The increase in the price of housing increases the advance that the bank requires of you. How long does it take to sell an apartment in big cities / Where is it more profitable to be a tenant than an owner

A Cluj resident who wants to buy a standard apartment of 50 useful square meters needs a 3,250 euro higher down payment compared to two years ago, a period in which houses in Cluj rose in price by over 35%, the data show imobiliare.ro, processed by HotNews.ro.

The price per usable square meter rose to €2,500 last winter, after being €1,850 in 2021, bringing the 50 square meter apartment to €125,000, up from €92,500 at the end of 2021. That’s right, salaries in Cluj also increased by 35% in the two years, so a Cluj resident needs the same amount of salary to buy his apartment as in 2021, i.e. 21.5 net salaries.

And in Brașov, prices have gone up by over 30% (from 1,260/m2 to almost 1,600 euros/m2), but salaries have gone up by over 40%, which means that the people of Brasov have gained in the last two years in real estate purchasing power . They would need 19 net salaries to get a 50 square meter apartment.

​The city of Brașov surpasses the capital and ranks second in the list, with a sale price of 1,647 euros/useful square meter. There are, however, areas where the average goes up to around 1,800 euros/usable square meter. Apartments in Bucharest, on the other hand, are sold for 1,581 euros/useful square meter, so they are approximately 5% more expensive than two years ago. However, an important characteristic of the new local segment should not be neglected, namely that the offer of mass-market housing is very generous compared to the other categories of properties launched on the market by developers.

Constanța and Timisoara occupy the following positions in the ranking, after a 3%-4% advance in the last 12 months. In the case of the city of Timișoara, the supply decreased by 35% in the same period of time, and the demand increased significantly. They are closely followed by Craiova where owners and developers request an average price of 1,480 euros/useful square meter.

In the city of Iași, apartments have become more expensive in the last two years by almost 23% to 1,416 euros/useful square meter. Another significant increase, by almost 21%, could be observed in the same period of time in Oradea. In the third quarter of this year, homes were listed for sale locally with an average price of 1,378 euros/useful square meter. Galați and Ploiești occupy the next places in the national ranking, after increases of about 8% recorded in the level of prices in the last two years. The owners and developers request a price of 1,128 euros/sq m, respectively 1,076 euros/sq m for the apartments put up for sale.

Sale period in major cities

The length of time required to find a buyer has increased in five of the six analyzed cities, if we refer to the similar interval from 2022. Owners in Constanța are waiting more than 20 days longer to identify those who will purchase their homes. The local market currently has the second longest sales period of 87 days, after the one in Cluj-Napoca.

The city where the average price reaches the highest level in the country is also the one where you wait, on average, three months until the transaction is completed. Even in these conditions, the sale period of apartments has decreased considerably in Cluj-Napoca in the last 12 months. At the opposite pole is Iași, a city where the time required to identify a buyer has increased by only four days. An apartment on the local market sells, on average, in 43 days. For owners from Bucharest and for those from Timișoara, the buyer’s wait ends in approximately two months.

Bargaining margin in major cities

The negotiation margin remains, in the 3rd quarter, below the 4.5% threshold in all six analyzed cities. The biggest difference between the transaction price and the last price asked for the apartments listed for sale can be observed in Timișoara, of 4.3%. The supply here has been reduced by 35%, and the owners are waiting for about two months to find buyers.

Last year, the negotiation margin reached the highest level in Constanța, at 5%. On a local level, but also in the case of the cities of Cluj-Napoca and Bucharest, there is less negotiation at the current time in the transaction process than in the third quarter of 2022. The indicator is kept at a low level in Iași. It is also worth mentioning that in this city, but also in Brașov and Timișoara, the margin of negotiation has appreciated in the last 12 months.

Purchase vs. Lease. What is more advantageous?

“Romanians can take advantage of a window of opportunity that remains, for the moment, open in the real estate market, in favor of purchases. The rental segment has recently been subjected to strong pressure with a direct impact on tenants’ pockets. On the other hand, purchases are still affordable compared to the previous year, while prices show real growth prospects – influenced both by the new tax measures and the downward trend in supply. Interest rates currently show relative stability, with good prospects for 2024”, said Dan Niculae, Managing Director of Imobiliare.ro Finance.

