Hello,
The new calendar year has begun and we are starting to sum up and learn the results of 2023, with the expectation of an improving trend in 2024. The relatively high interest rate environment (not only in Israel) and the “Iron Swords” war, which is still leaving its mark on the real estate market (in Israel and abroad), continue to affect the number of real estate transactions, especially after the hopes that arose at the start of the war with the growing interest in real estate in countries within a relatively short flight from Israel.
This month we would like to draw your attention to:
A. Changes in rental taxation in Romania.
B. Agreement on Romania and Bulgaria joining the European Union's free movement area (Schengen).
C. Expected rise in rents in Hungary in 2024.
D. The European Union report on housing characteristics in EU countries.
E. Rising housing prices and rents in the US.
We have launched a new international real estate column - every week we will share two stories from the field
Wishing quiet and safe days to us all, and enjoy the read,
Adv. Ilan Leibovitch and the office team
The stock of residential apartments in Athens at the end of 2023 is still extremely limited
According to a survey published in Greece, demand for homes far exceeds supply, causing prices to skyrocket and stock to dwindle quickly. In fact, in 2023 the only area where housing supply grew was the western suburbs of Athens.
According to a Spitogatos survey, in western Athens and the Piraeus suburbs, even though there is on average a small stock of homes/apartments, on the order of 4% to 4.5% compared with the rest of Athens, in 2023 supply in these areas grew. Specifically, apartments were added in Peristeri, Ilion, the Piraiki - Hatzikyriakei area and Keratsini.
The northern suburbs of Athens also saw a small increase in supply, as interest, mainly from Greek buyers who returned to the area in search of quality homes, spurred construction activity. The north consistently accounts for 18.3% of Athens's apartment stock, and the areas with on average the most apartments available for sale are Kifissia and Chalandri.
Central Athens is today the most sought-after area for buying a home, as a considerable number of properties were sold there in the third quarter. However, even though central Athens holds about 24.2% of Athens's apartment stock, the area recorded a significant decline compared with last year. An important reason for this is also the Golden Visa, under which, before the threshold reached 500,000 euros, foreign investors bought up massively every kind of housing that existed in the center. More precisely, Kypseli, Pagrati, Ampelokipoi - Pentagono and the area in Patision - Acharnon had the highest percentages of properties for sale in the third quarter of the year.
We also expect to see changes in the supply of real estate in the southern suburbs, even though until now the area has Athens's largest apartment stock, at a rate of 25.4%. Already in 2023 there was a decline in homes available for sale.
It is even worth noting that in 2023 the most homes were sold in the southern suburbs despite the high prices. In fact, most of the available homes are located in Glyfada, Voula, Kallithea, Paleo Faliro, Alimo and Nea Smyrni, where prices are sky-high. In the south, the average sale price in the 3rd quarter of the year reached 3,611 euros per sqm, compared with 3,167 in the corresponding quarter of 2022, which means a significant increase of 14%.
In fact, according to data published by the Bank of Greece on the housing market, growth rates in apartment prices continue to be recorded through the third quarter of 2023, although a slowdown has been observed during the last two quarters. Based on the valuation data collected by the Bank of Greece, in the first nine months of 2023 apartment prices rose (in nominal terms) by 13.9% year on year, compared with an increase of 11.2% in the corresponding period of 2022.
At the local level, apartment prices show heterogeneity in their changes, with significant increases mainly in locations of great investment interest and smaller changes in others.
Greece's Golden Visa program is “the most sought-after in the world”
Greece's Golden Visa program has been described as “the most sought-after in the world” after the country received a total of 7,752 applications by the end of November 2023 (an increase of 78% compared with the applications recorded in the whole of 2022). Of the total number of applications received in the first 11 months of 2023, Greece has so far approved about 20%.
The main beneficiaries of this program have been citizens of China, followed by those of Turkey, Lebanon, Iran, the United States and Egypt.
Greece's Ministry of Migration and Foreign Affairs revealed that in 2021, citizens of China and Turkey submitted the largest number of applications to the Golden Visa program. The ministry's statistics revealed that 6,405 citizens of China and 618 of Turkey acquired residency in the country through the residency-by-investment program.
