[DianaM]

Hello everybody!
This is dedicated to everyone who considers investing in Romania. If you have any doubts, thoughts, experiences that you might like to share, you are welcome to do so. I personally think Romania is a very resourceful place and one of the best investment destinations in Europe. I would not like to enter details here, but I think Romania's potential for investment exceeds Bulgaria or even the Baltic Region.

[catara]

DianaM, on Sep 22 2007, 09:09 AM, said:

Hello everybody!
This is dedicated to everyone who considers investing in Romania. If you have any doubts, thoughts, experiences that you might like to share, you are welcome to do so. I personally think Romania is a very resourceful place and one of the best investment destinations in Europe. I would not like to enter details here, but I think Romania's potential for investment exceeds Bulgaria or even the Baltic Region.

This is one of funniest posts on this site.

Sounds like Ceausescu's propaganda.

If you do not have time to offer details, why bother??

[DianaM]

I see you are an expert in Ceausescu's propaganda, Catara. May I ask if you have studied it or if you worked in PR or Public Communication fields? I would be impressed if you were an expert in so many fileds, wow! However it would be very amusing for me and very silly for you had you simply used a name in order to describe everything you don't agree with. I never considered forums to be a place for serious documentation and accurate market research, but it seems that you have very few, yet strong opinions about it and you think it is professional to start analyses here about the potential of a market.
Apart from the fact that one can write books on why Romania has more potential for investment than Bulgaria or even the Baltics, it is quite an obvious choice if you think about it from a reasonable perspective as Romania is bigger than Bulgaria and a bigger country means a bigger market for goods and services and for real-state as well.
I shall give you a few data as I see you thirst for knowledge, although you have a funny way of getting it:
In Romania the GDP growth is attributable to industrial investment unlike Bulgaria & Turkey where foreigners buying ‘Dream Overseas Holiday Homes’ (Investments) have contributed so much to the extent of their GDPs.
The inflation rate is the highest in Romania, but there have been and continue to be credible reductions in the past 6 years
As for unemployment rate, you will note only Hungary is 1.9% lower that Romania, whereas Bulgaria has almost twice the percentage of people out of work.
Romania has the highest investment after Bulgaria, compared to Turkey, Poland, Hungary and of course Bulgaria.
The public debt is very low in Romania and this is a very important factor when we talk about investment potential.
You don't have to believe me, Catara. Take a look on the World Bank website www.worldbank.org for a change (if you have the time and desire to do so of course and if you think too many letters might actually not harm your sensitive eyes)
To the data I provided before please add the level of education in Romania used to be quite good, indeed many bright minds left this country and maybe nowadays the youth of Romania is on average not so skilled and intelligent, yet you can prove me wrong and I hope through your future conduct you will do so. However, your last comment was very much in the "nowadays" category and it's a shame. Yet there is hope as I said, because I can't help but notice you have a very inquisitive mind. To feed you with yet more analyses (I'm sure you have investigated this website thoroughly before posting here and probably you think you have some experience with the investments in this country as well) please take a look at www.propertysecrets.net as well. Oups! there you have to pay something. Well, I'm sure that for a successful consultant such as yourself it will be no problem.

[markinspain]

If Romania is such a great place, why are most of the people of working age in Spain?

[catara]

DianaM, on Sep 25 2007, 09:19 AM, said:

