Sometimes I find myself sitting across from a client and left speechless by the arguments he raises. Some have studied, researched and delved deep, and their arguments are well founded; others understand next to nothing and raise arguments so baseless they border on ignorance.
Yaakov served as an economist at one of the large banks, took early retirement and decided to invest the severance pay he received in real estate abroad, specifically in Romania, where his parents were born and to which he feels a connection; he speaks the language and holds Romanian citizenship. Yaakov knows exactly what he wants and came to the meeting after doing his homework, and raised reasoned arguments:
“According to Eurostat data, Romania is considered the country with the highest home-ownership rate in Europe (about 95%). A Colliers survey I found indicates that young people aged 18-24 either rent an apartment (25%) or live with family/friends (40%). This implies that buying an apartment is mostly a step postponed to later ages, when economic stability allows it. Bucharest attracts significant internal migration, and most of the migrants (about 70-75% of all migrants) are of young working age (20-49). This group represents potential future demand for apartments, whether for rent or for purchase,” he explained.
“Wow, impressive,” I said, “but what conclusions does it lead you to?”
“As far as I'm concerned there's no question about whether to buy an apartment in Bucharest, but which apartment and where,” he replied.
There are several advantages to investing in Bucharest:
1. Attractive prices relative to Israel and Western Europe: Apartments in Bucharest are still considered significantly cheaper compared with most Western cities, and especially with Israel. An apartment in Bucharest can cost around 120,000-170,000 euros (not in the more prestigious center or north of the city), while in Israel prices are many times higher.
2. High rental yield: The average rental yield in Bucharest ranges around 5%-9% and sometimes even more. Compared with yields in Israel (usually 2%-3%), this is a very attractive yield that provides stable passive income.
3. Potential for appreciation:
o Stable economic growth: Romania's economy has been on a consistent growth path in recent years (about 3.5% a year on average).
o Joining the eurozone: Romania is expected to join the eurozone in the coming years (there are estimates of early 2026 or 2027 at the latest). This accession is expected to lead to a significant jump in property values, similar to other countries that joined the bloc in the past.
o Growing demand: Bucharest is a vibrant economic, cultural and academic center that attracts many internal migrants and students, which increases demand for apartments to rent and to buy.
o Gap between demand and supply: There is a gap between the high demand for apartments in Bucharest and the existing supply, which supports rising prices.
4. Tax policy favorable to foreign investors:
o Low purchase tax: only 3%.
o Capital gains tax (on the sale of real estate): 0%.
o Tax on rental income: about 8%-10%.
o A double taxation treaty with Israel.
5. Stability and trust: Romania is a member of the European Union and NATO, which provides a degree of stability and works in favor of transparency and a more reliable business environment.
6. Rising average wage: The average wage in Romania is steadily rising, although it is still significantly lower than in Western Europe, which contributes to lower living costs.
But it is important to remember that there are also disadvantages/risks:
1. Currency risk: Use of the Romanian leu rather than the euro still exposes the investor to exchange-rate fluctuations.
2. Dependence on the global and local economic situation: Like any real estate market, the Romanian real estate market is also affected by global and local economic trends.
3. Bureaucracy: Despite improvements, bureaucratic complexities may still arise. It is important to work with an experienced local lawyer.
4. Managing the property remotely: For an Israeli investor, managing the property requires finding a reliable management company.
5. Interest-rate fluctuations: The mortgage interest rate in Romania currently stands at an average of 6.5%, and changes in it can affect the viability of the investment.
Yaakov's dilemma was between buying a 2-room apartment in a new project by an Israeli developer, with appreciation potential in the coming years, and buying 2 studio apartments in an area near a university to be rented out to students.
“This is an excellent dilemma, touching on two investment tracks with different characteristics in Bucharest. My recommendation,” I said, “leans slightly toward buying 2 studio apartments near the university, especially if you want stable cash flow and reasonable appreciation potential. Demand for student apartments in Bucharest is very high and stable. There is a constant shortage of such apartments. This ensures a high yield and consistent cash flow almost immediately after purchase and rental. Proximity to universities guarantees constant demand. If you have a great deal of patience, a higher risk threshold, and are willing to give up immediate yield in favor of more significant appreciation potential over the long term (5-10 years), then a 2-room apartment in a pre-sale in a developing area could be more attractive.”
What would you buy?
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית