ESOP: Developers Can Further Drop Housing Prices Up To 40%

The number of housing units finished in Bucharest last year is close to 3,000 according to Alexandru Petrescu, the Managing Director of the real estate agency Esop. He told BURSA that many of the respective units were still for sale. So far, prices for newly built apartments in Bucharest have decreased between 15% and 35%.

Petrescu believes that developers will have to further reduce prices in order to counter the lending freeze. In his opinion, an average reduction by 38-40% of the sale price of new housing units should not be a problem to most developers, who will still make a nice profit. According to Esop, the real estate market is blocked by the lack of liquidities and the lack of trust in the current prices.

The former of the two is, however, the greater cause. "Let us not forget that much bigger prices were paid without hesitation in 2007-2008," Petrescu pointed out. There are expectations that mortgage lending may pick up a little this spring. If such moment is delayed beyond the autumn of 2009, the market will go into a very hard period and many investors will face bankruptcy, Petrescu estimated.

The crisis containment measures announced by the Government are not substantial enough to constitute real help for the housing and construction markets. Petrescu commented that the measures were welcome, but coherence and consistency were the keywords as investments in infrastructure have been needed for a long time anyway. Provided that the heralded governmental investments are actually performed and as substantial as announced, investor confidence could grow and indirectly support the development of the real estate market.