Crisis Halves Real Estate Transactions

The international financial crisis hit the Romanian real estate market hard as early as October 2008, when the overall transaction volume started to decline abruptly as a direct result of a corresponding plunge in the volume of new mortgage loans. Dumitru Viorel Manescu, President of the National Union of Public Notaries in Romania (UNNPR), told BURSA that, as illustrated in the attached chart, the decline of the real estate business was most severe between November 2008 and February 2009. The market somewhat picked up in Spring and early Summer, but still remained extremely low compared to the first half of 2008.

The UNNPR reported 162,724 real estate transactions in the first half of 2009, down by approximately 35% year-on-year. The number of real estate liens registered in the first half of 2009 is 34,955, nearly three times less than the 110,431 reported for the first half of 2008. While the notaries" statistics point to an annual decline of one third of what was reported in H1, 2008, the real estate agencies have estimated a setback as severe as 50%. Realtors could see the crisis looming already last Summer, when the investors" reticence to close deals began to become obvious.

One year into the crisis, the State-driven First Home Programme is the only ray of hope for the market as the real estate agencies that have not closed yet only survive on residential and commercial rentals. Most agencies see their only chance linked to the recovery of mortgage lending. In one year, the price of pre-owned apartments dropped as much as 40%, while residential rent followed by a 20-30% decline. In the meantime, owners of newly built apartments are hardly willing to decrease their prices by more than 10-15%.

The office space segment remains scarred by rampant vacancy rates and a 20-30% decrease in rents, while the loss of appetite for consumption has left many commercial spaces empty. While some owners managed to find tenants after offering a 20-25% discount, others, such as the Trident chain in Ardeal, were forced to close down.