Key Points:
The Romanian real estate market is struggling to recover from a decline in 2023, when the number of transactions fell by 16% and mortgage lending decreased.
High interest rates have discouraged buyers, with the IRCC (Interbank Average Overnight Rate) increasing from 1% to 6% in the past year.
Developers have slowed down new projects due to reduced demand.
Despite lower mortgage rates being offered by banks, BNR (National Bank of Romania) regulations require that the maximum loan amount be based on the variable interest rate (IRCC plus bank margin), which is significantly higher than the fixed rate.
This regulation is reducing the number of potential borrowers and hindering the market's recovery.
Mortgage brokers and banks are calling on the BNR to reconsider this regulation and instead use the fixed rate to assess loan eligibility, arguing that salaries have increased and most mortgages are denominated in lei, not euro.
Additional Details:
The construction volume of residential buildings decreased by 34% in the first quarter of 2024 compared to the same period in 2023.
While interest rates and buyer stress have increased, apartment prices have not declined.
Many potential buyers are waiting for prices to fall before purchasing an apartment.
Banks are offering fixed-rate mortgages of 5.49% for three years, followed by a variable rate based on IRCC plus a margin.
The current IRCC is 5.9%, meaning the variable rate would be close to 8%.
Using the variable rate for loan eligibility calculations reduces the maximum loan amount by 25%.
Mortgage brokers argue that the BNR's regulation is overly cautious and is hindering the real estate market's recovery.
They believe that the fixed rate should be used to assess loan eligibility, as it is a more accurate reflection of the borrower's current financial situation.
Overall, the Romanian real estate market is facing a number of challenges, including high interest rates, reduced demand, and BNR regulations that are limiting access to credit. The market is not expected to recover fully until these challenges are addressed.
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