| Romania Why Invest |
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For many years everything was quiet on the Romania property front. But suddenly a TV programme and EU membership changed all that. Now everyone talks about the booming Romanian property market to such an extent that questions such as is it too late to invest in Romania? Are the prices too high already? are being asked. It is true that in the last 2 years property prices have risen by 30% per year, (in Bucharest even more) but there is a long way to go before the market reaches saturation point. Romania is a sound mid to long term investment because a combination of solid fundamental factors underpins the future strength of the property market. EU Effect: The EU membership changed Romanias status and image abroad giving additional security to foreign investors. The EU membership also brings a massive funding of 31 billion euros in the next 6 years; half of each will be used for modernising and expanding the road and rail infrastructure. The conditions of entry for Romania were considerably tougher than those laid down for other recent member states and there will be regular and ongoing scrutiny of how the money is spent, minimising corruption and red tape and bringing European standards of quality and governance in all sectors, including construction and real estate. Foreign Investment: There is already a considerable government effort for the improvement of the infrastructure in order to facilitate the huge foreign investment, which in 2006 reached a record figure for Eastern Europe - 9.1 billion euros. The Romanian government forecasts for 2007 FDI at around 5 billion euros, while European Intelligence Unit estimates total foreign investments for the next 6 years of 30 billion euros, additionally to the EU funding. Virtually every big multinational company is now present in Romania, attracted not only by the highly educated and cheap labour force and the 22 population, but also its strategic location. Positioned between Hungary and the Black Sea, Romania has access to more than 200 million consumers within a radius of 600 miles. Furthermore, Romania is the gate to the former Soviet republics of Moldova and Ukraine. Investors tend to consider regions, rather than countries for their expansion. Therefore, Romania has a potential to become a European hub for services, manufacturing and logistics, serving an expanded EU and providing many years of jobs and income growth. This will increase property prices. That strategic position has already attracted big investors in great numbers. For example, in March 2007 Bill Gates inaugurated Microsoft Global Support Centre in Bucharest, Nokia announced that it will open next year telephone production plant in Cluj, creating 15 000 jobs and Siemens is opening a research and development centre in Iasi. Economic prospects: The interest of foreign investors is likely to continue and support , for the next 5-6 years, the current growth rate of the economy,( 7.7% in 2006) which is among the highest in Europe. It is widely believed that if Romania absorbs effectively the EU funds it is destined to follow in the footsteps of Ireland when it joined the EU and become a Balkan tiger. The huge EU funding and FDI are not the only similarities between the two countries. Like Ireland in the past Romanias best export is its youth. The education system surpassed everywhere else in Eastern Europe and Romanians seems to excel in IT (some data suggests that there are 50 000 plus IT specialists in Romania). Add to this the fiscal environment which is benefiting from the introduction in 2005 of flat rate taxation of 16% and VAT of 19% and one can see why the countrys economy will continue to expand. Local Purchasing Power: There are already signs of prosperity. The streets of the capital Bucharest and the other big cities are packed with new cars and well dressed and confident people. Unemployment is down to 5.9% -- well below the EU average. In 2006 the average monthly income went from 250 euros to 356 euros - a jump of 42%. Finally, a Romanian middle-class is emerging. Romanians are becoming increasingly affluent, with more people than ever before not only keen to become owners of modern homes but able to afford the move. Additionally, there are 2 million Romanians working abroad. Every year they send back more than 3 billion Euros, the bulk of which is channelled into buying properties, either as a future residence or as an investment. As bank loans become increasingly available, the purchasing power of the Romanian population grows steadily. The commercial banks offer better conditions on house-loans after the Central bank slashed interest rates to 8%, following the drop of the annual inflation rate to 4% in January. That trend is likely to continue, making mortgage borrowing accessible to more and more middle-class Romanians. Tourism: Considering its size and huge potential for tourism, Romania is still relatively undiscovered. It attracts 6-7 million tourists yearly or the same numbers as its much smaller neighbour - Bulgaria. There is a good explanation for that. In the communist past Bulgaria was a favourite seaside destination for all ex-communist countries and managed to attract Western tourists with cheap holiday packages. At the same time Romania, despite all its natural attractions was a not nice place to visit. Romania only now is shaking off its image as a grim ex-communist country. The constantly improving access to the country and the modernisation of its transport infrastructure are definitely going to boost tourist numbers. There are at least 8 airlines with flights from Britain to Romania and the trend for new flights will grow, helped by the fact that Romania has 6 international airports and 25 airports nation-wide with paved runways. The World Tourist and Travel Council forecast an annual growth of the Romanian tourist industry at 7.9% for the next ten years as tourist and hotel chains expand their facilities. The prospect for steady expansion of the tourist industry is always a good news for investors looking either for rental income or capital gains. |
