Bucharest Still Least Expensive?

Bucharest was and is sometimes still referred to as the least expensive European city. We have heard this quite a bit, and have been asked whether or not this is true. After researching all the cost of living surveys that we could easily get our hands on as well as talking to as many people inside and outside of Romania as we possibly could, we feel we have found the most current answer to this question. The answer is no but “depends on your lifestyle”. Bucharest is not the least expensive city in Europe. It seems that what started this rumor, was the relatively low cost of living compared to lets say…ummm.. London.. or Paris… which isn’t quite comparing apples to apples. Bucharest was a “less expensive city” in Europe for a while in the late 1990’s and and early 2000’s when one would imagine Bucharest to have comparable amenities, however the cost of living (which we are referencing here) has been on the rise, and certainly didn’t plummet in all arenas during the economic crisis. In many instances we saw prices rise. Consumer spending dropped as people tucked their savings under their mattresses, business and service owners cringed at the sight of decreased revenues, so they did the only thing they really knew how to do to increase profits… THEY RAISED PRICES OF GOODS AND SERVICES! Who would have thought. Now layoffs and salary cuts aside (yes that clearly occurred as well), this “raising of prices” was almost a gradual “correction” if you will, of current prices. The price of a cup of coffee has risen ever so slightly, the price of a liter of petrol increased just a hair, the cost of products at the supermarket increased, and the cost of apartment rental rates went up a bit as well! Generally speaking, the real estate market did not have such a massive “crash” as it did elsewhere, and quite a few people here own their homes from generations prior. The “churn” in the marketplace just isn’t very strong. All this in a local economy that may or may not be attracting all of the foreign investment it desires. So when a few euros gets you a cup of coffee in a great cafe in the middle of Barcelona, and a few hundred euros can get you a nice  studio apartment in Milan, Bucharest is certainly no longer the cheapest, least expensive city in Europe, especially when you venture out to smaller cities. All the prices seem to be comparable if one searches deep enough. The one thing we can say is the there are definitely more expensive cities out there, so Bucharest still can offer affordable lifestyles.

The Following is an Interesting Article From an older New York Times Posting. An interesting look at the “what money could have bought” concept.

In Bucharest, a Flourishing Housing Market

By JON GORVETT

BUCHAREST-

The streets may sometimes be chaotic and the sidewalks crowded, but to some of the New Yorkers who live in Romania’s capital, it can also be one of the most rewarding cities in Europe.

Leslie Hawke, mother of Ethan Hawke, the actor, is one such resident. She moved here seven years ago and now lives in a rooftop apartment on the city’s main street, Calea Victoria.

“It’s Bucharest’s Fifth Avenue,” she said, looking down from her 45-square-meter (485-square-foot) terrace, which curves around her apartment. “It has all the major department stores and museums, palaces and squares.”

Spreading out below her apartment is the eclectic jumble of downtown. And across the rooftops are the onion domes of a Russian church rising above 19th-century French-style apartment buildings. This is Europe’s sixth-largest city, with a population of 1.9 million.

Ms. Hawke’s 1930s-era apartment has 95 square meters (over 1,000 square feet) of living space, with a large living room, kitchen, two bedrooms and a bathroom, and is just a few minutes’ walk from her office. She works for Ovidiu Rom, a nongovernmental organization that uses education programs to support families and children, a job that spun out of the Peace Corps volunteer work she did when she first arrived in the country.

“One of the really great things about Bucharest is the sense of proximity,” she said. “Here, everything is still going on in the city center. I almost never have to go to a social or work event by car.”

That suits Anthony Raftopol, too. “As someone who grew up in the Big Apple,” he said, “I am absolutely fine with the metro and the buses.”

Mr. Raftopol works for Salans, a law firm. He moved here when it opened a local office in the 1990s. He bought a two-bedroom, one-bath apartment in the city center near Cismigiu Park, where he and his partner, Shawn Hargon, now take their 13-month-old daughter, Zoe.

Mr. Raftopol’s parents were Romanians who fled the Communist regime in 1968. Although the family ended up in New York, he was born in a refugee camp in Austria — where, he said, an exiled Hungarian countess used to help take care of him.

As both a buyer and a real estate lawyer, he has seen the market evolve. “Prices have exploded here,” he said. “The economy has been growing fast, yet the supply of apartments just hasn’t kept up with demand. We estimate they need about 300,000 new units at the moment, and so far this year there are plans to build just 30,000. At that rate, the boom in prices should continue for a decade.”

Because of the shortage, prices are comparable with those in Vienna and Berlin.

“Residential property in new developments in the suburbs goes for around 1,500 euros a square meter these days,” or $198 a square foot, said another real estate specialist, Brian Jardine, an American who works here for Wolf Theiss, an Austrian law firm. He said that 100- to 150-square-meter (1,100- to 1,500-square-foot) apartments downtown sell for around 300,000 euros ($426,000). “That’s five or six times what it was five years ago,” he said.

With high potential yields, Bucharest has become an increasingly popular place for foreigners to invest, and now that Romania is a member of the European Union, the number of those investments is likely to grow.

“Many individuals from places such as Germany, the U.K. and Austria are already here,” Mr. Raftopol said. “The U.S. resident community is pretty small but tends to be made up of people who have quite a commitment to the place.”

Ms. Hawke added: “Buying here is quite different from back home too. One great thing is, you can do it all via a notary, without all the lawyers you need back in the States.”

There are no restrictions on Americans’ buying houses or apartments. Land purchases, however, must be done through a company registered in Romania, although foreigners are allowed to own such companies. “Setting one up is a no-brainer,” Mr. Raftopol said. “It’s very quick and at about 300 euros ($426), pretty cheap.”

Transactions can be complex. When Ms. Hawke bought her apartment, she explained, she was asked for 113,000 euros ($160,460) in cash. “I didn’t feel so great carrying that around town in a bag, though,” she said, “so eventually I persuaded them that we could all just go to the bank and watch the wire transfer go through.”

Finding a place also can require unconventional methods.

“Word of mouth is the best way,” Ms. Hawke said. “I bought a little place out in the countryside recently and, to get that, I first asked a guy in a local shop, who took me to the local priest, who took me to the mayor, and while I was there a guy came by wanting to buy some wine off the mayor and said he had a place for sale. It’s not quite that extreme in Bucharest, but it always helps to network.”

Another issue to be aware of is restitution, Mr. Raftopol said. He explained that in 1946, private owners were stripped of their property by the Communists’ nationalization process, and that after 1989, those owners were shut out when current residents were allowed to buy their homes. Problems sometimes cropped up later, when the original owners were allowed to claim restitution.

“It’s a good idea to hire a local lawyer to do a full title search to find out if there are any restitution issues on the place you want to buy,” Mr. Raftopol said. “They should also look to see if the property is earthquake proof.” Bucharest is in an earthquake zone, and buildings are graded according to their ability to withstand tremors.

Restoring a property also can be a challenge, as Romanian workers have been heading to other European Union countries in search of higher wages, creating a shortage of skilled workers. Yet “all the big home-improvement stores are here,” Mr. Raftopol said. “The materials cost what they would in the U.S., but the labor is much less.” The restoration of his apartment cost 20 to 25 percent less than what it would have in America, he said.

Bucharest has appeal but it is definitely for someone who likes a challenge. “It is a city still figuring out what it wants to be,” Mr. Raftopol said. “It’s not the sort of place you come because everything is already fixed up and done; you come here because it’s not like that. Instead, the potential is still there for it to become something else — something really different.”