Prices for real estate property will remain high in Romania as long as the demand stays high and unsatisfied, a Unicredit Tiriac bank (UCT) representative told the Residential Market Forecasts forum organized by Evensys yesterday in Bucharest.

There are different opinions on the market regarding the unsatisfied demand in Bucharest and overall in the country. Figures vary from 60,000 to 200,000 units in Bucharest and approximately 1,000,000 units in Romania, said Antonela Marchievici, Real Estate Finance Director with the bank.

According to the bank’s internal assessment, there are over 100,000 individuals in Bucharest eligible for applying to a mortgage loan. Those belonging to the low to middle class are usually eligible for an average amount of mortgage loan of 130,000 euros while those in the upper middle class to top class are eligible for mortgage loans exceeding 325,000 euros.
Further to central bank’s new relaxation of the mortgage loans conditions (0% advance payment, 70% maximum annuity/net income ratio, longer tenor of the loans), these amounts of the mortgage loans could be increased by no more than 30%. As each bank has its own risk approach, such relaxed conditions will not be applied by all banks on the market, and thus the increase in the loan amounts would be lower. Despite the large number of residential projects announced on Bucharest market (over 100,000 units), there are only 66 projects delivering over the next 4 years approximately 27,000 units with 100% completion probability, according to UCT’s assessment in April 2007.

This means that the annual delivery rate will increase in average by at least 40% over the next 4 years (reference year 2006). However this figure is considerably lower than the similar supply in cities such as Warsaw, Budapest or Prague, which have a yearly increase in the new stock of over 10,000 units.

The northern area of Bucharest will continue to attract the majority of investment, but, starting with 2006, other areas of interest appeared on the residential map. These areas are suitable for large residential projects addressing the middle class and are located within the city in neighborhoods such as Tei, Colentina, Titan, Pantelimon, Vitan, Mihai Bravu, Dristor, Tineretului, Militari, therefore the densely populated medium class areas.

A new segment of the supply will be the development of large satellite cities within enlarged Bucharest metropolitan area (Corbeanca, Otopeni, Tunari, Tancabesti, Popesti-Leordeni, Cernica etc). Due to scarcity and increase in the price land in Bucharest, developers recently reoriented towards second and third tier cities in the country, where the new supply is almost inexistent. The lack of land available for developments in the city forced the developers to look for former industrial platforms to be reconverted into large mixed use residential-retail-office area. 
Among the factors limiting the supply are the scarcity of specialized labor force, limited infrastructure conditions in terms of access roads and public utilities, the lack of suitable land for developing residential projects at acceptable costs, the changes in the taxation system / VAT applicable to construction costs & land acquisition from January 2008 and the increasingly difficult and longer process for obtaining the building permit starting from January 2008.

Evensys is a planning company specialized in organizing business events aimed at providing interactive, insightful information and analysis about issues facing businesses today in Romania as well as in Central & Eastern Europe.

Source:  MyKinda