In the 1990s and 2000s, only the wealthy ones could think about the own home, but the decrease in the prices of real estate, the rise in the population’s incomes and promotion of the monetary policy by the National Bank, followed by the reduction in interests rates, led to the democratization of the real estate market. All these together made home rental be even higher than the monthly mortgage repayments in particular conditions, says the podcast “What is more advantageous: mortgage or rent?” that was published by the National Bank of Moldova, IPN reports.
They earlier sold by about 14,000 apartments in Moldova annually, but in 2019 and 2020 the number of transactions rose to almost 30,000. Furthermore, most of the transactions were earlier performed with money from abroad, but now the apartments are purchased with money gained in the country, said economist Veceslav Ioniță.
“Our nominal salary rises in euros each year. For example, the salary calculated in euros in 2015 was €2,600. Now the annual average salary is €5,000. This means our purchasing power during five years grew two times. Fifteen years ago, a citizen of the Republic of Moldova had to work for 36 years to purchase an average apartment of 70 square meters, but now a citizen of the Republic of Moldova needs less than eight years. This means the power to purchase an apartment is now 4.5 times better than 15 years ago,” sated the expert.
In parallel with the rise in revenues the past few years, the inflation rate on which the bank interest is based remained at 5%. 10-15 years ago, the interest rate was at least 20%, but now the effective interest rate on mortgage is 8.5% or even 7.5% and lower in particular conditions. Earlier, the banks released loans of 28 million lei a month, but in 2019 the figure rose to 190 million lei a month.
These factors together made the rent be higher than monthly montage repayments in particular conditions.
Veaceslav Ioniță said that if the effective interest rate is higher than 10%, it is risky to take out a mortgage as the interest rate will be high. Now the interest rates are lower than 10%. The monthly interest for an apartment worth €36,000 will be €255. This is lower or almost equal to the monthly rent. The main advantage of mortgage is that you finally become the owner of the apartment and this can be later replaced for a more comfortable one, can be sold or left as inheritance.
