Real estate market during COVID-19 pandemic: evidence from Romania

The Covid-19 pandemic has had a profound impact on all economic sectors, including the real estate market. The World Health Organization officially declared the Covid-19 pandemic on 11 March 2020, and a few days later, on 16 March 2020, a state of emergency was decreed in Romania. The authorities had to reconsider their policies and procedures to limit the spread of the coronavirus while allowing economic activities to continue. The aim of this paper is to provide insights into the changes that have occurred in the Romanian real estate market due to the economic slowdown induced by Covid-19 and to suggest a mitigation framework to minimize the effects. For this purpose, residential and commercial real estate markets are analysed from the perspective of properties supply and demand and their impact on prices during the Covid-19 period. During the pandemic, the real estate market was marked by divergent developments in its two sub-components: while the residential market saw an acceleration in activity, the commercial market experienced a decline. Demand for residential property was accelerated by improved saving and working behaviour of the population during the pandemic period, low-interest rates on loans, but also by expectations of increases in house prices in the coming period, as the authorities announced an increase in the threshold for the application of the reduced VAT rate for property purchases (BNR, 2021). Against the general trend of increased demand, supply has also been on the rise but remains insufficient to cover the high demand, which has been reflected in a sustained increase in house prices in most Romanian cities. Due to the persistence of the pandemic crisis and economic uncertainty, activity in the commercial real estate market has slowed down significantly, with some developers extending project delivery deadlines or postponing investments.