First house buying program is unaccessible to most of the people

The “Prima Casa” (“First House”) program aimed at helping young people acquire a home is unaccessible to most of the population and the effects will show in six months' time, declared for NewsIn Dan Ionascu, real estate evaluation and consultancy director with Cushman & Wakefield.

He described the government's initiative to thaw the real estate market and help citizens as very praiseworthy and welcomed, but unadapted to the market's level of investments.

“The 60,000 euros loan is way below the price of a decent apartment in a semi-central area. This money can only buy a one-roomed or four-roomed apartment in the outskirts of Bucharest,” explained Ionascu.

While in Bucharest the high prices diminish the purchasing power, in other areas of the country both prices and buying power are lower.

He added that the program is directed only to certain segments of the population, with monthly incomes above 4,500 lei.

The Cushman & Wakefield representative mentioned that, for a short period of time, the market may be partially destabilized as the funds will be absorbed in preferential conditions in a rather speculative and uncontrolled investment environment.

Ionascu also referred to the fact that the central bank (BNR) will need to give up its prudent behaviour adopted during the last 18 months in order to align its crediting lines with the government's policies and make the program work.

Romania's Prime Minister Emil Boc declared on June 5 that the first house buying program will be usable starting with June 20 by all those who did not own a house when the ordinance was published.

The government decided on June 4 that banks will set a type I mortgage right on houses purchased through this program during the entire period of the crediting contract, with the interdiction to sell the house for five years.

The annual margin of the guarantees issued, the crediting and eligibility conditions will be settled within 15 days after the emergency ordinance is published.

People buying a house through the “Prima Casa” program will pay a VAT of only 5 percent, the government and bank officials decided last week.

The state will work with all the banks answering the criteria imposed by the government: national coverage, an advance payment lower than 5 percent and interests below those of the market.

Banks will be selected through a bid organized by the Finance Ministry. By allotting 100 million euros, this program could help people buy their first house, the total purchasing value standing at 1 billion euros. The maximum loan guaranteed is of 60,000 euros, the average price of an apartment, mentioned Boc.

The program was approved by the government on May 20. The state will guarantee 80 percent of the value of a loan.

Cushman & Wakefield runs 230 offices in 58 countries and employs over 15,000 people. The Romanian unit was opened in January 2007.

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