Buying Real Estate in Moldova – Is it Worthwhile?

If you are looking to add developing countries to your European real estate investment portfolio, look no further, as I might have one interesting option for your consideration – Moldova

I have some friends from Moldova with whom I enjoyed chatting about this topic. Want to know what I found out? Continue reading…

First, I wasn’t in a hurry to invest straight away, as I wanted to take some time to observe how things will develop over time. As a general rule, I’m quite wary about investing in such a developing market as there can be a lot of uncertainty due to various factors that I might not be used to. Meanwhile, I gathered some additional information in order to understand what potential there was, as well as the risks.

Let’s Learn About Moldova

The first step was to learn about Moldova. As I said, I have several friends from this country, but they never spent much time speaking about their country, on the other hand, they mostly seemed very happy to have left and found better pastures.

Moldova separated from the former USSR in 1991 and is still considered to be a very young country, as it only gained its independence in 1992. For expats, it is one of the most inexpensive places in Europe. It still produces some of the best wines in Europe, despite being so little known. And yes, its economy currently is 10-15 years behind the Baltics but it has a lot of potential. In other words – it is a relatively poor country that looks for further growth.

For many years, Moldova has been oriented pro-Russia in its foreign policy decisions. After several economic sanctions were implemented, Russia has lost its strategic appeal to this country. As a result,  the Moldovan government decided to adopt more market-friendly reforms. In early 2020, the government successfully completed a $178 million IMF program and implemented some necessary financial sector reforms, as well as political. Many might not know, but in October 2020, Moldova had presidential elections, where the former World Bank economist and former prime-minister Maia Sandu won the presidency. She favors closer ties with the European Union and made “joining the EU” her main objective during the presidency in the following 4 years.

Key facts about Moldovan real estate

1. Despite the fact that Moldova is not a part of the European Union yet, there might be great potential in terms of real estate developments, especially with the new prime minister in place;
2. Taking into account that the country’s economy is 10-15 years behind Baltics, in the upcoming years, the property prices will increase (as they do already now). The current price for real estate on Moldovan is about 600-800 eur per sq. m. which is very cheap, compared to the level of any country around it, especially if it’s an EU country;
3. Currently, the profitability in the real estate construction sector is one of the highest;

For example, the notary system in Moldova still requires improvements. For purchasing properties, there is no such thing as a legal debt agreement. The reservations work in a way that the buyer pays 30-50% upfront and the ownership is changed to the buyer’s name. The developer has to finish the property to get the rest of the money and he is not allowed to put any mortgages on this property. Despite the fact that the average prices in Moldova are low, they have already started to grow and the notary system will adapt with time as well. For now, this could be an opportunity for smart investors to finance this gap and earn from it.

What are your thoughts on Moldovan real estate?