At most 15% of the new homes in Bucharest qualify for the "First home" program

Alina Toma Vereha

The "First Home" program will have an effect first and foremost on the market for old homes, estimates Dorinel Cazacu, consultant for Spanish group "Prasa" for its Romanian projects. "I think that right now, just 10 - 15% of the newly built homes that exist on Bucharest"s real estate market have any chance to qualify for being sold through this program", he said.

Mr. Cazacu estimates that the program will cause an increase in the price of old apartments, whereas prices for new homes will see a slight drop. Home prices in Bucharest will converge towards a point of balance, halfway between the current highs and lows. Dorinel Cazacu says that some owners of older two-room apartments raised their prices by EUR 10,000 as soon as the "First Home" program was approved, in order to qualify for the maximum guarantee of EUR 60,000. Others will try to cut their prices in order to make homes more attractive for the "First Home" program.

The number of new homes currently completed and ready for sale does not exceed 7-800 units, in the Bucharest area, Mr. Cazacu said. This estimate includes the number of small projects of local developers and those in the county of Ilfov.

Home prices have dropped since the beginning of the year, due to shrinking demand. Mr. Dorinel Cazacu said that the asking price for homes already built that have not found any buyers yet, did not decrease significantly. However, for the few transactions concluded in 2009, negotiations were concluded at prices sometimes 25% lower than the initial asking price.

"Gea Prasa", the joint venture between "Gea 21" and "Grupo Prasa", currently has an ongoing luxury residential project in Bucharest, in the Lacul Tei area. The first phase of the project is scheduled to be completed this year. "Laguna Residence" involves the construction of 504 luxury residences on a plot of land of over 5 hectares, which will require an investment of about EUR 96 million. 252 apartments will become available following the first stage of the project. According to the latest available data, over half of the homes have been sold.

Spanish group "Prasa" has another residential project underway, on the plot of land of the former sunflower oil factory "Muntenia", in the Spătarul Preda area, in Southwestern Bucharest. Dorinel Cazacu said: "The crisis and the deadlock of the real estate market have caught us with our works in the planning stage. The fact that we have not yet begun construction now works to our advantage, because we can adapt our development strategies, according to the new market circumstances. We acquired this plot of land in 2006 for a very good price and we are considering building about 2,000 homes for customers with average income. The complex will include the appropriate retail areas and service providers".

"Prasa""s project will be developed in several stages and will be designed so as to be truly accessible to medium class customers. The launch of the project will depend on the evolution of the real estate market in the coming period.

"Prasa" paid EUR 29 million for the plot of land which belonged to the former sunflower oil plant "Muntenia". 25% of the amount was provided by Spanish company "Gea 21".