Lack of accommodation sees rents rise
Pricier than Madrid and in short supply: Bucharest’s rental accommodation is a boom business out of reach for most of the city’s inhabitants
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Few Romanians on an average income can afford to purchase a home in Bucharest, while costs for renting accommodation are also soaring.
The cheapest three-bedroom flat in Bucharest costs around 160,000 Euro in a city where the average annual income, by generous estimates, is 7,200 Euro per year.
“A tenant is not inspired to rent if he can afford to buy,” says Daniel Prieto, managing partner at Spanish real estate consultancy firm FDP Grupo. “But many Romanians have no choice. They cannot get a mortgage because, even if they earn up to 3,000 Euro per month, a large amount of this cash is undeclared income. Everyone wants to buy, but not everyone can.”
House prices are expected to increase by 15 to 25 per cent this year, because the supply of new apartments is still low. Only 2,500 new units are due for completion this year in Bucharest, according to a study by real estate agency Eurometropola, for a city swelling to 3.5 million people.
Romania has one of the largest numbers of home-owners in the EU. This is because Romanians could buy their property from the state for a knockdown price in the early 1990s. A 70 sqm apartment in Targoviste, Dambovita county, for instance, could be acquired in 1990 for 100,000 old lei – then the equivalent of 250 USD.
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The culture of renting is only beginning. While it is still possible to lease an unfurnished apartment in east Bucharest’s Titan neighbourhood for 150 Euro per month, company managers, foreigners working for multinationals or young Romanians with rich parents, only consider living in new apartment buildings.
“Apartments in new building are rented out for amounts 700 to 1,000 Euro higher than flats in old buildings,” says real estate agency Veles’s Carmen Mihaita.
Northern areas such as Dorobanti, Kiseleff and new residential complexes and villas north of Bucharest are still popular among high income workers, says Adriana Albert, real estate broker at Regatta real estate agency. Rents in new northern developments for a four room apartment are around 5,000 to 6,000 Euro per month, while renting a villa could cost around 10,000 to 12,000 Euro per month.
“Rental prices in Romania are very high for new developments,” says Daniel Prieto. “They are more expensive than Madrid.”
A one-bedroom apartment can cost 140,000 Euro in Romania and can be rented out for 950 euro per month. The same rental price for a property in Spain is only possible for a building in the region of 300,000 Euro. The buying to renting ratio, in this example, is 25:1 in Spain and 12.5:1 in Romania. This is not a difference of small change.
Tax burden
To rent a property, a landlord must register the contract at the financial administration. If the landlord is renting through a company, the taxes are 16 per cent on profits. If he or she is an individual, the taxes are 16 per cent to 75 per cent of the rent. There is no VAT on providing rental.
But many owners do not register their flats because they want to pocket all the cash as black money. “My tenants want me to register the contract, but they do not realise that it affects my profit,” one landlord complained to The Diplomat. “If I register it, I have to increase the rent.”
But the owner risks penalties starting from 67 Euro if the contract is not registered within 15 days of the signing. “Some owners get caught when they go to the bank to take a credit and have to declare that they own rentable dwellings,” says Marina Topsa, associate lawyer at Bostina and Associates. “Many others do not know that the contract needs to be registered.”
Know your rights
The most common issue in the war between tenants and landlords is a sudden rental increase, even if the contract stipulates that it will remain at a fixed amount for one year. If the tenant does not agree to pay more, he can be evicted with a minimum of 60 days notice.
In Romania, owners do not have the right to enter a rented apartment without giving 48 hours notice to the tenant. “The tenant has the right to deny the owner’s access into the apartment in the absence of this notice,” says Topsa. “The owner must ensure the privacy of the tenant.”
Even if the contract is not registered to the financial administration, it is as legal as any written agreement between two people – which means that both parties retain their rights.
By Corina Ilie and Michael Bird
Greek developers head up for Corbeanca
Greek real estate developer Crown Constructions in partnership with property developer Helios Eastern Europe (HEE) is targeting Corbeanca village, Ilfov county for the delivery in 2010 of a 30,337 sqm villa complex, an investment worth 20 million Euro.
‘Apollonia Gardens’ will comprise 58 villas with areas of between 214 and 498 sqm, two tennis courses and one small football pitch.
Crown Construction has already completed the first phase of the ‘Perla Residence’ complex including 85 living units on a land plot in Pipera. Helios Eastern Europe has also developed Mercury Logistic Park in Bolintin Deal, Giurgiu county.
New villa complex on Lacul Buftea
Romanian real estate consultancy firm Quantum Consulting & Management is developing a 2.4 million Euro residential project in north-western Bucharest on Buftea Lake with a sustainable energy edge. The four villas comprised in ‘Adnana Residence’ have areas ranging between 650 and 950 sqm and include a heating system provided by solar panels. The complex has been under construction since 2005 and is due for completion this December.
Cotroceni mall wins 80 per cent financing
AFI Europe, the real estate division of Israeli Africa-Israel Group, has been granted a 234 million Euro financing by German Hypo Real Estate Bank, to develop AFI Cotroceni Park. The credit was granted for eight years and represents 80 per cent of the investment in the 300 million Euro project. AFI Cotroceni Park will be built at the junction of Blvd Timisoara and Blvd Vasile Milea in west Bucharest, on the premises of former electrical machine factory UMEB and will include a shopping mall and five office buildings.
