Monday, February 16, 2009

Housing prices could fall by 30% more by end-year

Housing prices in Romania will continue to fall this year, according to real estate company Cushman & Wakefield, which estimates a 30% drop of current levels, while recommending for 2009 investments in properties generating high rents.

According to Cushman, old housing prices fell by 15% in the period September - December 2008, and the new ones by 5-10%, and a 10% decrease in price was registered at overall market level from the beginning of 2009.

"In total, we talk about a fall in prices of up to 35% since September 2008 to date. From September 2008 until now, 50% of apartments have been removed from sale and offered for rental. Under these circumstances, one cannot make a market price for apartments, so there is a possibility for it to fall another 30% over this year. Thus, a 65% decrease may be reached at the end of 2009", the manager of the company's evaluation department, Dan Ionaşcu, said in a release.

Most residential buildings have entered "conservation" and all the unstarted projects, in the project stage, or in the stage of obtaining approvals are offered for sale.

"These projects which were in the stage of planning and organisation and where construction has not started yet represent 70% of all the new projects, on which works started after 2006", the release reads.

On the other hand, the Cushman analysts believe that the small investors, who purchased a large share of the housing under construction in the past two years, will stand the test of the market crisis, because only 15% of those who contracted bank credits will have problems during this period because of the impossibility to reimburse funds.

At the same time, there are very many small investors who have contracted bank credits and therefore will not be so affected by what happens in the market, as they offer apartments for rental at moderate prices.

Similarly, in the residential segment, the most favoured will be the cities where unemployment is very low, respectively those that enjoy the investors' interest, such as Bucharest, Constanţa, Cluj Napoca and Braşov.