Some notes for a Round Table discussion (rather than a full presentation) at the 4th Romania Country Risk 2007 organised by Coface Romania.

1. ROMANIAN REAL ESTATE MARKET – OVERHEATING? SELECTED NOTES MARTIN STOBBS 4th Romania Country Risk 2007 3 October 2007

3. WORLD CONTEXT

4. UK House prices

5. CEE Capital city price ranges – new residential more mature market

8. How much can I borrow? Mortgage loan capacity evolution A couple earning combined income equal to 3 x average salary ie 150% of average each 140 105 57 Multiple 130 000 95 000 35 500 Max borrowing (EURO) for 3 x average salary 3 000 3 000 2 220 3 x average net salary (RON) 1 000 1 000 740 Ave net salary RON (approx) 2007 CHF loan +grace period 2007 EUR loan +grace period 2005 (EUR)

9. Salary indices – construction and average Source: Eurostat via demography.matters.blog

11. Dwellings completed each year BASELINE – 98% individual homes – self financed BUT NOW: AN ADDITIONAL 15 000 – 20 000 per year of homes in new developments on top of baseline

12. Estimated new home construction?

13. Dwellings under construction, by stage, June 2006, June 2007

14. VOLATILITY OF MORTGAGE REPAYMENTS (1) 17.0% 6.1% 10.3% INCREASE OF 2 568 2 329 2 421 2 195 COMBINED RON/EURO 3.5 EURIBOR+100Bps Initial EURO100 000 mortgage loan tracker rate in EURO Monthly payment equivalent in RON (starting at RON/EURO 3.3 and initial interest rate of 7%)

15. VOLATILITY OF MORTGAGE REPAYMENTS (2) EXTREME CASE * Repayment/net income ratio in range 40-70% Note: 139% of 40% is 56%, 139% of 70% is 97% 39.3%* 15.2% 20.9% INCREASE OF 3 058 2 528 2 655 2 195 COMBINED RON/EURO 3.8 EURIBOR+200Bps Initial EURO100 000 mortgage loan tracker rate in EURO Monthly payment equivalent in RON (starting at RON/EURO 3.3 and initial interest rate of 7%)