“The real estate market is now paying the price for the last years’ frenzy”
In 2007, Tal Roma (photo) left the real estate market in Costa Rica behind and came in Romania to join the Israeli-based AFI Europe, part of Africa Israel group.
He found a similar market to the one in Costa Rica: prices were skyrocketing at an incredible speed, from 10 dollars to 100 within just a few months. Everybody wanted to invest in real estate, the landlords were enjoying the bargaining power, especially those who owned large land parcels and nobody seemed to be wondering for how long the prices would keep rising or by how much.
“It was incredible to see price increases like in Pipera. I’ve known persons who bought large land plots for 5 dollars per square meter and sell them afterwards for 2-3 hundred euros, dividing them into smaller parcels, destined for residential buildings. I believe we are now paying the price of those times, we are paying the price of an infant market, a purely speculative market”, representative of AFI Europe told Wall-Street.
Tal Roma says the crisis will mature players in the real estate industry, who will be more cautious over the next 5-10 years. Today, the prices of properties in Romania dropped to a decent level, affordable to a broader range of buyers. These buyers fall into two categories: persons who want to buy but don’t qualify for a banking loan and persons who afford to buy, but wait for the prices to go down.
“You don’t have to try to predict the lowest point of a market, because nobody is a fortune-teller and nobody can possibly know when the lowest point will be reached. Those who will try to speculate on that and take a guess are doomed to fail. You buy when you think prices are decent. Even though prices will continue to go down, the difference cannot be that big”, said the manager of AFI Europe.
Developers are not forced to sell and there are no distressed asset sales that everybody is talking about, AFI Europe’s manager continued.
“We see many developers freezing their projects and waiting, and not selling. Everybody’s expecting the banks to resume lending. Everybody’s laying their hopes at lending”, said Roma.
The economic crisis has its own positive side for AFI Europe, who will deliver at the end of September AFI Palace Cotroceni shopping center. “The completion of many shopping center has been put off, while others were opened and are almost empty”, Tal Roma explained.
Although the research reports of real estate advisors show price falls and rent cuts for office, commercial and residential at a monthly basis, Tal Roma says the prices didn’t plummeted at the speed everybody says they did. It all happens at a psychological level.
“People are still swarming in supermarkets, at the seaside prices dropped compared to last year, but the decline is yet narrow. Prices for apartments fell too, but the devaluation of the local currency intervenes. The declines are not so dramatic, it is rather a psychological crisis”, Roma stressed.
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