Why the silence when the market dropped from 4,000 deals to 1,000? Because 1,000 could still be called “cooling.” 623 deals in a quarter can’t. That’s 16% of the 2024 norm. It’s impossible not to notice. Someone decided to ride the theme first. With the right narrative.
The narrative is simple: “moderate correction of 5-7%, a year of recalculation, everything under control.” It suits everyone at the same time. Real estate developers need the buyer to believe – now is the bottom, then it will be more expensive, take it now. Banks need no one to demand revaluation of collateral hanging on the balance sheet at 2024 prices. Politicians need to avoid admitting that the government mortgage program fueled the bubble and the demographic hole killed demand.
Hence the “adjustment.” That’s why “not a crash.” That’s why now.
What the media isn’t reporting
The market is not “cooling.” The market has ceased to be a market and has become a showcase.
Most people think that the bank works as an intermediary. Collected deposits – made loans. Took someone else’s money – lent it to you. It doesn’t. And it’s not a conspiracy theory. This is the way the modern banking system works – it is explicitly written about in the guidance materials of the central banks of the UK, USA and Europe.
When a bank gives you a €100,000 mortgage, it doesn’t go into a vault and pull someone’s savings out of there. It opens two accounts. On one, it says: “the bank’s asset is a loan of 100,000 euros”. On the other: “your account has been credited with 100,000 euros”. The money appeared out of thin air the moment he pressed the key. No one had earned or saved it before.
Your debt is real. Your monthly payments are from your real salary. But the very money you received is an issue. The bank literally created it by writing a number on a screen.
That’s why when they say “banks are expanding lending” – it’s not a metaphor. It’s a literal description of how new purchasing power, not backed by real production or savings, is injected into the economy. Money appears – and it actually moves prices.
A buyer comes to the bank. The bank says: we need an appraisal of the apartment. The appraiser comes. And this is where the main problem of the Moldovan market begins, which is not commonly spoken about out loud.
The appraiser does not have access to the register of closed transactions with real prices. He works with listings – with announcements of sale. That is, the prices that the seller has written on his door. Prices that have no real buyer behind them who has agreed and paid. These are wish prices, not market prices.
In a normal system, the appraiser looks at closed transactions – how much the apartment was actually bought for, not how much they wanted to sell it for. The difference between these two figures is the liquidity effect: the real buyer votes with money, and this price reflects the real demand. The Moldovan appraiser does not see this. He sees only a shop window.
Then the mechanism is simple. The appraiser takes prices from the listings – let’s say the sellers want 1,200 euros per meter – and writes in the report: the market value of the collateral is 96,000 euros. The bank takes this figure and creates a 96,000 euro loan out of thin air – because the program allows you to lend almost 100% of the value of the collateral.
The buyer’s own funds? They are there on paper. But in practice they are spent on indirect costs – notary, registration, insurance, appraiser, commissions. By the time the deal closes, the buyer has zero money in the apartment itself. The bank financed everything.
The deal closes. The price goes into the registry. The next appraiser sees it as an analog – and it’s no longer a listing, it’s a closed deal that looks like market evidence. He writes: the market value is 1,200 euros per meter, or even higher. The next bank again creates the full value of the apartment out of thin air. The next transaction closes more expensive.
The circle is closed. And it is self-reinforcing – with double fuel.
Like a bubble inflating
First fuel: the appraiser works with offer prices without a liquidity test. The inflated showcase becomes the basis for the collateral valuation. Second fuel: a 100% loan with no real down payment removes the only stopcock. In the classic model, the buyer contributes 20-30% of his money and thinks twice. Here, his personal cachet in the apartment is zero. There is nothing to risk. There is nothing to brake.
Evaluation of listings – overvalued collateral – 100% loan – transaction – new analog in the register – valuation higher – again 100% loan – transaction even more expensive.
No one in that chain is doing anything illegal. The appraiser is honestly working with the data he has. The bank is honestly following the program. The buyer honestly takes the loan. The seller is being honest with the price. But collectively, they all inflate the bubble together – not because they want to, but because that’s the way the system works.
That’s what procyclicality is. An overvalued storefront breeds overvalued collateral. Overvalued collateral breeds a no down payment loan. A non-contribution loan begets a showcase-price deal. The showcase price transaction becomes a new analog for the next appraisal. The system does not strive for equilibrium – it runs further and further away from it until it hits the only physical limit that cannot be circumvented: the real incomes of the people who must service these loans out of their paychecks every month for twenty to thirty years.
In parallel, there is a second mechanism inside the bank that reinforces the first one. The bank has issued a mortgage. The apartment is on its balance sheet as collateral – an asset. The regulator requires a reserve in case of non-repayment. The size of the reserve depends on the value of the collateral: the more expensive the apartment, the smaller the reserve is needed. Prices are rising. Mortgages get more expensive. Reserves look sufficient. The bank’s capital is freed up. This capital can be used to make new loans. New loans push prices up again. Collateral appreciates again. Reserves look good again.