The analysis takes into account a 2-room apartment with a useful area of ​​50 square meters. Such a home can be rented in the capital with an average budget of 500 euros/month or bought by accessing a mortgage loan for a period of 30 years, with a 15% down payment.

If we take into account this scenario, without neglecting the additional costs that both the tenant and the buyer have, it turns out that it is more advantageous to be an owner if you plan to live at least 1.9 years in the same apartment. In addition, in Bucharest you also make the biggest monthly savings, if you choose to pay the loan installment instead of the rent.

Most of the time, Romanians repay their mortgage loans in advance. According to data collected from the main banks, the average loan repayment period is 18 years. If after this period of time you sell the home and repay the loan in advance from the capital obtained according to the annual average appreciation of the value of the property, the net purchase cost that the buyer pays – which includes the initial costs and the advance to access the loan, the installments paid, the maintenance costs and transaction fees, can be estimated at 20,430 euros.

A tenant would pay, instead, 140,237 euros, also taking into account the average annual rate of price increase in the same interval. This results in a net advantage of 119,807 euros in favor of the purchase in Bucharest. The analysis takes into account average prices, i.e. the average rent for a 2-room apartment with an area of ​​50 sqm, an interest rate of 5.9% for a 30-year loan repaid in 18 years and sold at a price that takes into account an appreciation of the asset value of 3.17%/year, respectively an annual rent increase of 3%.

A situation similar to the one in the Capital can also be observed in Constanța or Iasi. And this time it is more advantageous to make the purchase than to pay rent, if you will live for more than 1.9 years at that address. The difference between the rate that a buyer has to pay and the rent for the same property is 69 euros and 65 euros/month, respectively.

An apartment in Constanța is sold at an average price of 1,510 euros/useful square meter, while the budget required for renting it is 450 euros/month. The net purchase cost can be estimated, after 18 years, at 18,472 euros, while the rental cost reaches 126,213 euros. Thus, we observe a net advantage of purchase versus rent that is close to 107,800 euros.

In Iași, the average asking price for the sale of a home is 1,330 euros/useful square meter, and the rent for a 2-room apartment reaches 400 euros/month. After 18 years, the net purchase cost is 16,270 euros, and the rental cost is 112,214 euros. The net advantage of buying over renting exceeds 95,900 euros.

The minimum period of living in an apartment over which its purchase becomes more advantageous is 2 years in Brașov. The rate that the owner must pay is 406 euros/month, while the rent budget must be somewhere around 460 euros/month. By purchasing the property, you save 54 euros a month. After a period of 18 years, the net purchase cost is close to 19,700 euros. The net cost of renting the apartment is 129,013 euros. We take into account here both the monthly payments and the agency commission paid for identifying the property, but also the guarantee requested by the owner which is returned at the conclusion of the contract. We are thus talking about a net advantage of purchasing versus renting of 109,317 euros.

In Timișoara, it is more advantageous to buy the 2-room apartment than to rent it, if you do not intend to move sooner than 3.7 years. The monthly rate for the house is slightly higher than the rent requested by the owners. The net purchase cost can be estimated at 17,861 euros, while to rent the apartment for a period of 18 years you have to pay 101,015 euros. The net advantage of buying versus renting slightly exceeds 83,000 euros.

Things are changing even more for those who want to move into a home in Cluj-Napoca, the city with the highest prices for both buyers and renters. The minimum period of residence for a 2-room apartment after which the purchase becomes more advantageous is 4.9 years. At the local level, you also end up saving money by staying with rent. We are talking about a difference of almost 80 euros/month between the rate and the rent. After a period of 18 years, the net purchase cost for a 2-room apartment amounts to 30,461 euros, and the rental cost to 154,260 euros. The annual percentage that the rent represents in the price of the property is the lowest in Cluj-Napoca, among the six large cities analyzed by Imobiliare.ro Finance. The net advantage of purchasing versus renting is close to 123,800 euros.