The Prices of the Apartments Are Rapidly Decreasing

The market of the residential blocks of flats begins to lower the prices after the artificial increase in the last year. In Bucharest prices of apartments began to decrease by 10-15% in the last months, and in the future they are expected to reach a 30 to 40% decrease.

Browsing the newspapers that contain real estate offers one cannot say that prices concerning the residential blocks of flats began decreasing. But the real estate agents say that the high prices the owners ask for their flats aren’t accepted so easily by the buyers anymore. "The real estate market report from the summer of 2004" prepared by the Real Estate Counseling Institute (RECI Romania) at the request of "Casa Lux" (a real estate magazine in Romania) supports these rumors. "The more cautious and more responsible attitude of the buyers caused not only a change of preferences, but also commercial blockage. The consequences have already appeared. There are some district in Bucharest, especially some satellite suburbs like Berceni, Militari, Pantelimon, Balta Alba, where this decrease is already of more than 10%, said the report.

Free Fall

The prices’ decrease can get even bigger, but cannot be noticed for the time being because the starting price which the owners set for their apartments at first, are still very big. They cannot get that kind of money now and they won’t be able to get them in the future either. "We could even face a drastic decrease of the prices for this market, very active in the last year. The decrease could mean going back to the prices in 2003, that is more than 30%-40% lower than the artificial prices in the present", as we can see in the RECI Romania report.

Lack of Offers

The rapid and unjustified increase of the prices of the apartments in Bucharest was caused mainly by mortgage. That is why we can say that the Bucharest real estate market depends on the credit contracts and on mortgages. The fluctuations in this domain had some bad repercussions on the market at the end of the first semester of this year, but at the moment there are some other elements which don’t allow the prices to rise. So, the buyer having borrowed money believes the offer is to expensive, pretty low, starts to think about it and realizes that the result doesn’t justify the effort.

Good Areas Remain Expensive

Well reputed districts, like the Herastrau School and Baneasa will keep their special status, remaining as expensive as for the time being, since they are in very high demand. Estimations show that the decrease will reach the level of 8-12% in the next semester. More important adjustments - of 15-18% - will be possible in the Eastern part of the Civic Center, around the Alba-Iulia Plaza and on the boulevards Decebal and Burebista.

The House Demand is Constant

The people want more and more houses, but the offer is very low, and most of the times not a high-quality one, even having an uncertain status. However, an increase of the prices is expected "to appear once the potential house sellers will feel the taste of money. There will also be a higher offer, but of course a lot more expensive", shows the RECI Romania report.

The Deluxe Condominiums are Still Wanted

The deluxe condominiums built in blocks of flats having 4 or 5 levels will be in demand in the future in the same manner as today. Of course they have to be situated in famous districts like Dorobanti, the Bonaparte Park, Floreasca, the Domenii Park, and Cotroceni. The preference for such an offer can be explained for many innocent buyers by the fear of earthquakes and the loneliness need, as well as the central area myth", as we can also see in the report. The report also says that the high prices starting from 900 euros/m2 and getting to 1400-1600 euros/m2 as well the sometimes doubtful quality of these condominiums will determine the disappearance of this tendency.

Predictions

The crush of the apartment market will cause the increase of the ones of the residential houses.

The recession to happen in the near future will decimate the real estate agencies.

The Deluxe Condominiums in the famous neighborhood remain very wanted.

The first incapacities in paying the mortgages are to appear

Risks of Crediting

The real estate agents expect the first incapacities in paying the mortgages to appear. Though this fact is not a daily topic we will be able to see this kind of phenomena in the near future. ‘This will show the real irreducible character of the mortgage, that is an important risk factor", as we can see in the report. We can already see this in Bucharest, where money invested in apartments is mainly from these credits. In the big cities in Moldova and Transylvania the money comes from the Romanians working abroad.

Bankruptcies

The real estate agencies will face an important crisis in a few months. "The rise of the level of the transactions on the real estate selling market gave the artificial impression of a profitable business based on a low investment. The consequence is that the number of real estate agencies in Bucharest tripled in the last year. Unfortunately the services have been unsatisfactory most of the times" says the RECI Romania report. The expected recession of the real estate market - in the apartments sector - will certainly lead to the disappearance of this kind of agencies. This will also lead to a lot of dismissals.