Weakening purchasing power to affect real estate market

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Weakening local purchasing power coupled with a depreciation of the local currency might affect the real estate market of Romania, financial analysts argue.
 
Besides a surge in the number of instances in which property is pledged as collateral, the dangers looming ahead in the Romanian real estate market include the developments in individual income and the exchange rates. Financial analysts believe Romania is far from a real crisis, but the prospects for a crisis might emerge if the engines for economic growth slowed down.
 
A recent unveiling of notary statistics on the local real estate trends has worked up the interest of real estate brokers. The main concern now is whether or not Romania is facing any danger.
 
The same analysts argue that Romania is in no critical condition now, but it may slip on a dangerous path any time, should some factors act in concert.
 
"First, a slow down in the increase of individual income coupled with reduced economic dynamics and a deterioration of the exchange rates might bring many mortgage loan payers into a state of default. Such a scenario would be followed by foreclosures and property prices would be dragged
down," says financial analyst Aurelian Dochia.
 
He says that these factors will have to act in concert for them to generate any visible effects.
 
Nonetheless, he warns, vigilance should be kept high, as there is no always betting on the pay rises so far.
 
The purchasing power is an essential factor for stability on the real estate market, says analyst Liviu Voinea, executive director of the Applied Economics Group.
 
The analysts say there is no danger for as long as there is economic growth. Voinea is expecting the dangers to emerge in some years’ time, more specifically when economic growth slows down and individual income no longer rise by over 20 percent a year, as so far.
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