One thing everyone seems to agree on regarding the real estate market this year is that the amount of transactions has shrunk. Still, in spite of that, there are a lot of opportunities. Let’s review the different segments:
Market Segments
- Land: According to Colliers International, in some cases, the prices are half of what they were in 2007-2008, at the height of the real estate bubble in Romania. These circumstances are favorable to those who envisage complex development projects. Strictly speculatively, the liquidity in this segment is, however, very low.
- Houses/apartments: Sales are 40% lower compared to some of the most active years, also according to Colliers International. The “First House” state-guaranteed mortgage program did not work well. The banks have extended the terms for submissions, to no avail. As opposed to the period before the financial crisis, the residential sector is now a medium-long term business.
- Offices: They continue to be the star of the market. This was my reaso for going ahead with a recent successful transaction. Whatever office space was built during the recession has been occupied and the market has the ability to absorb the newly created spaces in the following years. According to Cushman & Wakefield Echinox, this will continue to be a market-growth engine. Of course, it is also worth noting that this segment has been very dynamic in big cities, such as Cluj-Napoca or Iași, where economic growth requires space for businesses.
- Commercial spaces have increased by 4.6 times compared to the level before the crisis, whereas street retail has dropped drastically, except for the space of traditional fairs. Experts forecast the development of large commercial areas for the real estate global players. Proof of that is one of the record deals this year – the purchase of the Militari Shopping retail park in Bucharest, for EUR 95 million by Prime Kapital and MAS Real Estate.
Developments over the Next Few Years
All experts I have been speaking to agree on the fact that the real estate market in Romania has entered a phase of maturity. The potential upcoming recession that everyone has been fearing will affect the real estate market in a nuanced way. It is hard to believe that we will witness another bubble followed by another crash the way it happened some ten years ago. On the contrary, the long-term development of the local economy will turn real estate into a growingly important (in volume) and lucrative market. The change of essence refers to what I have already written about before, namely that the market is changing from a speculative one, to one in which specialization and smart development strategies, based on high-quality market insights, give you the competitive advantage.
For the information in this analysis, I have used the following sources: