Thursday, October 30, 2008

10% price-cut from owners after negotiations

The negotiation margin trading in residential real estate transactions reached about 10% in September, in most cities in the country, which indicates the continuation of a downwards trend of the real estate market, informs a release of the real estate network RE / MAX Romania. The negotiation margin represents the difference between the price initially asked by the owner (the list price of the property) and the price at which the transaction is concluded.

"Compared to June, the negotiation availability of both parties increased, thus transactions were recorded under the list prices, negotiations over 10% being seldom met today," said Mihaela Alexandroiu, Broker / Owner RE / MAX Bastion, Bucharest. She added that, also as compared to June, the list price dropped by 5-10% for the new apartments and by about 15% in the case of the old ones, while the trading price dropped by 10-20%, which means a cumulative price drop of 15-35%. "As particularly regards the capital, I estimate a decrease in prices of up to 25% in the case of new projects that have sold less than 50% of the units built," Mihaela Alexandroiu also said.

The situation is similar in other cities, too, the list prices continuing their downward trend. In Arad, both the list and the trading prices fell by 5% each, as compared to June, while in Brasov list prices have dropped by 10% for the old apartments and even by 20% for the new ones, while the negotiation margin reached 10%. The same 10% negotiation margin is also registered in Timişoara, Cluj-Napoca and Bacău. In Piteşti, the prices of old apartments have dropped by 15-25%, those of the new apartments remained at 950-1200 euros/sqm, and the trading margin is one of the highest, respectively 8 - 12%.

As regards the number of transactions, in Bucharest they have seen a slight increase in September, as against August, but the RE / MAX specialists say that this phenomenon occurs each year after the summer months. While a similar trend occurred in Braşov, where falling prices recorded this summer have slightly stimulated transactions in September, in other cities (Cluj-Napoca, Constanţa, Piteşti, Timişoara, etc.), the number of transactions has not increased after the first autumn month, against the backdrop of the global credit crisis and increased interests rates at national level".



Tuesday, October 28, 2008

Becali expects land prices to double in five years

Businessman George Becali, owner of the Steaua soccer club and one of the top land owners in Bucharest, said he was no longer interested in acquisitions since the outburst of the crisis, but is not willing to lower prices for land he plans to sell, although he currently has no buyers.

 “I am only selling, but will not lower prices. I am negotiating with speculators who want to buy cheaper land. I can hold on to that land, because there is no pressure on me to sell,” Becali told Business Standard. He expects to have more clients interested in that land next spring. 

With his Arcom construction company, he plans to build several residential buildings on part of the land. “I want to build apartments which I plan to sell at lower prices than those on the market, because I already have the land. After the buildings are finished, I will sell the land and the construction, and will make profit from the selling price,” he said. Becali added that he is not interested in other cities, because apartments there are much cheaper than in Bucharest, while construction costs are similar. 

Becali owns some 484 hectares of land, located on the outskirts of Bucharest and in the cities of Braila and Pitesti. In the past year alone, he earned some €100 million from selling several plots.



GTC: Funding for our ongoing projects is ensured

Representatives of Globe Trade Center (GTC), one of the leading real estate developers on the Romanian market, says the company's short term investments amount to 318m euros, with funding for ongoing projects being ensured. The company currently has two residential complexes under construction in Bucharest, shopping centres in Piatra-Neamt and Arad, as well as one of the leading office projects in Bucharest - City Gate, in Piata Presei Libere. The Romanian subsidiary is 46% held by GTC Real Estate, which is in turn controlled by Israeli group Kardan. The two companies are to merge by the end of the year, which will make Kardan a direct shareholder of the local subsidiary. GTC developer has become known in Romania mainly after building and selling office buildings Europe House and America House in Piata Victoriei for almost 150m euros.



Standard & Poor's has downgraded Romania's rating to BB+, with negative outlook

Financial rating agency Standard & Poor's has lowered its long-term foreign currency sovereign credit rating to "BB+" from "BBB" and to "B" from "A-" for short-term foreign currency sovereign credit. The outlook is negative in both cases.

On the other hand, the National Forecasting Commission has revised the estimates concerning 2009 economic growth downwards, from 6.5 percent to 6 percent, and anticipates a slowdown for every sector, given the international turmoil. Up until this autumn, most forecasts made every six months would be revised upwards.

"This is slight revision influenced by the international context and by an increased caution. We used multi-annual averages a lot to eliminate potential sources of imbalance in the supply-demand ratios and the potential inflationary pressures," CNP chairman Ion Ghizdeanu told ZF.
He explained that growth of the economy had multi-annual trends to avoid surprises from forecasts.

The Romanian economy sped up this year, performing in stark contrast with the economies in the euro zone that signalled that they had entered recession a few months ago. The economic growth in the first half stood at 8.8 percent compared with the same time last year; the yearend estimate is equally optimistic, of 9.1 percent of the Gross Domestic Product, given that the second half of the year usually has a greater contribution to the GDP formation. The analysts believe that CNP's adjustment of the economic growth is not substantial enough considering the risks related to financing and lending.

