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Your definitive guide on Romania!

COUNTRY OVERVIEW
Romania’s economy received the
most positive news yet in 2006
when the European Commission
agreed it would join the EU in
January 2007
The aftermath was a Soviet-occupied Romania, and the
formation in 1949 of a Communist “People’s Republic”. In
1965, Nicolae Ceausescu became dictator and turned
Romania into a police state, during which time a progres-
Dambovita river, Bucharest sively heavy-handed mode of rule evolved. This period
lasted up until 1989 when Ceausescu was overthrown
and executed. Romania, under its new government, went
Situated in the southeast of Europe bordering the Black
on to forge closer links with Western Europe; in June
Sea, Romania is a country with plentiful natural beauty
1993 it applied for EU membership and in 2004 joined
and a wealth of historical and cultural appeal. In addition
NATO. Romania today is a semi-presidential democratic
to the resorts that have historically attracted tourists
republic, with a prime minister and a president between
dotted along the Black Sea coast, the country offers
whom executive functions are shared.
visitors established ski resorts, spa retreats as well as
culturally rich cities and untamed mountain regions. The
The culture of Romania and its people are a reflection of
dramatic Carpathian Mountains attract more adventur-
its position at the point where three regions - Central
ous visitors wishing to enjoy a range of sports, from
Europe, Eastern Europe and the Balkans - converge.
bobsleighing to horse riding, while the Transylvania
Romanian architecture is an example of this mix, offering
region - famously home to Bram Stoker’s Count Dracula
interesting examples of synthesis between two trends of
- has its own appeal.
design, one similar to that of Central and Western
Europe, the other to the Eastern Orthodox culture.
Romania is southeast Europe’s largest country, covering
over 327,000 square kilometres, and it borders Hungary,
Serbia, Ukraine, Moldova and Bulgaria, as well as the
Black Sea coast with its 70 kilometres of sandy beaches.
The main rivers of the country include the Danube, which
makes up a large part of the border with Serbia and
Bulgaria. The terrain of Romania is split between moun-
tainous, hilly and lowland areas, providing the perfect
environment for a variety of flora and fauna.

Romania was originally made up of the principalities of

Wallachia and Moldavia, which united in 1859 to become
Romania. Following the First World War, during which it
fought alongside the Allies, Romania gained new land
including Transylvania. During the Second World War,
Romania joined the Axis powers and was part of the ill-
fated German invasion of the USSR.
Old medieval town of Sighisoara

page04
The Absolute Guide Series.com
Your definitive guide on Romania!

COUNTRY OVERVIEW
Much of the character and identity of the Romanian
people is a product of their Roman origin, although this
has evolved through the geographic position of Romania
over major routes of travel and migration between conti-
nents. A good proportion of Romanians speak English – 5
million out of a population of over 21 million - due to the
focus on foreign languages in the education system.

