ROMANIAN REAL ESTATE PRICES IN 2013. ROMANIA INDEX OF PROPERTIES
Monday-4 February 2013, under the patronage of Institute of International Relations and Economic Cooperation of Romania, the conference on REAL ESTATE IN ROMANIA IN 2013. Lower prices or bankruptcy. has taken place. The conference was a get together of real estate agents, experts, brokers and real estate funds from Romania and EU and economists.
2012: a record loss on real estate field.
The debates started by highlighting the drop in prices on real estate market in Romania during 2012. The average price reduction was around 45% last year, the biggest drop since the crisis hit Romania but the prices are still a long way to go before they reach the real estate reality area. New significant drops in prices are necessary until the market will stabilized and the investment in real estate will become one more time efficient.
The initial value of 1.200/1.300 euro per square meter had dropped by the year end towards 800 to 650 euro per square meter, but is a long way to go until normal prices will come back on Romanian real estate.
The real dimensions of real estate crisis in Romania where made public: real estate frozen projects are reaching a value of 3 billion euro, the bankruptcy numbers in the construction field reach 80% of the investor`s numbers and 2 billion euro announced to be invested in real estate never materialized .
2013: a 60%percent drop in prices is expected.
The real estate market will continue on a downward spiral, with decreasing in prices reaching 80% in rural areas, secondary or vacation house and provincial cities real estate objectives.
The prices are expected to fall below 200-250 euro per square meter in prime areas of Bucharest real estate.
The falling in prices is fueled by the banking crisis, the spike in banking interest rates, high inflation, dramatic decrees in investment, drastic reduction in real income for majority of Romanians and also decrees in foreign investments and in revenues from Romanian working abroad.
To this long list of negative trends we can add the 100.000 flats that will be put on the market by the banks in the foreclosure process.
Already the banks presented the actions starting prices ranging fro 19.000 to 22.000 euro for one room flat, to 30.000 euro per two rooms flat and around 45.000 euro for three room flats. The mansions and villas are sold at pricing ranging from 60.000 euro per 100 squared meters villas for high luxury areas and as low as 20-30.000 euro in secondary areas.
The prices for land already dropped with 70% in 2012 and will furthermore decrease with 50% this year, bellow 50 euro per square meter in central areas of Bucharest.
Other phenomena that are impacting downwards the prices are: a drop in population income by 30% in 2013,a negative trend that will reduce bellow 20.000 people the number of real estate buyers ( from a maximum of 1 million Romanians active on real estate market before the crisis).
The banking system is engulfed in crisis and the average real interest is around 20% which is making the cost of real estate credits unsustainable. We can conclude that taking a real estate loan in this period is the path towards bankruptcy and foreclosure for 90% of the clients.
The real estate market is flooded by foreclosure.
The real estate collapse will continue and be aggravated on the count of individual properties foreclosures and also company bankruptcy that will flood the market with over 10.000 hectares of prime land that will press down the prices this year.
1.000 to 2.000 villas and mansions will also appear on the market in 2013 in areas as: Colentina, Bucurestii Noi, Pipera, Baneasa, Damaroaia etc. This will be sold on the market at prices bellow 60.000 euro and will push toward collapse the luxury real estate market.
This conservative estimates are based on property values offered already on the market by the banks on the foreclosure process stated Lo Petersen from banking consortium active on Romanian market. The decrease in economic activity forecasted for this year will only aggravate the situation concluded the official.
Chef Economist Mihail Racaceanu underlined in his speech that real estate market can not operate outside the negative climate of Romanian and EU economy.
The price per square meter in prime real estate areas cannot be over medium salary value by more than two times. As in Romania the salary is around 200 euro a price per square meter can not be substantiated up to more than 400 euro per square meter.
The responsibility of real estate crisis is mostly the burden on the lacuna of education of Romanian real estate agencies. The real estate agent must emphasize the necessity of a rapid reduction of prices in order to mend the crisis on real estate market. The market will restart if we will reach the interest zone around 300 euros, concluded the chief economist.
The housing/villa market: the main victim of 2013.
The main hit will be directed in 2013 towards houses and villas.
The economy crisis had dramatically reduced the number of interested players for buying this type of real estate, and the expenses to maintain such a property had gone up impressively, worsening the perspective for this type of properties. This type of properties is the most vulnerable for banking foreclosures because rapid prosecuted and sell on the market at prices below 80.000 euro thus villas can help the banks to cut their losses. In 2013 areas such as: Mosilor, Damaroaia ,Bucurestii Noi, Pipera, Baneasa, Tunari still offer the possibility to be sold around 60.000 euro, the rest of the areas of south and east of the capital are completely unfit for marketing and selling.
The foreclosures will open the market for villas at below 60.000 euro, concluded the panel of experts.
Simple truth: who buy`s is a looser!
In order to reignite the real estate market the key role is belonging to the real estate agencies. They must apply the necessary pressure to bring down the prices by at least 50% and to lead the properties owners from the la la land fantasies prices to a real assessment of the value of their properties in order to restart financial operations and re-emergence of profit on the market.
We should understand an obvious lesson that no investment in Romania is possible at prices of 400-500 euro per square meter as long as similar opportunities are to be found in Hungary, Greece, Turkey or Bulgaria but at prices below 100 euro. In this moment any buyer of Romanian properties is a looser, concluded the guests present at the conference.
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