"Uncertainty is the word that best describes next year. Deviations can be very high. The main elements with an important impact on the GDP progress are the slowdown of lending and the recession in the euro zone. The growth pace of lending could go down from about 50 percent to 20 percent," says Ionut Dumitru, chief economist of Raiffeisen Bank.

The most important decline estimated for the constructions sector, where the growth pace will halve. As a result, this industry is expected to increase by 12.8 percent compared with 28.8 percent this year. The final version of the autumn forecast indicated a 4.7 percent increase of the industry and a 5.8 increase of services, while agriculture will grow by 3.5 percent, given a very good harvest in 2008.

Compared with the preliminary version of the forecast, published at the end of September, CNP has revised estimates about the industrial sector downward both for 2009 and for 2008, as well.
The industry is expected to grow by 4.8 percent compared with 5.4 percent in the previous forecast.

The impact of international turmoil will also show among consumers, with consumption exuberance to go down, which is not that bad, considering the exaggerated growth of consumption lately. CNP estimates consumption to slow down significantly, from 10 percent increase in 2008 to 7.1 percent in 2009.

This is a substantial revision of the data, compared with the preliminary forecast that indicated an 11 percent increase for this year and of 7.6 percent for next year.

The acceleration of the economic growth was alarming for NBR, given the inflationary pressures it generates.

The final autumn forecast changes the data for this year's inflation upwards from 5.8 percent to 6 percent but maintains next year's estimate at 4.5 percent.



Wednesday, October 15, 2008

Immoeast's capitalisation drops to 800 million euros, fund plans property sale

Austrian investment fund Immoeast, the top buyer of real estate assets in Romania in recent years, will start selling some of these assets on the Romanian market, where it owns properties that were assessed at 3.4 billion euros at the end of June.

The capitalisation of Immoeast on the Vienna Stock Exchange reached approximately 800 million euros, down 87% from the same time last year when the market value of the company exceeded six billion euros.

At the same time, the market value of the properties held by the fund was valued at 10.9 billion euros at the end of June, that is in the first financial quarter of the company.

"After years of dynamic expansion, the group's focus will shift towards consolidation and modification of financial structures. Moreover, we will focus on steps to ensure liquidity by slashing the number of development projects and by the sale of other properties in our portfolio," said Thomas Kleibl, the new spokesman of Immoeast's board of directors, who replaced Karl Petrikovics at the helm of the fund.

Properties are to be sold in Romania, too, sources on the real estate market say, with this country being Immoeast's most important market and accounting for 31.6% of its entire portfolio. After the decline on the stock market, Immoeast has reduced its chances of raising cash from the capital market.

The company's debts amounted to 1.64 billion euros at the end of July, and average repayment term was 5.2 years. The banks Immoeast worked with to finance its investments include Erste Bank, Raiffeisen (RZB), Bank Austria Creditanstalt, Hypo Real Estate and Investkredit.

The most important operational properties that Immoeast holds in Romania include IRIDE, S-Park and Victoria Park business parks, Bucharest Airport Tower and Bucharest Corporate Center office buildings in Bucharest, several shopping complexes - Polus Center in Cluj, Armonia Center in Arad and Euromall Pitesti and a number of logistics centres. The company also owns interests in a number of real estate development companies that operate in Romania, as well, such as Adama Holding, TriGranit and Caterata and has several properties in development under a forward-purchase contract, such as the World Trade Center project in Constanta, Gold Plaza shopping complex in Baia Mare and Euromall Galati.

Real estate companies are being badly hurt by the international financial crisis, all the more so if they are listed on capital markets, considering the negative trend of the stock markets over the last few months.



Monday, October 6, 2008

Prices of one-room and two-room apartments dropped by over 10%

The global financial crisis determined an accentuated drop in prices and an increase in the sales offer. Thus, from March until now, one-room apartment prices have dropped by almost 10%, while two-room apartment prices by 12.6%.
According to the latest report of, September marks a significant increase in offers on the apartment sales market, but also a decrease in prices for the seventh consecutive month. "The prices required by owners for their apartments in Bucharest are lower and lower, many of them willing to sell their apartments in order to avoid the risk of higher losses in the next period," says the General Manager of, Silvia Vîlceanu.
She also says that, for the real estate market, March is a line of demarcation between the period of spectacular growths and the start of the real estate crisis. "This month is not only the period with the most sales offers, but also with the highest prices for all types of buildings. From March until now, one-room apartment prices have fallen by almost 10%, registering, for the first time this year, a decrease under 70,000 euros. Similarly, two-room apartments have lost 12.6% of the price asked in March, having been put up for sale at an average value of 107,162 euros, in September", Vîlceanu added. At the same time, the four-room apartments are the only apartments that have not changed their market price, as against March, however they see a dramatic drop compared to last month, when their value decreased by 6.8%. "We estimate that, by the end of the year, old apartments market will not register a stabilisation in the number of offers, given that the sale decision is generally influenced by the evolution of the market. The financial instability of the international markets will also produce effects on the Romanian real estate market, through a continuous decline in old apartment prices", considers the General Manager of According to the monitoring report conducted by, the sales offer for old apartments increased by 40%, as compared to September last year, and last month, the Bucharesters put up for sale 3621 apartments, while last year in September, the offer was only 2574 housing units.