Low appetite in real estate sight

Low appetite in real estate sight

The chronic global economic-financial crisis and particularly the uncertain situation generated by the sovereign debt crisis in Europe, decreased the private or institutional investors' appetite for Romania

The direct effect of this situation has led to a negative evolution of the local real estate market in 2012, although the declines were less pronounced than the first years of crisis. They generally occurred in the bubble's area and the development lands' area, the latter having the strongest speculative character.

Trends reversed

If in the boom period between 2004 and the first half of 2008 the real estate trading prices have risen spectacularly due to the flow of foreign capital and the prospect of Romania's accession to the EU, in the next period the trend reversed and the number of transactions reduced dramatically, and after a severe correction in 2009 the values began to steadily decline.

Some examples of real estate market analysis conducted by Darian DRS are significant to observe the influence of financing restraint on the branch. The fact that the value of commercial, industrial or office properties fell during June 2008 and June 2012 by 15% - 20%, is one example. In addition to, during the same period, the residential properties fell by 40% - 60%, and development lands by 60% - 65%, noting that this analysis refers to average trading values and represents properties of 27 major cities.

Finding roots in agriculture lands

The evolution of the real estate market is closely correlated with the economic status, the income of the population and the financing costs, and because these parameters haven't registered positive developments, the outlook does not seem to contain a significant recovery. I estimate that in the near future we will face decreases in property values for all real estate segments.

Even if we cannot speak of price increases in the real estate industry sector mentioned, I do believe that the value of agricultural lands will have an increasing evolution in the next period, considering the quality and the potential of these lands in Romania, but also the global situation regarding agriculture and food.

Analyzing the perspective, in the long run, starting from the infrastructure situation, the quality of buildings and real estates in Romania, there is a large investment coverage as well as a growing real estate industry, but this can only be achieved on the basis of efficiency and sustainability.