IB Extended Essay
Economics
Topic: Impact of new the local government policies in the real estate market of city of
“Cluj Napoca”.
Research Question: What is the impact of the new local government policies on the
real estate market in the city of “Cluj Napoca”?
Introduction
Cluj Napoca is the city with the highest GDP growth rate in the European Union due to
successful policies applied by the local Government and EU funds used to make
investments in different areas. The price of Real Estate rose exponentially in the last 5 years
in this city showing that the policies' purpose to attract more businesses and create more
jobs were effective. The main focus of the essay is to analyse the impact of the local
government policies on the real estate market and what is the cause-effect relationship
between them. To evaluate this, the research question is “What is the impact of the new local
government policies on the real estate market in the city of “Cluj Napoca”? ”
Hypothesis
It was hypothesised that the new government policies enhanced economic activity and
growth, attracted more firms, workers and created more jobs in the area which resulted in an
increase in demand for housing, as a result the housing prices increased over the past five
years.
Methods of Data Collection
The data collected was mainly about the city. The data about the investments made by the
local authorities was collected from the city hall website and local press agencies news
articles, also from the mayor Facebook page. The data about the population, new firms, GDP
was collected from the National Institute of Statistics and UBB University (the Economics
and Business Management University of Cluj Napoca).
What policies did the local government apply?
The local government invested mainly in infrastructure and in the business environment.
Over the past 4 years they spent a total of 479 millions of euros, 75% european funds and the
rest funds collected through local taxes. The main investments are bridge constructions,
childcare and schools renovations, acquisition of new electric trams, trolleybuses and buses,
renovations of existing bridges, renovations of existing roads, building of new roads and bike
lanes, building of new multi-level parking lots, urban planning projects, and etc…//.
The significant positive impacts of the investments in road infrastructure are improved
connectivity, trade and commerce, accessibility, reduced transportation cost. These factors
contribute to creating an environment that is beneficial for businesses attracting foreign
businesses in the region, also the creation of new businesses following an increase in the
number of new jobs and an increase
in income levels. Also, the real GDP
increases since there is more
economic activity. The results could
be seen in the diagrams below, the
GDP of the city of Cluj Napoca had a
real growth rate above 8% in 2019
and 2021, in 2020 due to the global
crisis it had a real growth rate of just
1.23%, but compared to most
economies around the world it did
way better, in 2022 due to inflation
and global recession caused by the Russian invasion of Ukraine, the real growth rate was
negative 8.24%. The real growth rate of this region over the past 4 years is the highest in all
EU. In fig. X we can observe the increasing number of new companies created in Cluj
Napoca clearly showing that a lot of entrepreneurs are incentivized to start a business in this
area due to the favourable conditions. The number of people employed also rose by 6.2%
from 2019 to 2022, nearly 4 times more than the capital city, Bucharest.
As more people are attracted to do business and work in this area, the resident population
grows so demand for housing is created.
What was the impact to the real estate market?
The increased number of residents, income levels created demand in the real estate market
for housing. The total new demand over the past 4 years is shown in the diagram x and the
supply of housing is also shown in diag. Y. As the demand increased there was created a
shortage in housing which led to an increase in rent prices. The price per square metre
increased by x% and you enumerate the years. The supply and demand diagram below
shows the shortage and the increase in prices.
+effect on different groups of stakeholders. 0