Greece's Golden Visa program gives foreigners the opportunity to acquire residency if they invest in the country and meet the required conditions. However, the program, which attracts a large number of foreigners, has brought significant challenges to the Greek housing market.
As part of efforts to increase the accessibility of real estate to Greeks, Greece's prime minister, Kyriakos Mitsotakis, passed plans that took effect last August to raise the minimum amount foreigners must invest from 250,000 euros to 500,000 euros in certain parts of the country.
House or apartment - ownership or rent? The Eurostat report
A report was published by the European Union's statistics office, Eurostat, on housing in the European Union countries.
More than two thirds of people in the European Union lived in households that own their home
Home ownership varies significantly among the member states. In the European Union in 2022, 69% of the population lived in a household that owned its home, while the remaining 31% lived in rented housing. The highest ownership shares were observed in Romania (95% of the population living in a household that owns its home), Slovakia (93%), Croatia (91%) and Hungary (90%).
In all the member states except Germany, ownership was more common. In Germany, renting was slightly more common, with 53% of the population living in rented housing, followed by Austria (49%) and Denmark (40%).
Slightly more than half of the European Union population lived in a house
Living in a house or an apartment also varies among the member states, and also according to the degree of urbanization, that is, whether you live in a city or suburb, or a rural area.
In the European Union in 2022, 52% of the population lived in a house, while 47.5% lived in an apartment (0.5% lived in other types of housing, such as boats and vans). Houses are most common in 2/3 of the member states. Ireland (89%) recorded the highest share of the population living in a house, followed by the Netherlands (79%), Croatia and Belgium (both 77%). It should be noted that this includes terraced houses. The highest shares of apartments were observed in Spain (66%), Latvia (65%, 2021 data), Germany (63%) and Estonia (61%).
In cities, 72% of the European Union population lives in an apartment and 28% in a house. For towns and suburbs, the proportions were 56% of people living in a house and 43% in an apartment, while in rural areas 83% of the population lives in a house and only 17% in an apartment.
Development of housing prices and rents
Housing prices rose by 47% in the European Union between 2010 and 2022
Looking at the trend in housing prices between 2010 and 2022, there has been a steady upward trend since 2013, with especially large increases between 2015 and 2022. Overall there was an increase of 47% between 2010 and 2022. There were increases in 24 member states and decreases in 2 in this period (data for Greece are not available). The largest increases were observed in Estonia (+192%), Hungary (+172%) and Luxembourg (+135%), while decreases were recorded in Italy (-9%) and Cyprus (-5%).
The cost of rent rose by 18%
There was a steady increase in rents in the European Union between 2010 and 2022 - a total of 18% over the whole period. There was an increase in all the member states except Greece (-25%). The largest increases were recorded in Estonia (+210%), Lithuania (+144%) and Ireland (+84%). In Cyprus the increase was only +0.2%.
Changes in rental income taxation in Romania in 2024
In addition to the change regarding VAT on new apartments and regarding finishing works upon delivery of new apartments, 2024 begins with changes made to the taxation of rental income.
1. The portion of expenses allowed as a deduction from rental income was reduced from 40% to 20%. This means that the landlord must pay 10% on 80% of the rental income. For example:
An apartment rented for 500 euros/month,
we will deduct 20% for fixed expenses - i.e. 100 euros.
500-100=400 euros; tax at a rate of 10% will be paid on this amount - 40 euros.
For contracts whose rent is set in foreign currency rather than in Romanian lei, the exchange rate valid for that day will be used to calculate the tax, namely the exchange rate published by the BNR (the Romanian central bank) on the previous day.
2. Where the tenant is a legal entity (a company, a freelancer and so on, anyone required to keep accounting records under Romanian law), the tenant must withhold the tax at source from the rent and transfer it to the tax authorities. That is, the tenant will transfer the 40 euros from the previous example to the tax authorities, and will transfer to the landlord only 460 euros each month.
3. The obligation was canceled for anyone who, at the end of the fiscal year, manages more than 5 rental contracts to switch to being taxed as income from self-employed activity in the next tax year.