I see you are an expert in Ceausescu's propaganda, Catara. May I ask if you have studied it or if you worked in PR or Public Communication fields? I would be impressed if you were an expert in so many fileds, wow! However it would be very amusing for me and very silly for you had you simply used a name in order to describe everything you don't agree with. I never considered forums to be a place for serious documentation and accurate market research, but it seems that you have very few, yet strong opinions about it and you think it is professional to start analyses here about the potential of a market.
Apart from the fact that one can write books on why Romania has more potential for investment than Bulgaria or even the Baltics, it is quite an obvious choice if you think about it from a reasonable perspective as Romania is bigger than Bulgaria and a bigger country means a bigger market for goods and services and for real-state as well.
I shall give you a few data as I see you thirst for knowledge, although you have a funny way of getting it:
In Romania the GDP growth is attributable to industrial investment unlike Bulgaria & Turkey where foreigners buying ‘Dream Overseas Holiday Homes’ (Investments) have contributed so much to the extent of their GDPs.
The inflation rate is the highest in Romania, but there have been and continue to be credible reductions in the past 6 years
As for unemployment rate, you will note only Hungary is 1.9% lower that Romania, whereas Bulgaria has almost twice the percentage of people out of work.
Romania has the highest investment after Bulgaria, compared to Turkey, Poland, Hungary and of course Bulgaria.
The public debt is very low in Romania and this is a very important factor when we talk about investment potential.
You don't have to believe me, Catara. Take a look on the World Bank website www.worldbank.org for a change (if you have the time and desire to do so of course and if you think too many letters might actually not harm your sensitive eyes)
To the data I provided before please add the level of education in Romania used to be quite good, indeed many bright minds left this country and maybe nowadays the youth of Romania is on average not so skilled and intelligent, yet you can prove me wrong and I hope through your future conduct you will do so. However, your last comment was very much in the "nowadays" category and it's a shame. Yet there is hope as I said, because I can't help but notice you have a very inquisitive mind. To feed you with yet more analyses (I'm sure you have investigated this website thoroughly before posting here and probably you think you have some experience with the investments in this country as well) please take a look at www.propertysecrets.net as well. Oups! there you have to pay something. Well, I'm sure that for a successful consultant such as yourself it will be no problem.

Unfortunately for you, I read daily many newspapers from Romania and I know the disaster over there. 3 milion people left after EU opened the border in 2002.
besides, all the capable persons think of leaving the corrupted country. If you do not know the right persons, it is impossible to succeed in Romania.

In what concerns the property, the prices are artificially high such that the thieves can squeeze the last drop. I have invested there, I made some money and I am still making money with my properties.

Nevertheless, I really do not see any reason why people would "invest" in Romania except maybe land. Romania is ruled by bandits and liers, until some more honest people come to power, there is no hope.

Toate cele bune.

[DianaM]

Catara, I live in Romania, so my experiences with this country are very direct. I see many things changing. This is not a wasteland, lawless and full of thieves. As disastruous as you claim it is, economy is growing, the people who work in Spain return and invest here quite a lot. You must not forget Romania made it into the EU and is very likely it stays there. As a matter of fact I've just seen on the news a Romanian family who got robbed in Bulgaria and their car was set on fire, so happy invest there! Don't get me wrong, I've been in Bulgaria too, I have friends there as well, it is a wonderful country, but I think Romania is more interesting from the investment potential perspective.
As for your properties, you say you have invested in Romania and the properties are offering you some revenue. I don't know what sort of revenue, I see you are sad about investing here. It's very bad that when you made the purchase you haven't had a good adviser to tell you what is worth buying and what is not interesting.
On the other hand, I've met so many investors who refuse to pay legal advice or financial advice and claim they know them all, so they'd rather spend 60k on something because the agent/owner seemed nice, than talk with a specialist and pay him/her 1000EUR! They would not pay 200EUR for consultancy and legal help. Actually they think Romanians should serve them for free. When I meet these kind of people with this slave masters attitude and mentality, I become disgusted and am very glad for all the misfortune they might encounter in this country or elsewhere.
Another matter regarding investing in emerging markets is the way you look at things: if you expect a great capital growth and a huge rental return in a country already developed, you should forget about it, go to the pub and get hammered! Capital growth comes only in a country under development and rental return is improving as well as the country is growing.
May I ask on what grounds do you fundament your allegation about land and only land?

Markinspain, so did the Polish when they entered the EU. As a matter of fact Ireland is full of Polish nowadays and if you don't trust my word take the plane to Dublin. And not only Ireland: UK, Holland, France, Germany, etc.
Are you trying to tell me Poland is a rubbish country? Bulgarians flooded Europe as well, take a look around!
Many Romanians working in Spain want to return home, they have money and they begun to invest in properties back home. Their families are back here, so if you are afraid they might stay in Spain, I assure you very little of them will chose to remain there when the wages here suffice their needs. Many declare that a 600EUR salary in tourism is enough to keep them home and I believe in a year or two this will be the case.