That’s why things look so secure in good times. Balance sheets are beautiful. Reserves are plentiful. Collateral is expensive. Loans are easy. Appraisers are writing high numbers. The market is growing.
But behind this beautiful machine, there has always been one question no one has ever asked out loud: where is the live money? Not the notes. Cash.
The diaspora at its peak gave the Chisinau apartment market 130-140 million euros a year. Plus domestic savings – another 90 million. Total living money on the market in 2023-2024: 220-270 million euros per year.
Now – a maximum of 100-120 million. Because people who left 10 years ago no longer buy in Chisinau. They buy in Germany. In Romania. The diaspora stopped looking at Moldova as an investment and started looking at it as the past.
At 100 million cachet for an average apartment of 120,000 euros, that’s physically 800-850 transactions a year. The market does exactly that many. The rest is either mortgaged to the limit of solvency, or not for sale.
And here is a figure that no one counts out loud. From the pockets of those who have already taken a mortgage, every year goes 60-80 million euros to the banks – interest plus the body of the debt. Incoming cache equals outgoing debt flow. Net purchasing liquidity tends to zero.
The pump has stopped. It hasn’t slowed down. It has stopped.
The effect of a kinked nut
No deals. There are no new analogs to appraise. The appraiser, who used to confidently take listings and write the market value, now looks at the market and sees a void – 623 transactions per quarter for the whole of Chisinau. The showcase hangs with prices from 2024, but behind it there is no real buyer who agreed and paid. Writing 1,720 euros per meter based on ads with no deals behind them is no longer an appraisal. It’s a fiction.
The bank senses this. It starts demanding more conservative valuations. Reduces LTV. Tightens up the requirements for the borrower. Fewer approvals. Fewer buyers. Even fewer deals. There are even fewer new analogs. Listings sit dormant even longer.
The first round is spinning in reverse with the same mechanics.
At the same time, the second circuit is starting to reverse. The pledges on the bank’s balance sheet are officially still expensive – because the last valuations were at 2024 prices, according to those very listings. But there are no real deals at those prices. Sooner or later, the bank must revalue the collateral downward. As soon as this happens, there are not enough reserves. You have to add more. That eats up capital. Less capital means less ability to lend. Less credit – less buyers. Prices are pushed down. Mortgages get even cheaper. Reserves are scarce again.
The downward spiral is unwinding with the same inevitability as the upward spiral.
And then the third blow comes from above.
“Shutting up shop” or throwing wood on the fire?
The IMF, which finances Moldova and has a say in the way the financial system is organized, has long pointed out the risks of overheating of the mortgage market and demanded to bring lending conditions in line with the real solvency of borrowers.
The translation is simple: close up shop with loans at 100% at window prices. The government nods to the IMF while quietly shutting down Prima Casa Plus – not with pomp, not with an admission of error, but simply by cutting off funding. The program that had been artificially supporting demand for the last few years has disappeared without an obituary.
And Radu Marian, chairman of the parliamentary economy commission, steps to the microphone at that moment and says that the solution to the problem is to increase the supply of housing and remove barriers to construction. A man looks at the fire and offers to bring firewood.
This is not just political deafness. It’s a signal that no one is going to recognize the real diagnosis. Because the real diagnosis sounds uncomfortable: the government program of subsidized mortgages has heated up the bubble, the appraisal system without access to real transactions has inflated it, banks are sitting on mines of overvalued mortgages, and the buyer has left the market not because of a lack of square meters – but because there is no more real money in the market.
Three circuits are pressing at the same time. The market is crumbling from below – through the disappearance of cache and liquidity. The banking system is being shaken from within – through the problem of revaluation of collateral. At the same time, lending to the construction sector has grown by 60% over the year: developers take money from banks, they do not sell, and real estate with real liquidity of 623 transactions per quarter serves as collateral for this debt. And on top of that, the IMF with its demands to tighten lending and the government, which has closed the last pump of artificial demand.
The NBM writes in the report: “revaluation risks persist”. This means one thing: everyone understands everything. But no one wants to be the first to hit the revaluation button. Because as soon as the first bank honestly rewrites the value of its collateral downwards, the second circuit will start in full force.
“A moderate correction of 5-7%” is not a forecast. It’s wishful thinking presented as probable. A market that has lost 84% of its transactions while prices remain unchanged is not correcting 5-7%. It is hovering. Sellers are keeping a face in the listings. The buyer is gone.
The mine is laid. The clock is ticking.
And a market that hangs in the air doesn’t live there for long.
Dmitri Taraburca,
expert in real estate development and valuation