Imobiliare.ro study: most buyers expect new price increases in 2024. How much do apartments cost in the big cities now?
A study by the Romanian website imobiliare.ro indicates that half of buyers expect apartment prices to rise in 2024.
In 2024, 47% of buyers expect to see price increases in the housing market. Of these, most (49%) believe the increases will be in the range of 10%-20%, while 13% of them believe the price increases could exceed 20%. Another 30% of respondents believe prices will rise this year by up to 10%.
Price increases are also expected by the main active players in the real estate field, according to information that reached Imobiliare.ro from the market. The main arguments are demand that remains at a high level, the growing supply of homes/apartments available for sale, and more attractive financing packages that buyers are expected to have access to in 2024.
“After two difficult years, but with performance that exceeded even the most optimistic expectations, the residential market is giving positive signals at the start of 2024. The most important signal comes from buyers, half of whom are worried about rising prices. We expect this very segment of buyers to be very active in the coming months in order to take advantage of market opportunities; therefore, we have all the preconditions for an increase in the number of transactions,” said Daniel Crainic, marketing manager of Imobiliare.ro.
Apartment prices continued to rise in 2023
The residential market underwent a positive development in 2023. Inflation and high interest rates put pressure on prices, but they continued to rise.
The national average price of apartments offered for sale reached the threshold of 1,500 euros/sqm in December 2023, after an increase of almost 7% compared with the end of 2022.
Some of the most significant increases in apartment prices in this period could be seen in the large cities of Brașov and Iași, at almost 11% and about 9% respectively. In fact, in 2023 the city of Brașov reached second place nationally in the ranking of the largest and most expensive regional centers for buyers in the country.
Another development observed in the past year that is worth mentioning is that of the residential market in Oradea. In this case, the price increase is close to 14% over 12 months.
Cluj-Napoca remains the most expensive city in the country for those who want to buy an apartment.
How much do apartments cost in Romania's big cities?
Cluj-Napoca: the average asking price for apartments offered for sale at the end of 2023 approached the threshold of 2,600 euros/sqm. For comparison, in December 2022 owners and developers asked on average 2,428 euros/sqm.
Brașov: the average asking price for apartments offered for sale rose by almost 11% in 12 months and reached 1,747 euros/sqm. The city of Brașov surpasses the capital and becomes the second most expensive in the country for buyers, after Cluj.
New apartments are sold at much higher prices than old ones. The average asking price for them reaches 2,044 euros/sqm.
Bucharest: the asking prices of apartments offered for sale in the capital rose by almost 4% in one year. The progress was more significant in the case of old apartments.
New studio apartments became more expensive by more than 7% over 12 months, while new 2-bedroom apartments absorbed a price decrease of 3.5% in the same time frame.
Constanța: the city is ranked fourth on the list of the country's most expensive cities for those interested in buying an apartment. The city recorded an increase of about 5% compared with December 2022, and the average asking price reached 1,555 euros/sqm at the end of 2023.
Iași: a significant price increase could be observed in the past year in the asking price levels in Iași. Whereas in December 2022 apartments were offered for sale at 1,375 euros/sqm, in December 2023 the average price stood at about 1,500 euros/sqm of usable area.
New apartments in Iași became more expensive by almost 11% in 12 months, more than those in the second-hand market.
Timișoara: the average price of apartments offered for sale at the end of last year reached 1,507 euros/sqm, after an increase of about 4% in 12 months.
The most significant increases could be seen in the case of new apartments. The average sale price reached, in this case, 1,800 euros/sqm in December 2023, a 12.5% increase compared with the end of 2022.
Craiova: the average price of old and new apartments offered for sale in the city rose by 4.3% in one year and reached the threshold of 1,515 euros/sqm.
Oradea: significant price increases could be seen in the city. An increase approaching 14% within 12 months. The average asking price for apartments reached 1,484 euros/sqm.
Sibiu: owners and developers sell apartments in Sibiu at an average price of 1,509 euros/sqm. Accordingly, an increase of about 4% can be seen in December 2023 compared with December 2022.
