What to buy: a two-room apartment off-plan, or two studios near the university?

Sometimes I find myself sitting across from a client, left speechless by the arguments he makes. Some have studied, researched and gone deep, and their arguments are well founded; others don't understand the first thing and make baseless arguments bordering on ignorance.

Yaakov worked as an economist at one of the big banks, took early retirement and decided to invest his severance pay in real estate abroad – specifically in Romania, where his parents were born. He feels a connection to the country, speaks the language fluently and holds Romanian citizenship. Yaakov knows exactly what he wants, and he came to the meeting having done his homework, with well-reasoned arguments:

“According to Eurostat data, Romania has the highest home-ownership rate in Europe (about 95%). A Colliers survey I found shows that young people aged 18–24 rent an apartment (25%) or live with family or friends (40%). That suggests buying a home is usually a step postponed to a later age, when financial stability allows it. Bucharest attracts significant internal migration, and most of the migrants (about 70–75% of all migrants) are of young working age (20–49). That group represents potential future demand for apartments, whether for rent or for purchase,” he explained.

“Wow, impressive,” I said. “But what conclusions does that lead you to?”

“For me, the question isn't whether to buy an apartment in Bucharest, but which apartment and where,” he replied.

There are several advantages to investing in Bucharest:

1. Attractive prices compared with Israel and Western Europe: apartments in Bucharest are still considered significantly cheaper than in most Western cities, and especially than in Israel. An apartment in Bucharest can cost around 120,000 - 170,000 euros (not in the centre or the more upmarket north of the city), while in Israel prices are many times higher.

2. Rental demand: rental demand in Bucharest is high, and the right apartment can provide a stable, regular income.

3. Potential for capital growth:

o Steady economic growth: Romania's economy has been on a consistent growth trend in recent years (about 3.5% a year on average).

o Joining the eurozone: Romania is expected to join the eurozone in the coming years (some estimates say early 2026, or 2027 at the latest). Joining is expected to lead to a significant jump in property values, as in other countries that joined the bloc in the past.

o Growing demand: Bucharest is a lively economic, cultural and academic centre that attracts internal migration and many students, which increases demand for apartments to rent and to buy.

o A gap between demand and supply: there is a gap between the high demand for apartments in Bucharest and the existing supply, which supports rising prices.

4. A favourable tax policy for foreign investors:

o A low purchase tax of just 3%.

o Capital gains tax (on the sale of real estate) of 0%.

o Tax on rental income: about 8%-10%.

o A double taxation treaty with Israel.

5. Stability and trust: Romania is a member of the European Union and NATO, which provides a degree of stability and works in favour of transparency and a more reliable business environment.

6. Rising average wages: the average wage in Romania is rising steadily, although it is still significantly lower than in Western Europe, which contributes to a lower cost of living.

But it's important to remember there are also drawbacks and risks:

1. Currency risk: the continued use of the Romanian leu rather than the euro exposes the investor to exchange-rate fluctuations.

2. Dependence on the global and local economy: like any property market, the Romanian market is affected by global and local economic trends.

3. Bureaucracy: despite improvements, there can still be bureaucratic complications. It's important to work with an experienced local lawyer.

4. Managing the property remotely: for an Israeli investor, managing the property means finding a reliable management company.

5. Interest-rate changes: mortgage rates in Romania currently average 6.5%, and changes in them can affect whether the investment pays off.

Yaakov's dilemma was between buying a two-room apartment in a new project by an Israeli developer, with potential for capital growth in the coming years, and buying two studio apartments near a university to rent out to students.

“That's an excellent dilemma, between two investment routes in Bucharest with different characteristics. My recommendation,” I said, “leans slightly towards buying the two studios near the university, especially if you want a stable cash flow and reasonable capital-growth potential. Demand for student apartments in Bucharest is very high and stable. There's a constant shortage of that kind of housing. That ensures a high return and consistent cash flow almost immediately after you buy and let. Being close to the universities ensures constant demand. If you're very patient, have a higher risk tolerance, and are willing to give up an immediate return for more significant long-term growth potential (5-10 years), then a two-room off-plan apartment in an up-and-coming area may be more attractive.”

What would you buy?