Romania is now an upper-middle income economy. Once

economically unstable and weak, its reform after the
1989 regime change allowed a stronger, expanding
economy with low unemployment to develop, particu-
larly since 2000 when strong demands for exports within
the EU market helped the country rise out of a three-year
recession. It had one of the highest growths of GDP in
Europe in 2004 at 8.5 per cent, and unemployment in July
2006 was just 5.1 per cent, considered low for similar
sized countries in Europe. Exports from Romania are
increasing, with the first quarter of 2006 showing a 24.8
per cent year-on-year increase. The country is also
benefiting from growing foreign investment, increasing
at a rate of 26.8 per cent between 2004 and 2005. The
effects of this have begun to reach the people of Roma-
nia, reflected in the emergence of a middle class, and the
action taken to combat the country’s poverty.
Romania’s economy received the most positive news yet
in 2006 when the European Commission agreed it would
join the EU in January 2007, albeit under a system of
close monitoring. The Commission did not recommend its
membership be postponed by a year, as it could have
done, but instead decided that Romania would join in
2007 with attention paid to certain areas to ensure that
EU standards are met. To protect its own interests and
reputation, the EU may employ “safeguard mechanisms”
with Romania in effect for up to three years into their
membership, such as potentially withholding funding or
temporarily suspending EU rights. However, Romania and
Bulgaria were both congratulated by the president of the
EC for their “solid” and “far-reaching” progress during the
period of accession talks. Any remaining issues of
concern for the EC were expected to be resolved in the
months following accession “based on the current
momentum”.
13th century Castle Bran, associated with the Dracula legend
The positive effects of EU accession to Romania should be
far-reaching, including a more consistent income level
across the country, greater ease of trade between EU
countries, reformation of some of Romania’s more out-
dated laws bringing it in line with the rest of Europe, and
infrastructural improvements boosting the company’s
already strengthening economy. Potential investors will
benefit in particular from a change in real estate laws
allowing foreign buyers to directly purchase land in the
country, without going through the current process of
purchasing indirectly through a company established
under Romanian regulations.
Romania has previously enjoyed success as a tourism
destination during the seventies, when resorts along the
Black Sea coast reaped the benefits of US-backed credits
boosting the economy, and ensuring its popularity with
European visitors. However, through a mix of political
instability and lack of investment, the industry waned
towards the end of the eighties. However, with its current
improved political and economic situation, Romania has
the potential to rival Europe’s other tourism hotspots,
with work and investment going towards improving the
country’s appeal. As well as the established Black Sea
resorts, Romania also offers spa tourism which has
proved popular with the domestic market, as well as ski
resorts and further facilities to cater for outdoor and
adventure tourism.

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The Absolute Guide Series.com
Your definitive guide on Romania!
INVESTMENT PERSPECTIVES
Romania has been receiving widespread positive media
coverage recently as the best location for the canny
property investor’s money. The Channel 4 programme ‘A
Place In The Sun’ reported in January of 2006 that house
prices in the country “are expected” to quadruple within
a decade. It placed Romania as number one in their top
twenty best places to make money on property in the
next ten years. One of the reasons cited was the fact that
the country’s economy is set to benefit from its entry into
the European Union in 2007 as well as the healthy rental
returns predicted.
The programme’s report forecasted that GBP 100,000
invested now could be worth GBP 514,000 in 2016, the
increase largely due to the impact EU membership is
expected to have on the property market. Accession to
the EU will also allow the country to trade more openly
and easily with Europe, which will boost the Romanian
economy further. The first plan for the transition from the
Lei to the European currency, the Euro, was already being
prepared by the Ministry of Public Finance and the
National Bank of Romania (BNR) towards the end of
2006.
The Channel 4 programme ‘A
Place In The Sun’ reported in
January of 2006 that house prices
in the country “are expected” to
quadruple within a decade
Pietrele Complex, Retezat Mountains, Southern Carpathians
page06
It should not be forgotten, however, that Romania was
formerly a Communist state and remains one of the
poorest nations in Europe. Although the country suffered
high inflation following the dictator Ceausescu’s depar-
ture, it has stabilised economically since 2000 and has, in
fact, begun to demonstrate a strong economic perfor-
mance. In 2004, ‘HVB Bank Austria’ reported that Roma-
nia recorded a GDP growth of 8.5 per cent just behind
Latvia ( 8.7 per cent ) at the top of the Central and
Eastern Europe league table. Corporate foreign invest-
ment into the country has seen also seen a recent boom,
with Nestle, Orange, Procter&Gamble, Wella, Equant, GE
and shortly Siemens, IBM & Motorola having a presence
in the capital Bucharest.
Piatra Craiului Mountains, Southern Carpathians
The real estate market within this strengthening
economy is showing signs of becoming extremely profit-
able. This is apparent by the fact that following changes
to the Fiscal Code, the Romanian Government has
profited from the real estate market by taxing the profit
made from reselling property after three years or less, at
a rate of 16 per cent.
Some potential investors have expressed concern about
the current lack of availability of mortgages for foreign
nationals. Anyone looking to buy in Romania at the
moment will need to have cash to invest upfront or find
alternative methods of financing their investment.
However, this current lack of available finance does mean
that the market is still at the early stages and the inves-
tors who are prepared to move in now and then wait until
mortgages do become available could stand to make the
greatest profits.
The Absolute Guide Series.com
Your definitive guide on Romania!

