Why are sales in the real estate market declining? "The buying process has become visibly more complicated"
Access increasingly difficult on loans, economic instability and rising construction costs outline a tense start to the year for the residential market.
"The decline in activity on the real estate market is the cumulative effect of several factors that affect both the confidence and purchasing power of Romanians. The slowdown in the labor market, the moderation of income growth, the uncertainties generated by the electoral context and the constant increase in housing prices create a difficult climate for transactions. In addition, access to bank financing is increasingly limited, amid high inflation and economic instability. In the case of new apartments, the pressures are even greater. The elimination of some tax incentives, starting with January 2025, led to an increase in labor costs, directly affecting developers' margins and fueling the increase in housing prices. At the same time, the shortage of construction personnel is becoming increasingly evident, especially as infrastructure projects advance at an accelerated pace., explains Gabriel Blăniță, Associate Director | Valuation & Advisory Services, Colliers Romania.
After a 2024 in which housing deliveries in Bucharest fell by almost 20%, 2025 does not bring convincing signs of recovery either. Even though the volume of construction works increased by 9% in the first quarter, according to official data, it is unlikely that the pace of deliveries will soon return to the levels of previous years.
Although the start of the year brought challenges for the residential market, interest in purchasing a home remains high, approaching historical highs, according to Eurostat surveys. However, for those who rely on credit, the purchasing process has become noticeably more complicated. Inflation, high financing costs and possible fiscal measures to reduce the budget deficit are further affecting housing affordability.
Colliers consultants estimate that inflation will remain high in the medium term, which hinders the central bank's attempt to relax monetary policy. At the same time, the fiscal measures needed to reduce the budget deficit could further complicate access to housing, directly or indirectly. Thus, 2025 is shaping up to be a difficult year for those who want to buy.
The number of tenants is increasing
In addition to economic and inflationary uncertainties, Colliers consultants emphasize that access to financing remains a major obstacle. High financing costs, in parallel with a possible delay in the interest rate reduction cycle, affect not only demand, but also the ability of developers to launch new projects, especially in the mid-market segment.
In this context, the rental market is becoming increasingly relevant. For many, renting is not only a viable alternative, but also a more affordable solution. In Bucharest, approximately 151% of residents rent, and this percentage could increase in the coming years, in line with trends in major European cities. For many buyers who are having difficulty accessing credit, renting is becoming a natural transitional solution. The rental percentage remains relatively low compared to the European average, but the direction is clear: the pressure on affordability and the lack of new stock in central and good areas will fuel rental demand.
"Looking ahead, residential market dynamics will depend to a large extent on monetary and fiscal policy decisions, labor market stability, and the ability of developers to adapt to new cost and demand conditions. While the decline in transaction activity reflects a period of adjustment, fundamental interest in living in big cities remains high. Therefore, it is expected that the market will remain active, but at a more moderate pace, with an increasing focus on efficiency and affordability.", concludes Gabriel Blăniță.
