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July 27, 2018 www.intellinews.com I Page 10
Romania's buoyant first-tier cities drive up mortgage lending
Iulian Ernst in Bucharest
The stock of retail mortgage loans in Romania increased by 13.5% y/y to RON69.8bn (€15.0bn) at the end of June, Romania’s central bank reported.
Mortgage lending remains the most dynamic segment of the banking market, but the central bank is increasingly concerned by the sluggish corporate lending.
Behind the soaring mortgage lending there is robust demand for housing in country's first- tier cities, which demonstrate much faster expansion compared to lower cities where the labour opportunities are less abundant the wages much lower.
The average net wage in Bucharest was RON3,100 in 2017 versus the RON2,400 country- wide average, while the average wage remained below RON2,000 in Moldova and rural southern counties. Other counties with major urban con- centrations like Cluj, Timis and Sibiu also boast above-average wages (RON2,500-RON2,700).
Real estate developers in Bucharest are already
complaining about labour costs in construction having increased by some 40% over the
past couple of years, while the prices of the construction materials have increased by some 20% as well. These higher costs (well above
the inflation or currency's depreciation) are covered by larger mortgage loans contracted by customers who need housing in the large cities.
Separately, the rise in overall retail loans (+10% y/y, up from 7.8% y/y at the end of last year) arguably supports the idea of robust consumer confidence. This comes in contrast with the economic slowdown and the poor administrative capacity of the administration — which are visible and should result in rising propensity
for saving (reported, indeed, by bankers and retailers of durable goods).
The dynamics of the consumer loans shows more moderation: they increased by only 6.5% y/y in June at a time when wages rose by double-digit rates (+14.4% nominally in June) and prices gained momentum (+5.4% y/y in June). From a broader perspective, the
stock of consumer loans has remained