INVESTMENT PERSPECTIVES
The World Travel and Tourism Council (WTTC) predicts
that Romania will be the fourth fastest growing tourism
sector in the world, with a growth projection of 7.9 per
cent per year from 2007 to 2016. All of this bodes well for
a future buy-to-let market. The main areas currently
experiencing investor demand are the capital, Bucharest,
the resorts along the Black Sea Coast and the mountain
regions of Banat and Transylvania.

Another boost to the tourism market is the construction

of the new EUR 2 billion super-highway being built with
the financial backing of the EU. This new super-highway
will be completed by the year 2012 and will substantially
change the face of the country. Travel time between
Bucharest and major European cities will be reduced
significantly and new areas of the country will be opened
up to tourists wishing to venture further afield than the
capital. This will also, therefore, increase the number of
locations ripe for the buy-to-let market.

Old City Hall in Oradea

Although prices are rising quickly and can be expected to

increase by 30 per cent in 2006 in anticipation of EU
accession, prices remain cheap by Western standards. In
the capital, Bucharest, apartments start at around GBP
50,000 rising to over GBP 300,000. Elsewhere, a newly View of Sibiu city
built property can cost you anywhere between GBP
45,000 and GBP 150,000 whereas a rural three-bedroom
house in need of some renovation can be picked up for as
little as GBP 15,000.

Romania is asserting itself as a newly popular holiday

destination. Air fares to Romania are inexpensive and
hotels and sundry costs such as travel and eating out
within the country are affordable, making it a low cost
holiday option.

