Realtors Snub Theory About Realty Market Collapse

Realtors yesterday reacted to the statements of Adrian Vasilescu, advisor to The National Bank governor, who told "Bursa" that the homes segment of the real estate market may collapse in two or three years. Vasilescu pointed out that the continuous increase in home prices would lead to a major crisis such as that in Japan, which would eventually affect all market segments. He added: "The real estate agencies rather exaggerated upon posting property prices. While banks distinguish between the real price and the posted price, those operating on the real estate market do not."

In response, realtors unanimously argued that a real estate market collapse was impossible. They believe that it was Vasilescu who exaggerated with his statements and pointed out that only a diversified offer on the market could balance prices. They say they look forward to the moment when banks start financing investors interested in building residential complex, which would lead to a diversified offer and improved construction quality.

Codrut Cioncu, general manager of the real estate agency Rasig Group, told "Bursa" that Vasilescu scenario was impossible and that, as long as newly built homes cost 1000 EUR/square meter, apartments in old buildings would be traded for half as much. He added that this ratio was applicable to the hottest areas in Bucharest, where property cost more than in Prague. Cioncu said: "The price of newly built homes cannot go beyond 1000 EUR/square meter, considering that no one builds apartments smaller than 160 square meters. Sometimes the price is much too high compared to the quality of the building. The real value of a home with deluxe finishings is about 800 EUR per square meter of net surface. Speculative prices and transactions concluded for exorbitant prices are encouraged by the small offer on this segment - the hot areas of Bucharest." Cioncu told us that, as long as banks did not finance residential investors, the offer would not improve in terms of price or quality.

Dan Ioan Popp, general manager of the residential builder Impact, believes that prices will continue to go up by virtue of the common market principle of price uniformity. He said: "Prices can level in five years, in 25 years or in 80 years. So it a decrease in property prices is impossible. They will continue to increase because of the general tendency of living standard and revenue improvement." He also believes that another explanation for the increase in prices is related to the demand - offer ratio, considering that the offer of investors in residential complexes is still rather small. "This prices is 85-to-90 percent dominated by the offer of new buildings constructed individually, with which investors cannot compete," Popp added. Mihaela Alexandroiu, general manager of the real estate agency Bastion, does not agree with Adrian Vasilescu either. She said it was not the realty market that was going to collapse, but the mortgage market. She explained: "Few people enjoy the comfort of a truly stable and safe job. Until this year, banks granted mortgage loans much too easily. In while from now, some of those who took mortgage loans will no longer be able to pay their installments, so their homes will be auctioned off below market prices. There are already plenty of speculators who hunt such opportunities. Similar situations have been recorded in Poland, The Czech Republic and Hungary." She admitted that, in many cases, the price - quality ratio in new constructions was not exactly satisfactory. She exemplified with the Soseaua Nordului area, where several apartments of execrable finishings were sold as deluxe apartments for 1,500 EUR/square meter of net surface. The buyers preferred such apartments because of location and the limited alternatives in the respective area. Alexandroiu, too, is displeased with the banks' refusal to open credit lines for those who invest in residential complexes. Alexandru Nitescu, investment manager for the realtor Regatta, also believes that a collapse of the residential market is impossible because the demand and offer mechanisms will prevent it. He said: "For the time being the residential market is functioning perfectly, as a function of demand and offer. The sale prices are very close to the prices posted by real estate agencies. The buyers are better informed now and they don't just throw money out through the window. Cases when the price - quality ratio is not observed have grown rare now. For the near future, I believe that Bucharest will evolve similarly to neighboring capitals where the demand pressure found its valve in residential complexes built in the outskirts."

The real estate agencies contacted by "Bursa" generally believe that the price of land in Bucharest has been rocketing since the beginning of the year. The average increase is 50-to-60 percent year-on-year in the areas preferred by investors. Realtors also expect that the prices of villas may also gain some 15-to-20 percent by the year-end.