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The private rental sector is expected to grow in Romania in the coming years, driven by the high overcrowding rate and a decrease in the accessibility of new homes in terms of prices

The Private Rental Sector (PRS) sector is expected to grow in the CEE region, as construction costs and inflation are rising and overcrowding rates are higher compared to the rest of the European Union (EU), reveals Colliers in its latest “The Private Rental Sector: Has it found a home in CEE?” report in collaboration with Greenberg Traurig and Kinstellar. Romania has the highest overcrowding rate in the EU, and even though private ownership is very high, the rising home prices and construction costs make it harder for people to own a bigger home, leading to notable growth in the private rental sector.

Housing ownership in Romania is at the highest level in the EU. According to Eurostat statistics, approximately 96% of people owning the property they are living, but some estimates quoted by the Ministry of Development place the figure of rented apartments at up to 20% of the total stock in big cities like Bucharest and Cluj-Napoca. There is a cultural bias to this choice as much as there is an economical reason. For a very long time, mortgages have been more affordable than rents. In Bucharest, a monthly mortgage is on average 12% cheaper than the monthly rent, a level comparable to Warsaw or Sofia. By comparison, rents in Prague, for example, are more than 40% cheaper than a mortgage.

The overcrowding rate in Romania, based on the availability of rooms per person and the average size of household, was 45.8% in 2019, followed by Latvia (42.2 %) and Bulgaria (41.1%). Data suggests that the majority of households in Central Europe are more overcrowded than the EU average, but the long-term European trend shows a gradual decline in overcrowding and the CEE markets continue towards a convergence, according to Colliers consultants. This long-term evolution will bring a supply gap, more housing will be required and, from this new supply, Colliers consultants would anticipate that rental properties would make up a reasonable portion, subject to a shift in strategy from more developers and investors.

The last 5 years across CEE have seen sales prices rising rapidly, including in Romania, partly driven by a shortage of supply, relative ease and low cost of debt. Moreover, there is a desire for people to invest, in an effort to earn more money on their savings than they would receive in the bank. All these represented vectors for rising prices and costs, a trend that will force many Romanians, in the long term, to head towards private renting”, said Gabriel Blăniță, Associate Director Valuation & Advisory Services at Colliers Romania.

The private rental sector also requires significant attention to tenant services. Having a professional platform where tenants can speak to someone, register issues, and get timely feedback or resolution, is something that many players have already implemented or are striving towards. Advances in modern technologies (PropTech), are making this increasingly more efficient and effective to manage”, explains Gabriel Blăniță, Associate Director Valuation & Advisory Services at Colliers Romania.

The private rental sector as an asset class is a relatively new phenomenon in CEE, and you certainly have less of it as you move farther east. Part of it is legacy-related: home ownership was always extremely high in CEE and reflected a mentality that one needed to own one’s home. That is no longer necessarily the case.  As demographics are changing and with prices steadily rising for development in congested areas with opportunities becoming scarcer, and many people being priced out of the market for home purchase, we expect this asset class to take hold in CEE”, explains Victor Constantinescu, Managing Partner Kinstellar Bucharest, Co-head of Real Estate practice at regional level. 

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Gabriel Blanita

Associate Director | Romania

Bucharest

Gabriel started his career with Colliers International Romania in 2010 as a real estate appraiser. He spent most of this time being involved in the appraisal of different large mortgage portfolios before specializing in the valuation of apartments, houses with land and land plots.

Gabriel holds a bachelor’s degree in Finance from the Faculty of Finance, Insurance, Banking and Stock Exchange – Academy of Economic Studies Bucharest, having graduated in 2011. He also holds a master’s degreee in Bank Management, graduated in 2013.

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