Cluj County ranks first among the regions with the highest housing prices (€2,329/sq.m. apartment in the quarter), the National Bank shows in a stability report published on Wednesday. High construction costs are putting pressure on new home prices, increasing their growth relative to existing homes (4.4 percent). Regarding the population’s access to the residential real estate market, the price-to-income indicator records values ​​that range from 11 years in Cluj or Constanta to 7 years in Bucharest.

The “price-income” indicator measures the ratio of the price of a standard 2-room apartment with an area of ​​55 square meters. m to the average net wage, adjusted by deducting the cost of living (calculated as 50 percent of the net minimum wage in the economy).

Activity in the residential real estate market has continued to decline since the summer, and the number of homes completed in the first half of the year fell 2 percent nationally, while the volume of construction work in the first 9 months fell 7.2 percent.

The expectation for the next period is a continuation of this trend, taking into account, on the one hand, a significant decrease in the number of permits for the construction of residential buildings (-24 percent in the period January-September 2023 compared to January-September 2022), as well as an increase in the volume of construction, the cost of construction of residential buildings (+15 percent)

Real estate transactions recorded a decline in January-September 2023 compared to January-September 2022 both at the national level (-18 percent) and in the main regional centers (-21 percent in Bucharest and Iași, -16 percent in Constanta, – 14 percent in Cluj, -10 percent in Brasov)

Disparities at the territorial level are also manifested in terms of trade activity, the most significant decrease is observed in the district of Ault (-68 percent), followed by Teleorman (-55 percent), while at the opposite poles the counties of Calaras (+23 percent) and Alba ( +21 percent).

At the level of the European Union, real estate prices recorded mixed changes, with 9 of the 27 member states registering a decline in the second quarter of the current year. The most important decrease was recorded in the case of Germany (-10 percent), while Croatia recorded the fastest increase in house prices (+14 percent).

In Romania, residential real estate prices in the second quarter of 2023 remained relatively constant compared to the previous year (+0.1 percent), but at the regional level, disparities remain important even from this point of view, due to the asymmetry of economic development.

The vulnerability of the banking sector to the housing market remains significant, accounting for 68 percent (September 2023) of total loans to the public. The importance of loans from the government’s First Home/New Home program continues to decline, reaching 30 percent of total mortgages in September 2023, from about 47 percent 5 years ago. The flow of new first home/new home loans has decreased significantly in the recent period (-52 percent in September 2023 compared to September 2022, annualized), in line with the evolution of real estate loans at an aggregate level, which is only 7 percent of new mortgage loans (September 2023). First Home/New Home portfolio quality continues to outperform standard mortgages (1.3 percent vs. 1.8 percent, September 2023).

A persistent problem for the mortgage lending market in Romania is the concentration of loans, with the 6 main regional centers holding 60 percent of the volume of mortgage loans, of which 35 percent is concentrated in the Bucharest-Ilfov region, Figure 2.27.

Against the background of concerns about a possible correction in the residential real estate market and a higher level of non-performing loans in the case of LTV loans, the National Bank of Romania decided (April 2022 ) to increase the level of prudence for the riskier mortgage category, respectively loans granted for the purchase of additional housing compared to the one where the debtor has permanent housing. As a result of this new regulation, there is an increase in the share of new loans granted with LTVs in the range of 65-75 percent (from 28 percent in March 2022 to 37 percent in September 2023), while the share of loans granted new loans with LTVs close to to regulated, between 75 and 85 percent (from 48 percent in March 2022 to 25 percent in September 2023), Figure 2.28. In this context, the average degree of loan coverage by guarantees for new loans (with the exception of loans

First Home/New Home) is 72 percent, while at the level of the entire portfolio of available real estate loans, the LTV value is 69 percent (September 2023).

Growing concerns about the impact of climate change can also be seen in the structure of real estate loan portfolios, with green loans accounting for about 29 percent of the total flow of new real estate loans in the first 9 months of 2023. Of them, the majority are loans for housing in green buildings (66 percent of the flow in September 2023), followed by loans for improving energy efficiency. However, at the level of the volume of real estate loans, this category of loans still has significant potential for growth, being represented in a low proportion (6.3 percent, September 2023).