Ploiești: the average asking price for apartments for sale in Ploiești remained well below the national average. In the past year the increase at the local level was very low, at only 0.2%, up to 1,088 euros/sqm.
Expected significant rise in rents in Hungary in 2024
Although rental and real estate prices froze in the last months of 2023 in Hungary, it was a hard year for tenants and potential apartment buyers. Rentingo.co, a Hungarian apartment rental portal, reported that 2024 will again see a marked rise in rents in Hungary. In Budapest, rents grew between December 2022 and December 2023 by 19%, while in the period 2021-2022 the rise in rents was 27%. It is expected that in 2024 the price increase will probably reach 10%.
Last December, the average rent in Budapest was 223 thousand forints (EUR 590) per month, while in larger towns in Hungary it ranged between 80,000 HUF (208 euros) and 200,000 HUF (519 euros). Demand is rising, and the stock of apartments for rent in Budapest remains low. Moreover, investors are not putting their properties into renovation projects for old apartments. The site's analysts believe that this year the average rise in the rental market will exceed 10%. The rise will be gradual provided that the market is not hit by unexpected shocks. They added that the reason for the moderate price increase is Hungary's low inflation. Last October the country's official inflation was below 10%. In 2024, the government forecasts average inflation of about 5-6%.
Improvement in the standard of living in Bulgaria
The latest Eurostat report highlighted that Bulgaria's economy reaches 62% of the European Union's GDP per capita in terms of purchasing power. The updated figures reflect growth of 12% over the past five years, marking a positive trend for the country's economic standing. This indicator shows Bulgaria's steps in narrowing the gap in income and standard of living compared with the European Union average, taking into account price differences between countries.
Economists at the Institute for Market Economics note this achievement as a potential historic high for the country. Despite past crises and political uncertainties, Bulgaria has steadily caught up with European countries, with annual growth of more than 2% on average in recent years.
Comparative analyses highlight Bulgaria's growth of 13% compared with Romania, and growth of 10% compared with Lithuania and Poland. Analysts stress the importance of leveraging these gains as a springboard for further growth in the coming decade, urging against stagnation.
The data highlight Bulgaria's progress but stress the need for sustained efforts to build on this momentum for future economic growth.
Housing prices in Greece are soaring, and yields are falling: are there still opportunities for Israelis?
The article describes sharp price increases in the housing market in Greece: according to data cited from Bloomberg, apartment prices in Athens rose in October by about 12% compared with the previous year, and according to the Bank of Greece they rose by 17% and 14% in the first and second quarters of 2023. In Thessaloniki, increases of up to 15% on an annual basis were recorded in the third quarter. According to the article, over the past four years prices in Athens have risen by about 10% a year on average and in other areas by about 5%, and industry sources note that yields are falling while demand, including from Israelis, continues to rise.
Source: Globes, Hila Weissberg, 17.12.2023
Housing prices in the 20 largest US cities jumped to a record in October
According to the S&P CoreLogic Case-Shiller index, housing prices in the 20 largest metropolitan areas in the US rose in October 2023 for the ninth consecutive time and reached a record, with an increase of 4.9% over 12 months. The sharpest increase was recorded in Detroit (8.1%), followed by San Diego and New York, and Portland was the only city in the index where prices fell. According to the report, prices continue to rise despite mortgage interest rates that reached 8%, mainly because of a shortage of homes for sale, as many homeowners do not want to give up low-interest mortgages.
Source: Calcalist, 26.12.2023
US housing crisis: rents have soared - and so has homelessness
According to a report by the US Department of Housing and Urban Development (HUD), the number of homeless people in the US rose in 2023 by 12% to about 653 thousand people, the sharpest increase since measurement began in 2007. The article links the rise to the cost of living, to the median rent being about 22% above its pre-COVID level according to Redfin data, and to the end of the benefits and emergency aid given during the pandemic. More than half of the homeless live in four states - Washington, Florida, New York and California - and at the same time a record number of rental apartments is expected to be built this year.
Source: Calcalist, 17.12.2023
Accurate as of the issue date. Laws, tax rates and procedures change; check the current position before any decision.
Translated from the Hebrew original. עברית