WOOD Flash – Romanian real estate: postcard from Bucharest

There is a delay built into the underlying rate (IRCC) used for calculating the interest on consumer loans and mortgages in Romania. As a result, the residential transaction market remains active, unlike those of other CEE countries (e.g., Czech Republic or Poland), which have slowed down sharply already. That said, given the scale of the rate increases, we expect the Romanian market to be affected similarly, although we will probably see the most pronounced weakness only at some point next year, in our view. Low prices, old stock, significant equity tied up in homes and limited new construction starts provide a silver lining. The fairly low amount of new developments could also help to alleviate the impact on the office market – although here, as in retail, much depends on the strength of the labour market in the coming months. The prime yields are trailing the 10Y EUR government bond currently (offering over 8%) by around 1-2ppts, and we expect them to move out – although, given the limited liquidity, it may take some time before we see a new price equilibrium established.