Romania is quickly emerging as a hot spot in the Central and Eastern European real estate market. With an affordable cost of living, a steadily growing economy, and a strategic location in Europe, it’s no wonder foreign investors are taking notice.
This guide is designed to give foreign buyers a comprehensive look at the Romanian property market. We’ll cover everything you need to know about buying house in Romania, from the current state of the market and the legal framework to the actual buying process, financing options, and taxes.
We’ve seen a significant increase in interest from foreign investors looking to capitalize on the potential of Romanian real estate, and we’re here to help you navigate the process.
An overview of the Romanian real estate market
Romania’s real estate market is diverse, with opportunities for investors and individuals alike. Here’s a quick look at what’s happening across different sectors.
Residential Sector
Romania has one of the highest rates of homeownership in the European Union, with nearly 95% of Romanians owning their homes. This presents unique opportunities for both renovation projects and new construction.
Demand is strong for modern housing, especially in major cities like Bucharest, Cluj-Napoca, Timișoara, Brașov, and Iași. If you’re looking for a place to live or rent out, these cities are worth a close look.
Property prices in these major cities have been steadily increasing. To give you an idea, here are some recent year-over-year growth rates:
- Cluj-Napoca: +15.7%
- Bucharest: +15.0%
- Brașov: +19.2%
- Constanța: +13.6%
- Timișoara: +12.8%
- Iași: +15.8%
Commercial and Industrial Properties
There’s also growing interest in commercial and industrial properties, particularly those located near transportation hubs. Proximity to highways and airports is a major plus for these types of properties.
Agricultural Land
Agricultural land in Romania is attractive for both farming and renewable energy projects. The country offers opportunities for developing wind farms and solar parks, making it an interesting option for those looking to invest in sustainable energy.
Why buy property in Romania?
Romania has become an attractive place to invest in real estate. Here are a few reasons why:
- Affordable prices: Compared to many other European countries, property prices in Romania are quite low. This makes it easier to get more for your money.
- Low property taxes: Property taxes in Romania are also relatively low, typically ranging from 0.08% to 0.2% of the property value.
- High rental yields: If you plan to rent out your property, you can expect good returns, especially in major cities. The national average gross rental yield is around 6.55%. Some cities, like Galați and Bucharest, offer even higher yields, up to 8.53%.
- Strategic location and improving infrastructure: Romania’s location in Eastern Europe makes it a strategic hub for business and travel. The country is also investing in its infrastructure, which is improving transportation and connectivity.
Who Can Buy Property in Romania: Legal Framework and Requirements
The rules around who can buy property in Romania depend on your citizenship.
EU/EEA and Swiss Citizens
If you’re a citizen of the European Union, the European Economic Area, or Switzerland, you can buy land in Romania without restrictions. Consider yourself good to go!
Non-EU Citizens
If you’re not an EU, EEA, or Swiss citizen, you’ll face a few more hurdles. Generally, you’ll need to set up a Romanian company (an SRL, or Societate cu Răspundere Limitată) to own land. A lot of investors form separate SPVs, or Romanian Limited Liability Companies, for each project to limit their liability.
The good news is that you don’t need to be a resident or have a specific visa to purchase property in Romania.
Why the Land Registry Matters
When you’re buying property in Romania, you’ll hear a lot about the Land Registry, or Carte Funciară. This registry provides secure information about the property and is essential for verifying ownership. Due diligence is key to avoiding problems down the road.
How to buy property in Romania: a step-by-step guide
- Find a property. You can use online portals or work with a real estate agent.
- Do your homework. Make sure any renovations were done properly. Check if the previous owner has any unpaid utility bills. Make sure the property is registered with the Romanian cadastre (land registry). It’s a good idea to hire a lawyer to review the contract.
- Sign a preliminary agreement (antecontract). This secures the property while you arrange financing. You’ll need to make a deposit, but don’t overpay.
- Sign the final purchase agreement. All property transactions in Romania must be finalized in front of a public notary.
- Register the property. The final step is to register the property with the Land Registry.
Can I buy property in Romania remotely?
Yes, you can buy property in Romania remotely by granting someone power of attorney (procură). Expect to pay between €500 and €1,500 in legal fees for a remote purchase.
What are the costs of buying and owning property in Romania?