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The Absolute Guide Series.com
Your definitive guide on Romania!
THE KEYS TO SUCCESS
Five Star Hotel Europe in Iasi, Romania
As with any rapidly expanding market, one of the biggest
potential problems of property buying in Romania is not
succumbing to the hype. Since attracting widespread
media interest as one of the best places for investors to
place their money, more and more people are jumping on
the Romania ‘bandwagon’. Unfortunately this has led to
some local real estate agents marking up their prices
disproportionately, simply due to interest from a foreign
investor. There are also the legal and bureaucratic
complications that foreign investors must currently
endure prior to the simplification of the process once the
country gains entry to the EU at the beginning of next
year. To make the entire process as simple and ultimately
as successful as possible, remember the following key
points:
With some property experts
reporting that Romanian property
prices are rising by 30 per cent a
year, the profit margins look
enticing for the overseas investor
page08
10 Factors to Ensure Success
1. Consider Your Objectives
It is always important to define the objectives of your
property purchase at the outset to ensure you meet your
desired criteria in the end (i.e. the greatest capital growth
or the perfect holiday bolt-hole). This is even more vital
when investing in Romania as the cheap property prices
could distract you from your original goal. Property prices
as low as GBP 15,000 can seem tempting to the investor,
but these properties tend to be in rural locations and can
have little rental or resale potential. With a clear plan in
mind, the investor has a better chance of realising the full
potential of their purchase.
2. Areas
One of the first considerations for the investor is which
area of the country is right for their investment. Romania
is an unknown quantity to most people and therefore it is
even more important to research the various areas
properly. The majority of property investment interest in
Romania is currently centred on real estate in Bucharest,
however other areas are proving popular such as Transyl-
vania, as well as coastal and ski resorts. Once you have
chosen the best area in general for your property, you will
need to consider the exact area of your selected property.
Things that will affect the value of your property will be
its proximity to amenities and major cities as well as
transport links. For instance, transport links are set to
improve significantly with the completion of the afore-
mentioned Budapest-Bucharest Transylvanian Super-
highway, scheduled for 2012.
3. Research
Research is key with any property purchase, but it is of
particular importance when buying in an emerging
market such as Romania. There are current complications
facing the overseas investor interested in Romania,
which need thorough research, such as the need to create
a Romanian company in order to purchase property.
However, even when the country becomes a member of
the EU and things become easier for investors, there will
be much research needed into the positive changes.
Which laws have been relaxed, what effect will that have
on your purchase, will your choice of property or areas be
widened etc.? Your lawyer will be able to help you, but
also do your own, independent research as a lot of infor-
mation will be released on new member countries of the
EU once they gain accession.
The Absolute Guide Series.com
Your definitive guide on Romania!
THE KEYS TO SUCCESS
Herastrau Park,Bucharest
4. Choosing the Right Agent
Choosing a suitable real estate agent can make the
difference between a successful property search and a
failed one. It is important for the investor to secure the
services of an estate agent in Romania who speaks
English and has local knowledge of properties available
for sale. As mentioned, the investor should have a strict
set of criteria for their property acquisition, based on
their objectives at the outset. These should be articulated
to the estate agent so that they can source suitable
properties for viewing.
5. Country-Specific Considerations
As previously mentioned, research into your property
investment is vital when considering a country such as
Romania. There are a host of considerations for those
interested in Romania that investors looking to buy in
Spain or France need not concern themselves with. For
instance, domestic mortgages were only introduced in
Romania in 2002 and there is no current system of
finance, either in the UK or Romania, for British investors
to buy Romanian property. While it is commonly
accepted that this will change, for the time being foreign
purchasers must pay cash, and acquisitions of land must
be made through a Romanian company.
6. Legal Issues
While it is not a requirement to have legal representation
when buying in Romania, it is always advisable to do so.
The amount of confusing bureaucracy involved with a
property purchase means that an independent lawyer can
be invaluable. Basic legal checks must be completed such
as establishing that the vendor has the right to sell, i.e.
the authenticity of the title deeds, the contract showing
when they bought the property (or land), etc.
page09
It is also advisable to get your lawyer to carry out
additional checks – check if there are any charges or
debts of any kind linked to the property or land under
offer, for instance.
7. Choosing the Right Lawyer
You will want to hire a lawyer that is independent from
any parties with a vested interest such as estate agents
or people working on behalf of the vendor (it may sound
unlikely but it does happen!). They should also have a
good understanding of the local Romanian market as
well as being fluent in English. There are lawyers in
Romania that specialise in setting up Romanian founda-
tions or companies in order for foreign nationals to be
able to purchase property; however this will not be
necessary next year under the EU regulations which will
by then apply to Romania.
8. Finances
In terms of the associated extra costs a property investor
in Romania should budget for, they should allow for at
least an extra 5 per cent of the original purchase price.
Costs will include the lawyer and notary fees as well as
state taxes and there is also an annual property tax
payable in Romania. Laws have recently been passed to
prevent too much speculative property investment going
on in Romania and this has resulted in VAT and CGT
increases that become applicable upon the resale of
property and the subsequent realisation of any property
price gains.
9. Profit Margin
With some property experts reporting that Romanian
property prices are rising by 30 per cent a year, the profit
margins look enticing for the overseas investor. Also, like
any country about to join the EU, Romania is undergoing
rapid growth and change, which encompasses the real
estate market, making potential returns impressively
high. While it is still a fledgling market and there are
bargains to be had, the massive profit margins will
naturally be harder to come by when increased interest
pushes the property prices in Romania up.
10. Long-Term View
The situation for overseas investors in Romanian property
will improve greatly with the country’s entry into the EU
in January of 2007. How long the positive changes will
take to come into effect and for practical differences to
be felt by investors is difficult to say, which makes it
important for investors to see Romania as a long-term
investment option.
The Absolute Guide Series.com
Your definitive guide on Romania!

LEGAL ADVICE
As in Bulgaria, non-Romanian citizens are not currently
permitted to own land in Romania unless they purchase
it through a Romanian company. However, these laws are
set to comply with EU regulations when the country
gains entry to the EU in January 2007, which is good
news for the Romanian overseas property investor.
Regardless of EU accession, there are certain legal issues
that the purchaser should bear in mind when purchasing
in Romania. The first is the importance of hiring an
English-speaking independent lawyer who will act on
your behalf throughout the transaction process. In
Romania it is not a requirement to have legal representa-
tion when purchasing property; however it is highly
unwise to proceed without a lawyer. There is a huge
amount of bureaucracy and red tape involved with any
purchase, which can be daunting even for Romanian
citizens, so overseas investors will be aided greatly by an
independent lawyer.