[catara]

DianaM, on Sep 25 2007, 09:19 PM, said:

Catara, I live in Romania, so my experiences with this country are very direct. I see many things changing. This is not a wasteland, lawless and full of thieves. As disastruous as you claim it is, economy is growing, the people who work in Spain return and invest here quite a lot.

Only people who cannot make it in Spain are returning to Romania.

I did not say that Romanian is a land of thieves. But the people in power are thieves.

I have a question: why isn't Valea Oltului being developed? I think that the region around calimanesti is among the best I have ever been to (mountains, river, thermal waters, fresh air).

About my investment in Romania, I made them long ago so they are 8 to 10 times more now than when I bought them (also considering that I bought in dollar and now everything sells in Euro). My point is that I am not sure if an apartment at 30 km from Piata Univestitatii (like many are sold nowadays) is such a good investment. How is somebody going to make it to work in time?

[Togo Joe]

Actually, I think DianaM and Catara are both right (and both wrong).

1) Rumania is a cracking little country run by crooks.

2) The Land Registry, issues of Title etc are nowhere near as good as in other latin countries. And if you've ever got Title issues, you need steep discounts.

3) There is no yield. DianaM is talking nonsense when, even if salaries increase dramatically, she asserts rents will increase. There is no known case in the entire post-Soviet bloc EU entrants where increases in income have translated into increased rents. The marginal propensity to spend is never directed towards rent. Capital is so scarce, increased income is treated as capital and deployed accordingly. The only exception to this has been in cities where the local population have had to compete with foreigners. And that is a purely urban phenomenon. There have been nominal increases but these have been destroyed by inflation.

4) So if there's no yield, you'll run into a "Minsky Moment" sooner or later which they are currently re-discovering in NY and London and pretty soon will do in Spain. And that is, when the insufficient income generated by an asset is artificially disguised by capital gains, you always need capital gains to plug the cash-flow loss, and when these stop, the merry-go-round does and assets get re-priced based on their income-generating ability. This will happen in many parts of the States, large parts of Southern England and almost all of Spain. It's also true of Rumania. Prices have run way ahead of their investment value. The Capital Price of a Property Asset can only run ahead of its Yield because of Credit. Geddit ???? Or (zzzzzzz) it has to be "different this time". And there is a little bit of that in Eastern Europe.

5) I repeat, Rumania is a great little country, a poor man's Ticino, at a fifth of the price, but it's still not cheap.

6) Finally, property prices often depend on social infrastructure. You might argue that Rumanian prices are a tenth of London prices but that's not the whole story. Property prices are often a case of arbitrage. A few years back agricultural land in the Punjab rocketed and lots of them cashed in and bought farms in Canada - what really swung it was 1. Canadian re-training grants 2. Free Universities for the children 3. Pensions 4. Health Service. When you put a monetary value to all that Canadian farms were actually cheaper than the Punjab. Now, let's be clear about this. No Buy-to-Let baron is ever going to be given re-training grants, etc in Rumania.

7) In short, there are good reasons, why Rumanian property has to be cheap. Until Prague and Berlin have proved the case otherwise, demand draconian discounts to EU property.

8) In twenty years time, you might not have a Health Service in Rumania, so it's, at the risk of some understatement, unclear how many Westerners you are really going to have retiring there (in what is, admittedly, a very beautiful country.) The Scandinavian countries and Switzerland have sucked every dentist, every anaesthetist etc etc from Poland and Germany. The same will happen in Rumania. All skilled medical will leave and the country will fall into the hands of other professionals, who do not have cross-border skills (at least in the same way) such as lawyers and accountants but even they will either leave or become barons.

Catara thinks Spain is ridiculously over-priced and I tend to agree. But there is a reason the rich and successful think Barcelona and Palma are worth silly prices. And that is, that they are seriously nice places. Ignoring the silly bubble on the East Coast and around Malaga, it still has to be said that Seville and Granada are sunny places with sunny people and sunny food. From Norilsk in the North to Kosovo in the South, the rain in Spain is betta, innit ?

