2007 was considered the best year for real estate players. We’ve seen the first frozen projects in 2008, together with price fallout for new housing units. Insiders see no positive signal for this year’s market trend. The first half will surely be tough, whereas things might settle down in second half.
Tim Wilkinson (photo), Managing Director of advisory company DTZ Echinox, says that this year will be marked by the attempt of real estate market to adjust to the effects triggered by the crisis.

“The market needs to be reviewed and this will happen in investment and land segments. I think the residential market will be the first to resume activity in first half of 2009, but we will surely witness a re-assessment of prices compared to 2007”, Tim Wilkinson told Wall-Street.

The quality will become a more important factor, and real estate market will recover gradually, sector by sector, whereas we will see a slowdown of activity in segments that were very active in 2008.

“We expect a slowdown of activities in office, retail and industrial”, said Wilkinson, stressing that he didn’t expect the market to be fully restored in first half of 2009.

Evelina Necula, Head of Marketing Department within DTZ Echinox said the developers who hadn’t yet completed their projects, but they would deliver them in first half of 2009, intend on framing the offer within the range that benefits of 5% VAT via surface reconfiguration.

“As for the commercial segment, the developers who put off the delivery date of projects endeavor to meet the new lending requirements of the banks.

Adrian Ghimpau, manager of residential department at Coldwell Banker Affiliates of Romania thinks the factors that could unclog the real estate market are: loosened lending conditions, a lineup of prices to real purchase power of buyers as well as messages broadcasted by the media.

“In the first part of the year, the current trend will continue. However, off-plan sales were driven out – in other words, developers will not be able to sell ‘on-paper’ properties, so they will have to have higher equities. Furthermore, many of the completed housing units will be to let, therefore, the rental offer will be enriched”, said Adrian Ghimpau.

Opus Land Development, developer of Cosmopolis project in Bucharest expects a stagnation of property sales in first three months of 2009, whereas it forecasts a steady second half.

“Although we expect a stagnation of sales in first quarter, we think the things will settle down starting with the second half of the year”, said Murat Kavurga,managing director of Opus Land Development, quoted by NewsIn.

“The crisis will surely last until the second half of 2009. We think that one of the effects of the crisis will be the decline of the prices for old apartments, a slight decline for new apartments and growth in rents”, Eren Colakoglu, technical manager at Pelican Com told Wall-Street.

Increasing number of distressed sales

For next year, the developers would surely rethink their market strategies, as the lack of funding will require higher levels of equity to be put into deals and developers will be less willing to do this, due to economic outlook, according to Michael Lloyd, former managing director of Baneasa Project.

“This means that a largest number of projects are likely to be mothballed. I believe there will be a number of banks looking to recover cash forcing developers to increase equity margins which they will struggle to do. This will lead to an increasing number of ‘distressed’ sales”, said Michael Lloyd.

Blake Horsely, the first expat of Colliers International Romania said in November last year, that core fund could withdraw from actively purchasing, perhaps into 2010 and that all major plays could be made by private equity funds.

“Private equity funds are now beginning to look more closely at Romania, waiting for some owners and developers to become distressed, putting pressure on them to sell quickly at below market value to repay their financiers”, Blake Horsley explained.
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