1. The end of 2014 and the beginning of 2015 brought a significant cleaning of the banking sector in terms of non-performing loans. What lesson has the valuation market learnt from the banking sector?
Since the beginning of 2014, but especially this year, Romanian banks have considerably reduced bad loans portfolios. This led to an increase in lending which was at its highest point at the middle of the year. The trend will continue if the economy receives positive signals from the foreign markets. The investment funds became more and more interested after the crisis ended and they bought important amounts of bad loans. Valuation is a profession tightly connected to bank loans and had a lot to learn from this crisis. For example, standards have changed, new regulations emerged, as well as new clarifications for particular aspects. In Europe specialists discuss more and more about Mortgage Lending Value, a concept which applies already in some countries around the world. This concept refers to a certain valuation which is successfully applied to bank loans and sums up a vigilant attitude regarding the value of the loan, the fact that the value of one property has ups and downs and that the assets need to be analysed with care and conservatism. This approach will rule out the extreme values and will follow a sustainable long-term value.
2. Please name 3 key indicators (or key industries) which trigger growth on your market and please detail the way these indicators (or industries) have worked in 2015 so far. If they have not worked, what do you think has limited their transmission mechanism?
Should we discuss which the most important domains that led to an increase in valuation are, we should pay attention to the ones connected to valuations that are imposed by the caution required by the Romanian National Bank regulations and the ones connected to the collateral values that influence bank indicators. Furthermore, there is the value of the estate that will be sold and which is the cause of bad loans. Another area was restructuring businesses in order to adapt to the after crisis situation, but also the valuations needed in order to revive the real estate market, especially after land transactions started to emerge again.
3. The European economies seem to get better and the Romanian economy seems to get much better (in terms of growth). How is this growth reflected in your industry?
Some European economies look better. There are signs of growth which influence the Romanian economy as well, especially because Romania exports most of its goods within the European Community. Economic growth is important and Romania’s is one of the most important in the European Union. This positive trend has continued for a couple of years now and is due to the fact that Romania used to have a smaller Gross Domestic Income, but a bigger development potential than larger economies in Europe. Regarding the valuation industry, we can say that the significant growth in lending the population gave us a lot of work to do. Moreover, bank portfolios valuation, either for forced sales, either because the National Bank needs to establish provisions, led us to a significant growth in the first semester of this year. To conclude, the positive evolution of the Romanian economy and the changes that emerged during the crisis influenced valuation, both qualitative and quantitative. The turnover increased by 20% in the first semester.
4. Is Bucharest still the star of the real estate market? What are the other stars and where do you see bigger opportunities for both the real estate industry and for the valuation industry?
Bucharest with its human and financial potential is the biggest and most developed city in Romania and it is still the biggest real estate market in the country. Bucharest is the spearhead in this domain. After the crisis passed new markets emerged, important ones, especially in cities with big universities and which have more than 300,000 inhabitants. These cities have important human resources and good infrastructure. Cluj-Napoca is one of these cities, a new rising star in real estate and it is being followed by Timisoara and some other big cities. We have to pay attention to some other cities as well, smaller but important in their counties.
5. Have investors regained their trust in the Romanian economy? If so, what are the risks of losing this trust? If not, what are the main reasons?
Investors regained their trust in Romania because the economy constantly increased in the past years with 2 or 3% per year. We have a stable government which encourages a more relaxed fiscal legislation and this will led us to economic stability and to an increase in trust in Romania`s country rating. This is the basis of a long term development.
6. In the USA, the economic policies restored the trust and the real estate wealth of the population. When do you think that wealth represented by the real estate in Romania will reach the pre-crisis level again? What are the arguments?
In the United States there were significant developments in real estate which led to a recovery of the market and to an increase of the standards of living. If we talk about Romania, where the standards of living and real estate values are much lower, we can say the growth potential is higher. We expect to reach the potential met before the crisis again, but not in the near future. The argument is that Romania has a lower growth, prices are lower and so the growth potential is bigger. One of the reasons should be a more accelerated economic growth due to the positive effects of the new Fiscal Law.
7. What risks do you envisage for 2016?
The world faces major turbulences. Europe has the migrant crisis and the war in Ukraine which are reasons enough to be worried. Globally, China faces major risks, its economy dropped suddenly and the currency depreciated and we also have the tensions in the Middle East. These are risks that influence the global economy.