The first months of price freefall
If in 2007, the residential market was on a permanent upward trend on both segments, new apartments and old apartments, last year was marked by drastic changes. The gap between the year’s peak and the year’s bottom level was 350 euro/sqm, namely a roughly 20% decline.
“We had a prolific first quarter, when we had our first decline in asking price since the introduction of the indice that gauges the real estate market evolution (BREI – Bucharest Real Estate Index) in January 2005. Throughout the past three years, the real estate market was on constant upsurge, until February 2008 when the industry slid 50 units, namely by 3% from prior month, after a record 1,826 euro/sqm of BREI,” according to Colliers analysis.
In March, the indice climbed by 110/sqm, up to 1,887 euro/sqm, and together with April’s peak of 1,888 euro/sqm, were the biggest values of BREI since its introduction. The maximum point of price evolution in the residential market was in third and fourth month of 2008, after which the indice slid into a downtrend.
“If we had a fantastic evolution of the market in first quarter, with an unexpected decline and steep growth, the second quarter however, was marked by a full stalemate. Although there was a 2% decline in May against April, in the following three months, the indice remained around 1,840 euro/sqm”, said Calin Bucur, head of the team who introduced BREI indice.
In July 2008 was the last stagnation of asking prices, after which the real estate market was under downward pressure, starting August.
“Thus, we have a decline from 1,844 euro/sqm, recorded in July, down to 1,540 euro/sqm, recorded in December,a 304 euro/sqm shortfall, equivalent to 16 percent within six months, and compared to January 2008, the year closed down by 286 euro/sqm”, said Calin Bucur.
New BREI vs old BREI
Although the old apartment market and the new apartment market did not synchronized, there were short intervals when O-BREI and N-BREI had a different trend. Thus, at the beginning of 2007, O-BREI was much below N-BREI. However, throughout the year, the O-BREI had a 29% growth, achieving 1,875 euro/sqm value and exceeding N-BREI by 140 units.
“Despite the steep decline in February, in the entire first quarter of 2008, O-BREI remained ahead of BREI-N, the situation shifting starting April, when O-BREI value slid below the indice of new apartments. Up to end-2008, O-BREI had a descending path interrupted by a short period of stagnation, during summer”, according to Colliers.
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