We analyzed this system in detail in our previous post. In a nutshell, it works like this: bank liquidity fuels mortgage lending to the public; mortgages drive demand; demand fuels the construction sector; the construction sector builds without property development or regional development, profits are withdrawn from the industry without leaving a trace in the infrastructure, the infrastructure deteriorates under the strain, the area’s appeal declines, and demand in that area slumps.
As a result, the system that has run itself into the ground ends up devaluing itself.
A Systemic Failure
The problem is not that each link in this chain is a rarity. Mortgage-fueled overheated demand, weak development, and infrastructure deficits—taken separately, all of these occur in one form or another almost everywhere. The problem is that in Moldova, these links form a closed loop with no single point of external resistance.
There is no one to intervene at the outset—when land first enters the market. There is no mechanism to retain a portion of the profits within the territory, rather than letting them flow out of the sector along with the last apartment sold. And there is no metric to distinguish genuine housing need from surrogate demand—an apartment purchased not to live in, but as a substitute for a bank deposit.
The system doesn’t just malfunction from time to time—it is structured in such a way that every cycle of its normal operation simultaneously serves as a mechanism for its own destruction.
This does not lead to a list of reforms—we have already drawn up such lists twice for Chisinau, and a list in and of itself solves nothing—but rather to three institutions, positioned precisely at those three points on the system’s perimeter where the Moldovan system currently faces no resistance.
Institutional Barriers
The first is the institution of entry. The municipality’s right to determine the conditions under which land enters the construction market at all—before the plot ends up in the contractor’s hands, not after.
In practice, this means that land enters the market not as a bare plot, but as a fully developed site plan—with predetermined density, infrastructure commitments, designated use, and obligations of the future developer—and is allocated through an open concept competition, rather than through a private agreement between the owner and the first bidder.
In the Moldovan context, where a significant portion of potentially suitable plots is encumbered by unresolved property rights and fragmented Soviet-era ownership, the municipality does not need to purchase or expropriate land to gain this leverage.
It is sufficient for the municipality to define the development area; the physical consolidation of fragmented plots within it then becomes the responsibility of the competition winner—with a mandatory mechanism for redistributing shares that prevents a single uncooperative co-owner from blocking the entire project.
This mechanism breaks the cycle leading from the growth of the contracting sector to a lack of territorial development: land can no longer be put to construction without a territorial commitment attached to it from the very beginning.
The second is the institution of retaining profits within the territory. A mandatory infrastructure agreement, established as early as the tender stage, rather than retroactively imposed as a separate tax on an already approved project.
The terms are known in advance: what load will be placed on roads, water, sewer systems, power grids, schools, and kindergartens; which part of the infrastructure the investor will build, which part the city will build, and within what timeframe.
It is essential that this payment not go into the general budget—otherwise, it becomes a standard fee that the developer factors into the price of an apartment, while the road or utility network near the new neighborhood never materializes. The payment must be strictly tied to a specific territory.
This mechanism breaks the cycle from a lack of development to profit extraction and infrastructure deterioration: profits can still be withdrawn from the project, but only after the obligation to the area has been fulfilled—not in lieu of it.
Third—the measurement mechanism. An independent mechanism for assessing actual housing needs, separate from investment demand, along with constant monitoring of how much of the existing housing stock is occupied—how many apartments are actually vacant, how many are owned by individuals who own multiple properties, where people actually live in the city, and where investment properties are located.
This link breaks the most insidious transition in the entire cycle—the moment when demand in a specific area slumps.
Such a slump almost never means that people no longer need housing. It means that investors have stopped buying apartments in anticipation of further price increases.
These are two different processes, but without a metric to measure them, the government reacts to them the same way every time—with the very same remedy that caused the problem in the first place: further reductions in mortgage rates and new measures to stimulate demand, which once again target not the area itself but the square meter as an asset. This is precisely why government buyer support programs, including Prima Casă, must rely directly on this institution: a loan guarantee should not cover just any home purchase, but rather a purchase driven by a genuine housing need in an area capable of sustaining that need—otherwise, the budget will continue to guarantee the liquidity of an asset that is flawed by its very design.
Not separately, but together
It is precisely these three institutions together—and not a disparate list of measures—that constitute the institutional framework that needs to be built.
Not because this is how it’s done elsewhere, but because each of them breaks the cycle precisely at the point where it currently sustains itself. Land, not a finished building, is the point where intervention is needed.
The system must be fixed as a system, not as a collection of individual failed transactions.
And the housing issue in Chisinau is measured not by the number of square meters completed, but by what that number actually represents—new homes for new families or new storage units for money that will once again stand empty.
Dmitri Tereburce,
an expert in real estate appraisal and development
