern history of the profile market. This was possible not only because of the poor result registered in 2020: each month from 2021 set up a monthly transaction record for that specific month.

A house on the ground

This is considered to be the classic dream of a Romanian home buyer and it became reality for a bigger number of people since a bigger surface was one of the main requirements in the residential market in 2021. We estimate that over 1,000 villas were delivered in Bucharest´s region this year.

Easier to pay installments

The IRCC’s decrease to 1.08% in Q4 2021 led to further decreases in average interest rates and a smaller weight held by installments in average wages. The NBR increased the reference interest rate in January 20222, but the weight held by the installment in the average wage should still be lower compared to pre-Covid-19 periods, due to wage increases.

New residential destinations

Also, the year 2021 brought several land transactions in areas where over 10,000 new residential units could be developed in the future: Fabrica de Glucoza and the area next to Petrom City. In addition, Sisesti and Bucur Obor will continue to be important underdeveloped areas.

Main risks

Inflationary trends, Covid-19 evolution, macroeconomic imbalances, and the suspension of coordinating PUZs in five of the six districts in Bucharest are the main important risk factors existing at this moment.

Price increases and bigger interest rates will also lead to a worsening of the accessibility of buying a new home but the levels that will be registered in 2022 will be, most likely, better compared with the ones registered immediately before the Covid-19 outbreak.

(extras from Romania Market Drive 2021 study, made by SVN Romania)

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