The NBR is thinking about starting to monitor real estate asset prices, taking them into account as a risk factor for the stability of prices and of the financial system, a practice that is common among Western central banks.
"We have never talked about an asset bubble (i.e. high inflammation of asset prices above the real value with a correction risk) in Romania until now as being a problem within the scope of NBR, but the north of Bucharest is clearly such an asset bubble," NBR Governor Mugur Isarescu stated during the SE European Financial Forum yesterday.
He says the central bank has not included the prices of the real estate assets among the indicators it monitors yet.
"When we take steps on this matter, we may come into conflict with contractors, as the measures to temper lending were not to the liking of the banks, either," Isarescu said.
The trend of the asset prices has been one of the concerns of the European Central Bank (ECB), which believes unsustainable effervescence threatens both the prices stability and financial stability, as explained by Klaus Masuch, head of the Monetary Policy Strategy Division of ECB. The rise in the price of real estate assets can outstrip the volume of demand, with prices continuing to go up until "the bubble bursts", and price corrections are likely to occur and make an impact on the financial system.
Steven van Groningen, Raiffeisen Bank chairman believes it is worth discussing to what extent Romania is headed towards an asset bubble, considering the constant escalation of building and land prices over the last few years.
"The increase in lending generates an increase in the asset prices," said Van Groningen, who maintains that the banking system is robust enough to cope with possible shocks.
Speculation about the constant prospect of an increase in the prices of homes and land in view of the European Union accession, supported by the increase in people''s incomes, have been driving prices up year after year.
According to data provided by real estate company Eurisko, prices for new residential complexes that were built last year in areas in Northern Bucharest range from 1,000 to 2,500 euros per square metre. The most expensive area remains Primaverii, where old residential spaces sold for as much as 3,000 euros per square metre built. The NBR Governor also stated yesterday that funds entering Romania to make profit from the interest spread or exchange rate fluctuations, as well as investments on the capital market amount to less than two billion euros.
The central bank official explained that almost 400 million euros had entered the Romanian forex market before the relaxation of the flotation regime, in November 2004, and approximately 800 million euros arrived until last summer.
"The amounts on the market have kept constant since about last year. If we take into account the investments on the Stock Exchange, we estimate the capital inflows at less than two billion euros," Isarescu added.
Pentru alte știri, analize, articole și informații din business în timp real urmărește Ziarul Financiar pe WhatsApp Channels
