RADU ZILIŞTEANU: "Real estate investors have moved to Asia, after the events in Cyprus"

Many real estate investors have turned their focus to Asian areas such as Singapore, Macau, Taiwan or Hong Kong, taking out their money from European banks and/or investments in the EU member states, following what happened in Cyprus, according to real estate expert and Economics PhD Radu Zilişteanu.

According to him, some of the real estate investors that have reacted early on to avoid being affected by the bail-in were also present in Romania.

Three weeks ago, the EU member states and the European Parliament have approved the rescue of banks that default through a bail-in, in other words by using the unguaranteed portion of bank deposits, after two Cypriot banks that were in default used over 50% of the deposits of individuals and companies that exceeded 100,000 Euros, last spring.

On the reaction of real estate investors, Radu Zilişteanu said: "As a general rule, the major real estate investors are very well educated and connected to the banking and financial realities and they take the necessary measures when things such as the measures taken to save the bankrupt banks happen.

Many investors were frightened by what happened in Cyprus, which is in fact an experiment for what is going to happen in Europe. Cypriot banks held accounts of real estate investors, and especially of those from the ex-soviet space. Thinking that what happened in Cyprus could happen in Europe as well, have taken the necessary steps right after it happened, by moving their accounts outside the European space and by relocating their investments.

This behavior of aversion to the risks involved by turbulence periods is one that is specific to this crisis. Cyprus is slowly losing its tax haven nature".

Under these circumstances, the real estate expert considers that the bail-in measures approved by the European institutions will not affect the Romanian real estate market.

At the present time, there aren't any more major funds that invest in Romania, said Radu Zilişteanu, who added that, on the residential segment, there are numerous unsold apartments and that investors aren't too interested in new investments.

"On the commercial segment, there are some malls that are being built, but there are no premises that any of them will become operational this year. The market for offices was not that unstable last year, with some exceptions of relocation to smaller spaces and to cheaper areas", Mr. Zilişteanu said.

At the same time, demand in the sector has dropped, and banks are becoming increasingly cautious in lending money, because they view real estate sector as highly risky. These are some of the reasons why forecasts are not optimistic.

Radu Zilişteanu also told us: "We could see a certain turnaround on the market for farmland, due to the media frenzy on the subject. I do not think that the regulations which allow the sale of farmland to individuals will have any positive effect, because those who wanted to buy that kind of land could do so in the past, by creating a company to do so. The buildable land sector will not see a turnaround however".

He also emphasized that the real estate market will not see a turnaround in 2014, because this sector depends highly on what is happening in the entire economy, where the forecasted growth is less than 2%, and the real estate ratios (average prices and the number of deals) take 6-12 months to react from the moment the economy sees a significant growth.