Togo Joe (the Ni-Kto from Kyoto)

[Sean]

An excellent post, Togo Joe, best I've read in a long time. So much of what you say can be applied to other overseas threads and to propery in general. Two key things that you have explained very well and I consider when buying property are 1) yield and 2) social infrastructure. I have never bought without at least one of these being in place or there being a strong likelihood that they will be in place. If the yield isn't there (or the likelihood of a yield isn't there) then there are no (sensible) investors and if the social infrastructure isn't there then there are no home buyers. Investors need to consider these things as, without secondary investors or home buyers, there is no coherent exit strategy and prices will experience the Minsky Moment. In many cases, overseas property investors don't quite appreciate the extent to which they are indeed speculating and dependent upon the creation of acceptable rental yield and basic infrastructure and that many commercial, economic and political influences beyond their control can delay or derail the outcome. Having said that, if you've got money to lose and an appetite for risk, there is a lot of money to make if you do your homework and have a bit of luck. Just be clear that it is not the same as buying a flat in Cambridge.

[catara]

Togo Joe, on Sep 28 2007, 12:22 AM, said:

Actually, I think DianaM and Catara are both right (and both wrong).

1) Rumania is a cracking little country run by crooks.

2) The Land Registry, issues of Title etc are nowhere near as good as in other latin countries. And if you've ever got Title issues, you need steep discounts.

3) There is no yield. DianaM is talking nonsense when, even if salaries increase dramatically, she asserts rents will increase. There is no known case in the entire post-Soviet bloc EU entrants where increases in income have translated into increased rents. The marginal propensity to spend is never directed towards rent. Capital is so scarce, increased income is treated as capital and deployed accordingly. The only exception to this has been in cities where the local population have had to compete with foreigners. And that is a purely urban phenomenon. There have been nominal increases but these have been destroyed by inflation.

4) So if there's no yield, you'll run into a "Minsky Moment" sooner or later which they are currently re-discovering in NY and London and pretty soon will do in Spain. And that is, when the insufficient income generated by an asset is artificially disguised by capital gains, you always need capital gains to plug the cash-flow loss, and when these stop, the merry-go-round does and assets get re-priced based on their income-generating ability. This will happen in many parts of the States, large parts of Southern England and almost all of Spain. It's also true of Rumania. Prices have run way ahead of their investment value. The Capital Price of a Property Asset can only run ahead of its Yield because of Credit. Geddit ???? Or (zzzzzzz) it has to be "different this time". And there is a little bit of that in Eastern Europe.

5) I repeat, Rumania is a great little country, a poor man's Ticino, at a fifth of the price, but it's still not cheap.

6) Finally, property prices often depend on social infrastructure. You might argue that Rumanian prices are a tenth of London prices but that's not the whole story. Property prices are often a case of arbitrage. A few years back agricultural land in the Punjab rocketed and lots of them cashed in and bought farms in Canada - what really swung it was 1. Canadian re-training grants 2. Free Universities for the children 3. Pensions 4. Health Service. When you put a monetary value to all that Canadian farms were actually cheaper than the Punjab. Now, let's be clear about this. No Buy-to-Let baron is ever going to be given re-training grants, etc in Rumania.

7) In short, there are good reasons, why Rumanian property has to be cheap. Until Prague and Berlin have proved the case otherwise, demand draconian discounts to EU property.

8) In twenty years time, you might not have a Health Service in Rumania, so it's, at the risk of some understatement, unclear how many Westerners you are really going to have retiring there (in what is, admittedly, a very beautiful country.) The Scandinavian countries and Switzerland have sucked every dentist, every anaesthetist etc etc from Poland and Germany. The same will happen in Rumania. All skilled medical will leave and the country will fall into the hands of other professionals, who do not have cross-border skills (at least in the same way) such as lawyers and accountants but even they will either leave or become barons.

I more or less agree with you.

Point 1) Everybody is aware that the crooks run the country. But you know what, many enjoy this... To be a crook in Romania is received as a sign of being smart.

