Should you walk away from your deposit in Romania?

As I have both said and written in the past I believe the Romanian property market is a mess and believe it will stay like this for sometime.

I am glad I had the strength to resist the apparently quick profits available there as every property expert seemed to suggest, thus luckily I have no investments there.

But for those that have put a deposit down on a property in Romania there is a very important question many are asking themselves - should I just walk away?

Whilst this may be a very painful decision I believe that for most it will be the best option.

There are a number reasons why I believe that its better to move on than face a number of years of continued problems:

1. the Romanian property market is falling dramatically and thus it could well be a long time before you get anywhere near the purchase price for a sale of the said property
2. the Romania economy is a mess, this will not be turned around overnight and this will not help the property market
3. there has been a huge currency swing against investors meaning the remaining money to pay on a property is now larger (in one's home currency) than the original purchase price of the property - this makes the deposit less than worthless
4. the market is very oversupplied (not good for sales or rentals)
5. much of the property built in the last few years in Romania was both very poor quality and overpriced - not a good combination
6. there is still no sign of mortgages for foreigners in Romania, they are likely still to be some way off, and even when they do come in they'll be low LTV and high interest rates and expensive terms.
7. rentals are weak, the market is oversupplied, thus cashflow is likely to poor for a long time (combined with the potential for very high mortgages rates once they are available)
8. as you can't get a mortgage you'd have to pay the remainder of the purchase price in cash - i would have thought in this times there are far better returns to be had on the money than tying it up in a dud investment
9. if you do complete on the property you'll have to spend extra money on kitchens, furnishings etc
10. the ongoing hassle, time and energy spent on the investment will not be worth it, and it will require this energy every year for a number of years - not something to be underestimated.

Overall what you've got is a market where prices are falling fast, poor quality build and oversupply, a weak rental market, no resale market, no mortgage market and a poor currency.

In general I would recommend most investors just to walk away from their deposits in Romania - better to take the hit now than be faced of 5+ years of poor (negative) cashflow, having to continually subsidise a property that you can't sell (nevermind sell at the purchase price). Tough as it may be this is the reality.