Thursday, July 31, 2008

Romania Property Prices 'at Risk of Collapse'

30 July 2008
Higher interest rates and plans for restricting private borrowing are among the main factors that could lead to a crisis in Romania's real estate market, experts warn.

In a letter published on Wednesday by the local press, the Romanian Bankers' Association is asking country's central bank to impose less credit restrictions otherwise "home prices may collapse."

The central bank is to publish new regulations aiming to restrict private borrowing, which increased 63.4 percent over a twelve month period to June amid a lending boom.

On the other hand, analysts say the central bank will most probably maintain the current interest rate at around 10 percent, which is the highest in the European Union.

Sales of new apartments dropped by half in the first six months of this year, compared to the monthly average in 2007.

April and May saw the largest drops due to rumours about a real estate market crisis.

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