Point 2) Depends where. In Transilvania the ownership is much more secure than in the Muntenia or Moldova. Banat and Transilvania are about 20 years ahead as compared ot the rest of the country.

Point 3) + 4) I agree. The only problem is that your professionals (who are still being unfortunate to live in Romania and try to succeed there) need to buy apartments now for theimselves and families. They need to pay the current overinflated prices.

There is no reason to purchase asa foreigner in Romania, only if someone wants to actually live in Romania (which is OK-ish if you have a Western Europe salary).


Point 8) Everybody who is smart and not lazy and not scared of unknown left the country or is leaving the country now. The mediocre people (and the crooks discussed above) will become the elite in Romania.

[The Soup Dragon]

Enjoyed reading your comments Togo Joe. Just one point I'd like to add to. That is:

Togo Joe, on Sep 28 2007, 12:22 AM, said:

Prices have run way ahead of their investment value. The Capital Price of a Property Asset can only run ahead of its Yield because of Credit. Geddit ????

In general I feel this statement holds. We all know property is worth what people are willing to pay and credit, as you have pointed out, impacts what people are willing to pay. There are other factors that infleunce price (and will continue to do so.) One such factor is the desirability of particular areas. There will always be places that are more desirable than others. In these locations the value of property will be less constrained by yield.

I assume your strategy is to identify opportunities that will deliver high yields (rental rather than appreciation) and when the yields start to fall (expressed as a proportion of up-to-date property valuation) you will start to think about existing the market. (Theory being that capital appreciation will be weaker when yields are lower and you will do better by finding another market that provides stronger yields which should lead to stronger appreciation.)

Is that your strategy? If so, where are you looking at for your next investment?

[Sean]

Soup, its not just yield that drives prices. If the infrastructure is in place, lower yields are more tolerable so prices can keep moving ahead. Togo Joe referred to universities, pensions, health services, seriously nice places, people and food as being relevant.

[The Soup Dragon]

Sean, we agree there are many factors that influence price, I’d just interpreted point 4 of Togo Joe’s post as being a broad rule that applies to anywhere and point 8 being specifically on concerns individuals thinking about retiring in Romania should have.

[DianaM]

The Soup Dragon, on Sep 28 2007, 12:31 PM, said:

Enjoyed reading your comments Togo Joe. Just one point I'd like to add to. That is:
In general I feel this statement holds. We all know property is worth what people are willing to pay and credit, as you have pointed out, impacts what people are willing to pay. There are other factors that infleunce price (and will continue to do so.) One such factor is the desirability of particular areas. There will always be places that are more desirable than others. In these locations the value of property will be less constrained by yield.

I assume your strategy is to identify opportunities that will deliver high yields (rental rather than appreciation) and when the yields start to fall (expressed as a proportion of up-to-date property valuation) you will start to think about existing the market. (Theory being that capital appreciation will be weaker when yields are lower and you will do better by finding another market that provides stronger yields which should lead to stronger appreciation.)

Is that your strategy? If so, where are you looking at for your next investment?

Sorry to disappoint you people, but the credit market was inexistent in Romania till very very recently. So whatever applies to UK or other European markets, doesn't apply to Romania!

[DianaM]

Togo Joe, on Sep 27 2007, 11:22 PM, said:

Actually, I think DianaM and Catara are both right (and both wrong).

1) Rumania is a cracking little country run by crooks.

2) The Land Registry, issues of Title etc are nowhere near as good as in other latin countries. And if you've ever got Title issues, you need steep discounts.

3) There is no yield. DianaM is talking nonsense when, even if salaries increase dramatically, she asserts rents will increase. There is no known case in the entire post-Soviet bloc EU entrants where increases in income have translated into increased rents. The marginal propensity to spend is never directed towards rent. Capital is so scarce, increased income is treated as capital and deployed accordingly. The only exception to this has been in cities where the local population have had to compete with foreigners. And that is a purely urban phenomenon. There have been nominal increases but these have been destroyed by inflation.

