Contents
Supply
After 2022’s record high in terms of deliveries, last year saw a continuation of the downward trend, with quite a significant pullback. At a national level, the number of newly built housing units decreased by 15%, while in Bucharest, the decline was even more pronounced, exceeding 20%. This reduction in deliveries was driven by several factors, including high construction material costs, economic uncertainty, and more difficult access to financing for developers. And while deliveries remain quite a bit higher than, say, the average for the past decade, this situation is in stark contrast with demand.
While in previous years a significant number of new homes were authorized and built annually, the trend over the past two years shows a sharp decline in authorized construction areas, signaling an even more limited housing supply in the near future. This situation is particularly striking in Bucharest, where demand remains strong, but new developments are constrained by limited land availability, urban planning regulations, and rising construction costs.
Demand
Working on a somewhat different schedule than supply, demand actually increased in 2024 by around 7% compared to 2023, as per the number of transactions monitored by the local cadaster agency. The almost 170,000 transactions recorded that deal with “individual units” (mostly apartments) at a national level – a figure which involves both new and older apartments as well and deals with sales as well as inheritances – is less than 8% behind 2021’s peak; meanwhile, compared to the 2018-2019 average, it is over 40% higher.
Bucharest and the bigger cities have seen different dynamics. Bucharest recorded a 5% increase in the number of apartment transactions last year, while Cluj and Timisoara saw marginally slower growth rates, of approximately 3-4%. The only notable exception was Iasi, where apartment sales surged by an impressive 40%, driven by the delivery of a significant number of new housing units. This substantial increase was supported by recent residential developments that reshaped the available supply and attracted a growing number of buyers.
While the previous dynamics deal with full year numbers, it is worth pointing out that the first semester was quite a bit different than the second one. In the second half of the year, the growth rates began to cool down, particularly December. Factors such as uncertainties regarding the 2025 budget and the postponement of the presidential elections influenced purchasing decisions, leading to increased caution among buyers. These political and economic uncertainties were felt particularly in the mid-range and premium segments, where decision-making involves larger amounts and more complex financing conditions.
Another key factor that influenced the market in 2024 was the persistence of restrictive financing conditions. The central bank’s policy rate was reduced to 6.5%, but the IRCC benchmark rate remained relatively high, around 6% due the way it is calculated with a lag versus the money market rates. Although commercial banks continued to offer competitive mortgage products with attractive fixed interest rates, the high borrowing costs maintained a level of prudence among buyers. As a result, mortgage-financed purchases grew at a slower pace.
On the other hand, despite the still restrictive financing aspect, wages continued to easily outpace inflation and this remains a key driver of the residential market by improving housing affordability. This contrasts with other regional markets such as Poland, the Czech Republic, and Hungary, where property prices and rental costs have increased significantly faster than household incomes.
Post-pandemic shift: Bucharest and Sofia buck CEE trend of residential prices becoming less affordable
Source: Colliers, national statistical institutes
In conclusion, 2024 was a transitional year for Romania’s residential market, characterized by moderate sales growth and economic conditions that influenced access to financing. Market prospects remain positive, but factors such as limited supply, high interest rates, and economic and political uncertainties have shaped a more complex landscape for both buyers and investors.
Prices
Prices continued to move north in 2024, with the rate of increase influenced by supply dynamics and local market specifics. Nationally, housing prices grew at a pace above inflation (5.1% at the end of the year), but below wage growth (+13.1% year-on-year nationally); so we estimate that residential property prices saw, on average, high single digits growth rate throughout last year. This gap between income growth and price increases contributed to maintaining housing affordability at a relatively stable level. However, in the central areas of major cities, purchasing a home has become increasingly difficult for most buyers. On the other hand, in metropolitan and peripheral areas, where land is more available and developers can build at lower costs, the housing supply could expand, helping to balance the market.
In areas with limited supply and high demand, prices increased significantly, supported by the scarcity of newly built apartments and strong buyer interest. For example, in Bucharest, Cluj-Napoca, and Iași, where the stock of new homes could not keep pace with demand, price growth exceeded the national average. Conversely, in areas with greater competition among developers or lower demand, there were downward price adjustments, though these did not indicate a generalized market correction.
Outlook
Unless a major economic correction takes place (and this is not the base case as of this moment), we would expect more of the same for the residential scene over the next year. In other words, demand should remain fairly solid, supported by decently growing wages, an improving interest rate picture and a natural demand for residential units in certain parts of the country – particularly Bucharest and the bigger cities, with sprawling local economies.
At the same time, supply is likely to continue moving south, especially in some major cities, guided by administrative hurdles or some developer caution. With supply going down and demand likely to remain robust, if not pick up a bit throughout 2025, we expect to see continued upward pressures on prices. The decline in the number of newly built homes will further exacerbate the supply-demand imbalance, potentially leading to medium- and long-term price increases. In this context, housing affordability will remain a challenge in central and well-connected urban areas, where prices are already high relative to average incomes.
Another theme to keep track of is the institutional rental market, which is gaining traction, attracting investors interested in long-term stable returns. In Bucharest, this segment has begun to develop following the model of Central and Western European markets, providing a viable alternative for individuals who cannot or do not wish to purchase a home under current financing conditions.
No oversupply in sight (average number of rooms per inhabitant by NUTS region of the capital city)
Source: Eurostat
Over the longer-term, we need to point out that Romania is finally seeing a mild population increase on a net basis for the last few years and this likely has a lot to do with Bucharest and the bigger cities. While also keeping in mind that Romania has one of the largest overcrowding rates in the European Union, we expect demand to remain good in areas of the country where people want to live and work – i.e. Bucharest and other large metropolitan areas. This fairly rosy assessment has nothing to do with the somewhat gloomy atmosphere in the economy and should help anchor long-term expectations should a negative economic scenario come to pass.