University of Lasi

Once they are part of the EU, Romania’s property buying

process should become more straightforward. The Roma-
nian Government has passed a series of laws that will
allow for direct foreign freehold ownership of land in
Romania five years after the country achieves full EU
member status (seven years for agricultural land), which
will bring the property laws in Romania in line with those
of other European Union member states.

As mentioned, at the present time if the type of property

you choose is anything other than an apartment, your
lawyer will need to establish a Romanian foundation or
company in order for you to be able to own the land on
which the property sits. However, the process for creating
these entities is not very complex and there are now
lawyers in Romania that specialise in this type of legal
affair.
Once they are part of the Opera House of Bucharest
EU, Romania’s property buying
process should become more
straightforward

page10
The Absolute Guide Series.com
Your definitive guide on Romania!

LEGAL ADVICE
You may need to sign a preliminary contract as an agree-
ment to purchase the property and then pay a holding
deposit through your lawyer. However, the vendor may be
happy to wait for the signature of the final contract; this
is the day the complete cost of the property is due unless
you are buying off-plan, in which case a payment sched-
ule will be drawn up at this point. The final contract will
be signed by the vendor and purchaser in front of a public
notary who will legalise the transaction and submit the
necessary documents for title transfer to the land regis-
try.

The purchase contract must be written in Romanian. For

your own security you should request that an authorised
translator performs a full translation of the contract,
which you must read and understand. You can ask your
lawyer if you have any doubts about terms in the
contract and only sign if you are entirely satisfied with it.

As previously stated, investors should allow for at least

an extra 5 per cent of the purchase price for additional
costs. These cover the fees for the lawyer and notary,
state taxes and the annual property tax.

It is worth noting that recent laws have been passed in

Romania to put a stop to excessive speculative property
investment. This has resulted in increases to VAT and
Capital Gains Tax which are payable upon the resale of
the property and the subsequent realisation of any
property price gains. However, such laws, like many
others in Romania, may be subject to positive change in
January of next year when the country experiences
liberalisation following its entry into the EU.