4) So if there's no yield, you'll run into a "Minsky Moment" sooner or later which they are currently re-discovering in NY and London and pretty soon will do in Spain. And that is, when the insufficient income generated by an asset is artificially disguised by capital gains, you always need capital gains to plug the cash-flow loss, and when these stop, the merry-go-round does and assets get re-priced based on their income-generating ability. This will happen in many parts of the States, large parts of Southern England and almost all of Spain. It's also true of Rumania. Prices have run way ahead of their investment value. The Capital Price of a Property Asset can only run ahead of its Yield because of Credit. Geddit ???? Or (zzzzzzz) it has to be "different this time". And there is a little bit of that in Eastern Europe.

5) I repeat, Rumania is a great little country, a poor man's Ticino, at a fifth of the price, but it's still not cheap.

6) Finally, property prices often depend on social infrastructure. You might argue that Rumanian prices are a tenth of London prices but that's not the whole story. Property prices are often a case of arbitrage. A few years back agricultural land in the Punjab rocketed and lots of them cashed in and bought farms in Canada - what really swung it was 1. Canadian re-training grants 2. Free Universities for the children 3. Pensions 4. Health Service. When you put a monetary value to all that Canadian farms were actually cheaper than the Punjab. Now, let's be clear about this. No Buy-to-Let baron is ever going to be given re-training grants, etc in Rumania.

7) In short, there are good reasons, why Rumanian property has to be cheap. Until Prague and Berlin have proved the case otherwise, demand draconian discounts to EU property.

8) In twenty years time, you might not have a Health Service in Rumania, so it's, at the risk of some understatement, unclear how many Westerners you are really going to have retiring there (in what is, admittedly, a very beautiful country.) The Scandinavian countries and Switzerland have sucked every dentist, every anaesthetist etc etc from Poland and Germany. The same will happen in Rumania. All skilled medical will leave and the country will fall into the hands of other professionals, who do not have cross-border skills (at least in the same way) such as lawyers and accountants but even they will either leave or become barons.

Catara thinks Spain is ridiculously over-priced and I tend to agree. But there is a reason the rich and successful think Barcelona and Palma are worth silly prices. And that is, that they are seriously nice places. Ignoring the silly bubble on the East Coast and around Malaga, it still has to be said that Seville and Granada are sunny places with sunny people and sunny food. From Norilsk in the North to Kosovo in the South, the rain in Spain is betta, innit ?

Togo Joe (the Ni-Kto from Kyoto)

Togo Joe, I like your post but I do not agree fully. This is why:
1. We must not forget Romania is close to the Balcan area and corruption is a tradition in these parts.
2. Taking title in Romania is safe (pitfalls are everywhere, if anyone is so naive as to think can purchase on a foreign market without legal advice, then he should stay home, right?)
3. A Brit buddy of mine rented his flat by the House of the People with 900EUR/month. If this is not a good rent, I shoot meself! Another firend of mine has a flat in Budapest in the centre and the rental revenue on that is around 5%, while for the one in Bucharest, teh Brit gets 8% easily.
Never stated that yield applies to all properties sold in Romania. There are areas of interest in this country. However, to respond Catara once again, I don't think Bucharest is such a top investment destination anymore, as prices in the centre of the city reached 5000EUR and that is too funny to talk about!
4. Never claimed Romania was cheap (should it be?), only mentioned affordable and having a huge potential.
5. Even Prince Charles bought here and it wasn't a blue-blood mood in it. There are free universities here, name a few free good ones in UK or even in Spain. The kids here get scholarships in the major universities of teh world based on what they learn home, so learning here can't be that bad.
6. Demand for Eastern Eurpoe is pretty high actually among a certain target of investors.
7. Please tell me on what you fundament your statement re the inexistence of Health Service in Romania in 20 years.

Anyone who likes to live under the sun is likely to choose Spain. Does that surprise anyone?
And have I mentioned anywhere anything about retiring to Romania? I am only thinking of buying, renting, selling in 3 years max.

Catara, I see this country really upset you. On the other hand, instead of calling the youth of Romania mediocre, take a look at what the youth of Romania is doing abroad. I mean what jobs are being offered to them abroad: au-pair, nanny, medical care jobs (lowest rank most of the time), bartenders, nudy bar dancers, construction, agriculture, etc.