When you buy a house in Romania, remember to budget for transaction costs. These usually amount to 5-7% of the property’s price. Here’s a breakdown:
- Notary fees: Expect to pay 0.5-2% of the property value, with a minimum of €500.
- Land registry fees: These are relatively low, at 0.15% for individuals and 0.5% for companies.
- Lawyer fees: Factor in 1-2% of the property value for legal assistance.
- Real estate agent commissions: Agents typically charge 2-5% of the sale price, plus 19% VAT.
Once you own the property, you’ll also need to pay annual property taxes, which range from 0.08-0.2% of the property’s taxable value.
Finally, don’t forget other potential costs like property insurance and condominium fees if your property is part of a condo association.
Financing Options if You’re Not a Romanian Citizen
If you’re planning to get a mortgage to buy a house in Romania, you’ll be glad to know that it is possible to get financing as a foreigner. However, expect to encounter stricter requirements, particularly if you’re not an EU citizen.
Here’s what to expect:
- Larger down payment: Non-EU citizens often need to put down 15-25% of the property value.
- Income verification: Banks will carefully assess your income and debt-to-income ratio to determine your eligibility. Be prepared to provide thorough documentation.
- Interest rates: Mortgage interest rates in Romania currently range from approximately 6.5% to 8.5%.
- Loan-to-value ratio: Foreign buyers can typically finance up to 60-75% of the property value.
- Romanian bank account: You’ll almost certainly need to open a Romanian bank account before you can even apply for a mortgage.
Taxation and Financial Considerations
Buying property in Romania comes with its own set of tax rules. Here’s a quick overview to help you navigate the financial landscape:
- Property Tax: Expect to pay between 0.08% and 0.2% of the property’s taxable value each year. This is an annual tax, so factor it into your ongoing costs.
- Capital Gains Tax: When you eventually sell the property, you’ll likely owe capital gains tax. The rate depends on how long you’ve owned the property. If you’ve owned it for more than 3 years, the tax is 1%. If you sell within 3 years, it’s 3%.
- Corporate Tax (for SPVs): This is more relevant for non-EU citizens who choose to buy land through a company (a Special Purpose Vehicle). Be sure to consult with a tax advisor to understand the implications.
- Value-Added Tax (VAT): VAT can come into play in certain property transactions, particularly with new builds. Make sure to clarify whether VAT is included in the listed price.
Common Mistakes to Avoid
Buying property in Romania can be tricky if you aren’t familiar with the process. Here are some common mistakes to avoid:
- Not doing your homework. Make sure you understand the market and the specific property you’re interested in.
- Skipping the permit check. Always verify that any renovations have the proper permits.
- Overpaying the deposit. Don’t hand over more money than you have to.
- Ignoring land ownership rules. Non-EU citizens may have restrictions on owning land.
- Failing to check for unpaid bills. You could be on the hook for unpaid utilities, taxes, or condo fees.
- Not getting it in writing. Make sure everything is in writing and notarized.
Taking the time to do your research and avoid these mistakes can save you a lot of headaches down the road.
Where should you invest?
Romania offers several cities with unique investment opportunities:
- Bucharest: As the capital, Bucharest boasts a strong rental market and potential for capital appreciation. You might see rental yields as high as 8.67% for a one-bedroom apartment.
- Cluj-Napoca: This tech hub has higher property prices, averaging around €3,000 per square meter, which represents a year-over-year increase of over 15%.
- Constanța: As a coastal city, Constanța has potential for tourism-related investments. The average price is around €1,766 per square meter, up over 13% from the previous year.
- Galați: If you’re looking for rental yields, Galați might be a good choice. The average price is around €1,000 per square meter, and the yield is about 8.5%.
- Other cities: Don’t forget about Timișoara and Iași. Iași, for example, has seen a transaction volume increase of almost 40% recently.
Final Thoughts
Romania’s emerging real estate market offers a compelling opportunity for foreign investors. With comparatively low property prices, a growing economy, and a welcoming attitude toward foreign buyers, Romania could be a smart place to expand your real estate portfolio.
However, as with any international real estate transaction, thorough due diligence is essential. Engage with experienced local professionals, including real estate agents and lawyers, to navigate the legal and practical aspects of buying property in Romania.
By taking a measured and informed approach, you can potentially unlock significant value in Romania’s burgeoning real estate sector.