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Foreign investment is pouring into this recent addition to the European Union. For most people, mention of Romania, particularly its region Transylvania, most immediately conjures up images of Dracula.

Bran Castle, which is on the border between the Transylvania and Wallachia regions, is commonly known as Dracula's castle and attracts 450,000 tourists each year; it was recently listed for sale for £53 million, though the Romanian parliament barred the sale.

Fictional characters aside, the country remains relatively unknown, prompting people to call it “the undiscovered Europe.”

Now that it has joined the European Union, there is no question that Romania has been discovered both by a growing number of tourists and property investors.

Romania’s 2007 inclusion into the European Union has helped the economy expand. The flow of foreign direct investment continues to be strong, according to the Oxford Business Group.

The Romanian real estate market

Romanian property values continue to rise in parts of Romania where demand outruns supply. “Despite the continuous rise of the prices of real estate properties, the market in Romania offers still the most attractive investment opportunities among all other countries in the E.U.,” said Damien Thiery, Managing Director of Romanian Properties Ltd., a company that helps investors find properties with high return potential in the country.

Demand for quality housing is increasing in tandem with the rising income of the city’s residents. On the flip side, the income gap between the rich and the poor has continued to grow since the country opened up its economy.

Eighty-five per cent of the 220,000 square meters leased in Bucharest last year were pre-leases, according to a 2008 real estate market overview report by CB Richard Ellis (CBRE).

This is because there is a soaring demand for modern office buildings that is not yet met by what is already available both in quality and in numbers.

The demand for office space is driven by the auto industry, financial institutions, retailers and IT and telecoms. Vacancy rates in the office sector remained below an overall rate of three per cent, with only one per cent for premises considered to be Class A. Demand in the office sector over the next few years will depend on the level of foreign investment in Romania.

Buying property in Romania

“Non-Romanians cannot buy land except through a company, which they can own,” said Michael Beckerman, owner of Romtrade Consult SRL in Romania.

The process for purchasing Romanian properties is rather complex at first glance, but creating a Romanian company through which investors can buy real estate “is a common and straightforward procedure,” Beckerman said.

“The properties are then owned freehold. A company can be set up for around £820 without traveling to Romania,” said Thiery.

It can be hard to determine the value of land or property in rural areas of the country, according to Beckerman. “Good local knowledge is essential. Land registry documents must be very carefully checked as about 70 per cent of land in Romania is still not properly registered,” he said.

The next few years

“Capital appreciation of around 20 per cent per annum over the next three years is expected on selected properties,” said Thiery.

The Romanian real estate market is expected to continue its growth along with the economy for the coming years. It still has quite “a long way to go before it reaches Western European prices, but it will eventually,” said Beckerman.