Morgan Stanley joins investors in Adama
US real estate developer Adama specialized in central and eastern Europe has launched a capital increase of over 100 million Euro. Morgan Stanley joined existing shareholders the Lehman Brothers and real estate investments company Immoeast in the transaction. Over 85 per cent of the investment will be directed to finance the expansion plans of Adama in Romania, Ukraine and Turkey. This is the fourth major capital increase over the past two and a half years. In December 2006, the company issued bonds worth 62 million Euro on the Tel Aviv Stock Exchange.
Property: Romania
AFUMATI, ILFOV Israeli real estate company Intercolony has bought a one million sqm land plot in Afumati village, Ilfov county, where it will begin constructing a residential project in 2009, in partnership with another Israeli investor. The works will be completed by 2014. In Bucharest, on Strada Floreasca, the company owns another 14,000 sqm land plot and is looking for 5,000 sqm more in the same area to develop a residential complex on 60,000 sqm between mid-2008 and 2012. Intercolony, which is American Colony’s European Division, operates throughout Europe and currently owns around 25,000 residential units in Romania, Cyprus and Hungary.
DAMBOVITA COUNTY Romanian real estate agency DDA Land Invest will pour over 1.5 million Euro in the development of a residential complex including 15 villas. Construction works on the ‘Samur ‘complex stretching over 2,600 sqm on Lacul Crevedia, Dambovita county started last May and will be completed this August, according to Ovidiu Florea, real estate broker at DDA Land Invest. Selling prices are around 195,000 Euro per unit.
TARGOVISTE Romanian company Princo Group, a producer and exporter of kitchen equipment, is building 350 apartments in a ten-block complex in Targoviste, Dambovita county to be delivered in three stages by 2010. ‘Class Park Targoviste’ located on Strada Madrid in north Targoviste is the company’s first residential complex. ‘Class Park Targoviste’ required an investment of 25 million Euro, Costel Florescu, project developer, told The Diplomat.
OTOPENI Israeli real estate developer Primak Invest Europa has been working since 2007 on a 154-apartment project, developed on 12,000 sqm in Otopeni, Ilfov county. The 11 blocks of flats included in Golden Residence, situated on Strada Steaua Rosie, will be delivered in several stages by 2009, according to Ioana Urzicanu, sales representative at Golden Residence.
SUCEAVA British property investment fund Princeton Investments and global property fund Argo Real Estate Opportunities Fund (AREOF) will open this month the 70 million Euro Shopping City Suceava retail park, the first shopping centre in Suceava county. Located on Strada Calea Unirii in the centre of the city, the mall will cover a gross lettable area of 48,000 sqm with a shopping centre of 11,500 sqm and anchor tenants such as Carrefour, DIY store Baumax, furniture retailer Mobexpert, consumer electronics store Media Galaxy and 116 other shops. Shopping City Suceava is the second project of AREOF after the company’s purchase in 2006 of 48,000 sqm in European Retail Park Sibiu.
PRAHOVA Portuguese real estate company Plusvag Investimentos will develop a retail and residential project in Tatarani, near Ploiesti, Prahova county, in a public-private partnership with Prahova County Council. The investment will be worth around 250 million Euro, according to Ziarul Financiar. The project will include over 3,000 housing units and a shopping centre covering a 102 ha land plot.
Property: Bucharest
BUCURESTI Real estate developer Carmel Land Development is erecting a residential project on Soseaua Pipera-Tunari, near the American School, set for delivery by December 2008. ‘Green Vista’ includes 229 living units with studios, two, three, four rooms and penthouses, Bianca Scarlat, project manager at Euroest Invest told The Diplomat.
BUCURESTI Romanian company Integral Technic Trade, which specialises in air conditioning equipment, construction and interior design, has purchased a land plot in Baneasa, on Strada Alexandru cel Bun where it intends to erect a residential complex of 54 apartments with a total built area of 6,000 sqm. ‘Baneasa Happy House’ requires an investment of 12 million Euro and will be delivered in three stages between March 2008 and 2010, according to Alina Negrila, a company representative.
TITAN Romanian-Irish real estate developer Gigant Construct has budgeted around 100 million Euro for the development of two residential projects in Bucharest’s Titan neighborhood. The first project will be erected behind Piata Trapezului and will include around 400 apartments, Corneliu Serban, general manager of the company told The Diplomat. The second project will cover 11,000 sqm on Strada Fetesti and will also include 400 apartments. Ongoing projects of Gigant Construct in the city include ‘Pallady Residence’ with 134 apartments to be delivered this autumn and ‘Pallady Towers’ with 293 apartments distributed in three tower blocks, located both in Titan neighbourhood.
STRADA 1 DECEMBRIE Israeli real estate developer Itzhar Invest will develop a seven million Euro residential project ‘Gold Residence’ with 54 two and three room apartments on Strada 1 Decembrie. Sold on prices ranging between 1,200 and 1,400 Euro per sqm, the total built area of the eight-storey construction exceeds 6,400 sqm and is due for completion in winter 2008/2009.
STRADA EMINESCU Real estate agency Remax Imobiliare, part of the Israeli Future Group, is developing an 11-storey apartment project in Bucharest, at the junction of Strada Eminescu and Strada Episcop Radu. The completion of ‘Eminescu View’ complex, stretching over 13,000 sqm, is estimated to be ready in June 2009, Cristina Secu, representative of real estate agency Esop Consulting told The Diplomat. The project, which will have 69 apartments, has been acquired by UK-based Tri Investments Fund, which invests in east Europe.
PIATA VICTORIEI An Italian real estate company invested 1.7 million Euro in the development of a luxury residential building situated within two minutes walk of Piata Victoriei.Victoria Residentiale is expected to be delivered this December.