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The Absolute Guide Series.com
Your definitive guide on Romania!
HOT SPOTS
With Romania’s low property prices, together with its
impressive upturn in economic performance, and immi-
nent accession into the EU, it is little wonder that it is
tipped as the country to watch for real estate investment
purposes. It was forecast to be Europe’s top country for
property investment over the next ten years, in a Price
Waterhouse Coopers and the ‘Place in the Sun’ Channel 4
study from earlier in 2006, with a huge 414 per cent
return on investment predicted. Property prices are said
to have increased at 25 per cent on average every year
since 2003, yet most people know little about the
country’s different areas aside from the Black Sea Coast
and its numerous tourist resorts. In reality, Romania
offers much more than sandy beaches; visitors and house
buyers are increasingly attracted to the area for its
variety, including historic cities, ski and spa resorts.
Fogarasch main ridge, Southern Carpathians
The Black Sea Coast of Romania is currently attracting a
lot attention from investors, as tourism grows and the
resorts develop accordingly. The entire coast is around
245 kilometres in length, which includes the Danube
Delta nature reserves right down to the more built-up
holiday resorts in the south. Tourists are attracted to
these resorts by the coast’s sloping and sandy beaches
with almost no currents or tides to speak of, making it a
perfect spot for family holidays. It enjoys a dry and warm
climate, with a summer holiday season stretching from
May to October, affording buyers a potentially lucrative
investment opportunity, as well as a selection of resorts
to choose from.
page12
Of the resorts along the Black Sea Coast, the oldest and
most popular is the lively Mamaia. The resort first sprung
up in 1906 on a strip of beach separating the Black Sea
from the fresh water Lake Mamaia, and is now home to
numerous discos, a casino, water parks and leisure parks.
Its beaches are known for having the finest sand of any
Romanian resort. Visitors interested in spa tourism rather
than beach breaks would be interested in Eforie Nord, an
established spa resort which offers its guests treatments
using water and sapropelic mud from nearby Lake Techir-
ghiol Lake. This is unusually mineral-rich and is used by
those with rheumatic and dermatological complaints.
The resort is sheltered from currents by off-shore dams
protecting its sea walls.
Catering for the slightly older and often more affluent
holiday maker or resident, the resort of Neptun-Olimp
was home to late dictator Nicolae Ceausescu’s private
villa and jetty, until the regime change of 1989. It still
enjoys an exclusive feel, and offers a variety of excellent
restaurants to keep its guests entertained. It is consid-
ered to be the most elite resort the Black Sea Coast has
to offer, near woodland and two lakes, and enjoys exten-
sive facilities from sports grounds to taverns and clubs.
Prices in this area range from under GBP 43,000 for one
bed luxury apartment with terrace, shared swimming
pool and close to the beach and all amenities. A two bed
apartment in the same development would be priced at
around GBP 62,000.
The capital city of Romania is Bucharest, situated in the
south east of the country towards the Bulgarian border.
The city is very much the economic hub of the country,
generating around a fifth of the country’s GDP despite
having only 10 per cent of its population. The architec-
ture of the city is a mix of the traditional, communist and
more modern styles, with tree-lined boulevards below,
and a number of skyscrapers overhead built in the last
five years. This modern approach extends to its transport
infrastructure, with bus, tram and rail links operating
within the city, and international travel catered for by
two airports. Low cost flights are becoming more
frequent, with carriers operating throughout mainland
Europe and the UK. As the largest city of Romania, with
its architecture and culture ingrained in its appeal,
property in Bucharest represents a safe option for poten-
tial investors looking for a city property at an affordable
price.
The Absolute Guide Series.com
Your definitive guide on Romania!

HOT SPOTS
In the centre of Romania is Transylvania, one of the most
popular tourist destinations of Romania and a familiar
name to overseas visitors. The region is arguably
Romania’s most beautiful, with a landscape made up of
valleys, streams and the peaks of the Carpathian Moun-
tains that surround the area. In amongst this naturally
beautiful setting are a variety of different attractions for
visitors, from ski resorts such as Poiana Brasov and
Sinaia, health spas, hiking trails, rural villages and a
wealth of customs and festivals. Much of its charm is due
to the old-fashioned lifestyle that remains the norm in
this part of Romania. The population of the area today
has been affected by the many different groups that have
passed through in the past, including Hungarians and
Germans as well as Romanians, and although the area
enjoys some of the conveniences of modernisation, the
traditional and unspoiled nature of day-to-day life
prevails.

Boats on Herastrau Lake, Bucharest

Lake Saint Ana
Transylvania is currently served by three international
airports offering routes to Germany, Austria, Italy and
Hungary, with further routes promised when Brasov
airport is extended, expected to be in 2008. As the area’s
tourism industry grows, and with the additional transport
links making the region more accessible, it generates
more and more interest from overseas buyers.
Romania currently represents a
unique opportunity for the real
estate investor
The whole area is currently going through a programme
of modernisation, which has caused a rise in property
prices between 20 to 30 per cent in the last two years.
Next year, the region stands to benefit not just from
Romania’s accession into the EU, but also from the selec-
tion of the city of Sibiu in Transylvania as the 2007
European Capital of Culture. This is an opportunity for
Sibiu to demonstrate and develop its cultural heritage,
and to influence and promote its name internationally.
Romania currently represents a unique opportunity for
the real estate investor. The country has been congratu-
lated by the EC on the progress it has made in order to
meet the criteria for EU membership, and once it has
become a member next year it will begin to see the
benefits that membership brings with it. Romania offers
a wide range of options to holiday makers, whether they
prefer beach, city, ski or spa breaks, and investors wishing
to capitalise on the buy-to-let market can currently
purchase Romanian property at favourable prices, even
compared to the other Eastern European emerging
markets, with a view to making impressive returns.

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