Poverty and Lack of Foreign Interest Keep House Prices in Moldova at a Lower Level than those in Romania

The small existing wages in the R. Moldova, as well as the lack of consistent demand from foreigners, due to the legislative instability, maintain the prices of flats in Chisinau at a relatively low level, compared to the Romanian market, according to the “Cotidianul” newspaper, and cited by Info-Prim Neo. According to the cited source, from the point of view of the real estate market, the R. Moldova presents a miniature copy of the evolution of the Romanian market in the last five years. The uncontrolled price rises, the legislation which leaves room for speculation, the corruption problems or the disequilibrium in the relations between demand and supply are just a few of the similarities. Chisinau leads the top for the number of transactions in the Republic of Moldova, for the value and prices in what concerns the real estate market. Here, one-room flats situated in a good zone can be purchased with 22-25 thousand euros. For the peripheral zones, the price is lower, at about 19 thousand euros. The price of two-room flats fluctuates, depending on their location, from 28 thousand to 39 thousand euros, prices lower than in Bucharest, but which are high enough for the citizens of the R. Moldova, baring their incomes in mind. For four-room flats, the price fluctuates very much depending on how well they are equipped and their location. In this respect, it is possible to find flats of 90 sq.m., situated in a good zone, at about 67 thousand euros, but there are also flats of 130 sq.m., which cost about 120 thousand euros. However, four-room flats are less looked for because of the exaggerated prices for Moldovan disposable incomes. On the other hand, the level of rents for flats equipped with conditioners and modern furniture is net higher than those for other apartments and can be compared to that of the European Union. The most obvious comparison can be made by looking at two three-room flats situated on the same boulevard, one better equipped and situated closer to the center of the city, would be rented out at 900 euros/month, whereas another one, situated closer to the peripheries, modestly furnished, could be rented out at 500 euros. A well furnished one-room flat, situated in a decent zone, can be rented out at approximately 150 euros/month. The Romanian publication also notes that the problem of corruption in the R. Moldova is a general one, and its presence can also be felt on the real estate market. The corruption within the real estate goods registration system and the conflict between the state interest and the personal or regional interests are growing issues in the R. Moldova. At the basis of this stands the process of privatization of state property which took place after 1990. In addition, the economy in the region is not in a very good state, being at the present time in a severe state (high inflation, high unemployment, and low wages). The legislation of the RM is also weak in respect to the real estate sector. The notary is the one who legalizes the acts required for the transaction. Even if the amounts demanded by them for such services are rather high, the amounts for the transactions registered by the state are ridiculous, much less than they are in reality. Even though, normally, this price should correspond to the notary statistics, the RM has no law that would oblige them to provide the data which could show the price of the property. Just like in Romania, the only indicator of the value of apartments or of property is the “shout out” price, meaning the amount demanded by the salesman or by the real estate agency which is making the transaction. Even if in 2005, the supply of living estates put on the market could cater for more than half of the market; the price of the estates remains high. The high costs and the lack of customers have lead to bottleneck on the Moldovan real estate market last year. One of the solutions would be the building of new estates, but the high cost of the lands makes the cost of the buildings higher than the price on the market and makes such investments unattractive. On the other hand, the mortgage market is also under-developed. The high interest rates and the low wages which do not permit for access to such credits are just a few of the obstacles faced by Moldovans. Also, the Moldovan people are rather skeptical when it comes to purchasing a flat which is only at the project state. There have been cases when the price demanded at the end of the construction works was higher than the one agreed upon on paper, fact which scared many potential buyers of such flats. According to a statistic study of the big real estate agencies in Chisianu, 60% of potential buyers need a mortgage credit in order to purchase a flat. If in 2005, the crediting services for personal needs of all sorts, including mortgage credits, constituted approximately 3-4% of the credit portfolio, then in 2006, according to a study made by the Ministry of Economics and Commerce, in partnership with the European Bank for Reconstruction and Development, we can expect that these will situate themselves, towards the end of the year, at about 13% of the entire crediting portfolio.