The effects of the pandemic: Romanians trade urban congestion for more spacious and affordable housing around big cities

2020 saw, for the first time in 14 years, an increase in the rural population in Romania. Working from anywhere and social distancing have led to a population migration trend towards quieter areas in the suburbs or in localities around big cities, with important effects on the residential market, according to Colliers Romania consultants. The number of Romanians who trade urban congestion and choose more spacious, affordable housing has increased, and the trend is expected to continue in the medium term, creating new opportunities for residential developers.

“The increase in Romania’s resident rural population by 28,000 inhabitants in 2020 is not major, but it is a first since 2007 and what also needs to be considered is that, in the previous decade, the rural population decreased on average by about 50,000 inhabitants per year. Moreover, Romania’s urban population has decreased by 170,000 inhabitants in 2020, compared to an average decrease of about 50,000 inhabitants per year between 2010 and 2020, indicating that, in addition to the usual emigration, somewhere between 50,000 and 100,000 Romanians have chosen to move from the city to the countryside, supported also by the effects of the pandemic that impose social distance and support remote working”, says Gabriel Blanita, Associate Director Valuation & Advisory Services at Colliers Romania.

The Capital is a clear example of the current trend. Thus, in Bucharest, the resident population decreased by 9,800 inhabitants in 2020, based on the NIS data analysed by Colliers Romania consultants. At the same time, the Capital’s metropolitan area recorded an increase in the resident population of 10,800 inhabitants.

Similar trends have been recorded in metropolitan areas in other major parts of Romania. In Cluj, the urban population decreased by 4,800 and the rural population increased by 5,600. In Timis, the urban population decreased by 9,900, while the rural population increased by 9,200. And in Iasi, the urban population decreased by 1,900, while the rural population increased by 2,000, official data show.

“These large population movements from urban to metropolitan areas will have important effects in the residential market, where the pandemic has emphasized the people’s preference for larger homes, either with an extra room or with an office, terrace or garden. Data shows that the Romanians’ preference has turned into action, especially as the metropolitan area is more attractive both in terms of the average size of a home, which is larger than in cities, lower prices, and the gradual improvement of transport infrastructure facilitates this migration. The average area of a residential unit delivered in Ilfov last year was 102 square meters compared to 47 square meters in Bucharest, but this ratio is strongly influenced by the fact that Ilfov is seeing more housing developments. Otherwise, even if a larger suburban home can cost more than an apartment in the city, the price difference per square meter is significant – in Bucharest-Ilfov, for example, the price gap starts from 20% and goes even towards half price in some cases”, Gabriel Blanita also says.

This migration represents an opportunity for residential developers, and a big advantage of the suburbs is the significant abundance of land and the lower acquisition costs. They offer developers greater flexibility in the projects they build and can present buyers with larger homes with gardens. Such facilities are appreciated considering that, over the past year and a half, the time spent in and around the home has significantly increased.

Another important aspect is the number of residential units delivered in the Capital and the metropolitan area, which has been increasing year on year to new highs. If 3 years ago, both in Bucharest and in the surrounding area, 5,600 – 5,700 living units were delivered per year, the number of residential units delivered in 2020 was 13,800 in Bucharest and 7,000 in the metropolitan area.

“If housing deliveries in the Capital maintain their upward momentum, as the resident population declines, we expect a combination of slower sales rates for new residential developments in the city and lower demand for rentals. In addition, we could see an increasing number of older homes coming up for sale, which could put downward pressure on prices in this segment. Also, disregarding the price premium for the position of the residential unit, the central areas being, of course, more sought after, this situation should also lead to a widening gap between the value of existing and new homes built at good standards”, adds Gabriel Blanita.