Under the impact of high inflation, bank lending is undergoing a period of resettlement and access to finance for home purchase is tightening, as the key interest rate has risen sharply over the past year, from 1.75% in November 2021 to 6.75% in November 2022, says JLL.
The average price of new homes in Bucharest has reached a level of EUR 1,920 per usable sq. m, 25% below the peak level of EUR 2,576 per sq. m reached in Q1 2008, according to the real estate index published by imobiliare.ro.
Meanwhile the average net salary in Bucharest is currently EUR 1,085, double the 2008 level (EUR 499). The average price of a new residential unit delivered in Bucharest was around EUR 270,000 at its peak in 2008, as compared to around EUR 134,000 today.
The difference results mainly from an average area per unit which was 48% larger in 2008 as compared to 2022, i.e. 104 sq. m in 2008 vs. 70 sq. m in 2022, according to official housing statistics.
In contrast to 2008, in 2022, 75-80% of the residential units are purchased by end-users, while the difference is represented by investors targeting a rental income and not as much for reselling.
On the other hand, the mortgage market has also reached a certain level of maturity, as the maximum debt to income ratio for local currency loans has decreased from 70% in 2008 to 40% since 2019, a level maintained to this day.