Friday, November 7, 2008

Prices of old apartments in Bucharest continue to fall

Prices of old flats in Bucharest continued to go down in October, by 6% compared with the previous month and by 16% compared with the beginning of the year, reveals the Bucharest Real Estate Index (BREI), put together by real estate consultancy Colliers International.

The average price of old flats in Bucharest has therefore reached 1,576 euros/square metre, with the most important depreciation occurring in sector six, which comprises districts such as Militari and Crangasi, where prices reached 1,310 euros/square metre, as a result of an almost 13% decline.

On the other hand, according to the ZF real estate index which takes into account the asking prices on the website, three-room flats in Bucharest have dropped by 12% since the beginning of the year, while in some areas the decline was as steep as 20% (Iancului, Mihai Bravu, Oltenitei).

The price of new flats remained at the same level in September and October, according to BREI, although a series of smaller companies announced price cuts or various incentives to help facilitate buying a home.

"Although the asking price remains constant, developers continue with the promotional offers of the summer or launch new ones to boost sales," Colliers officials note. The price drops were caused by the low volume of sales in the last few months, due to both the financial situation that led to higher interests rates and harsher lending terms and to the expectations of the potential buyers that prices would fall, influenced by the situation on the foreign markets.

In addition, a large part of the demand would come from speculative investors until recently, who have, however, reduced their operations significantly.

However, not all the prices of old flats fell, as there are still some owners who keep asking for the same prices, without closing a deal.

"The supply is no longer uniform but divided into two segments; those who keep the prices close to the values of the previous month and those who cut some of the price in the hope they would close a deal. We are therefore seeing a dispute on the market related to the minimal threshold that prices could reach," Colliers officials add.

Although the number of sale-purchase deals went down, real estate consultants have noticed a rise in the number of lease contracts, of some 15% compared with the summer of 2007.

"This autumn, many of the clients looking to buy a home, either no longer had access to loans, or were confused by the situation of the market and decided to rent at least for a while," says Adrian Ghimpau, head of the residential department of the Coldwell Banker Affiliates of Romania.