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de Marin Pana , 16.4.2018

According to the revised data published by Eurostat, Romania has fulfilled again (a near-miss) the macro stability requirement set at the European level for the increase in the price of housing.

With an arithmetic mean of 6% for the whole of 2017 and a value declining to 5.6% in the fourth quarter, we were in line with the requirement of no more than 6% increase, year on year, in real estate sector prices.

We remind that our country had reached 13 of the 14 stability criteria met in 2015 (the one regarding the net investment position cannot be achieved given the massive foreign investments made in our country and the quasi-inexistent Romanian investment abroad) and it is already foreseen, as a planned loss, the criterion regarding the labour unit cost increase (it is calculated for a period of three years and has a reference set at 12%, which we can no longer meet following the salary increases decided in 2016 and 2017).

  • We also present developments in other countries from the former socialist bloc, as well as in Germany, France, and the significant averages at the EU level, to see how we position ourselves at this sensitive indicator. It can be seen that we are obviously better than our neighbours Bulgaria and Hungary, and even better than the Czech Republic and two of the three Baltic countries.
  • Evolution of housing prices in 2017
  • Country           Q1       Q2       Q3       Q4       Average

Our model, though, should be Poland, which just follows discreetly but with maximum efficiency, the European trend and had precisely the same value, calculated as an arithmetic mean (values have not been adjusted seasonally, according to Eurostat), as well as the Eurozone.

An area where Germany and France set the tone in this matter, with a trend somewhere below four percent (with the mention that the former was on a declining trend and the second on a growth trend so that their positions exchanged in the last quarter of the year). Estonia also managed to temper its momentum with which it started last year and to keep a reasonable distance from the threshold set.

Noteworthy, calculations have been remade slightly downward for the whole Union compared to those in mid-January this year (respectively, from 4.1% to 4.0% weighted by Eurozone seasonality and from 4.6% to 4.5% for EU 28), as specified by the EU statistical body.

In this European context, especially given the increases in income and inflation at the national level, we should be very cautious with the real estate market prices. Especially that not even are we objectively pushed to the limit of the macroeconomic stability (as it has been established theoretically) but we are also working with housing prices traditionally expressed in euros and we have not adopted the single currency.

But euro stood in the first quarter of the year significantly above the target in the official forecast considered as the basis for the 2018 budget (4.59 lei/euro, revised from 4.56 lei but 4.65 – 4.66 lei as a monthly average in January, February and March), with a marginal growth trend.

Basically, we have here an important factor of economic stability that we should better keep track of more carefully and maintain it under control as much as we can with administrative means that could take on potential outbreaks of the market.

The alternative is that the implications of any potential real estate bubble may not suit us at all.

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