BR ANALYSIS. Residential development growing at steady pace in 2019

More than 20,000 new residential units will be delivered this year in Bucharest and the main regional cities on the back of a stable market that might see an uptick in prices in the second half of the year, say consultants and developers.

Asking prices for apartments stood at an average EUR 1,228 per square meter in April, slightly down compared to the previous month, according to an index of real estate classifieds platform imobiliare.ro. Prices went up by 18 percent between the end of 2016 and the end of 2018, when they climbed to EUR 1,239 per sqm, according to the same source. This year, Cluj-Napoca has remained the most expensive residential property market, with asking prices averaging EUR 1,568 per sqm. By comparison, Bucharest residential prices had reached EUR 1,330 per sqm by April, says the index.

“The residential market in Romania is becoming more and more stable, with healthy and not so spectacular price evolutions, which is perfectly normal. Potential buyers are more and more interested in medium and medium-high apartments, located in areas with easy access to public transport, schools, parks, shopping centers and other social facilities. In 2019, we don’t see any major changes occurring on the Romanian residential market,” says Geo Margescu, the CEO and co-founder of Forte Partners. His firm is investing EUR 37 million in a residential complex in northern Bucharest.

The first months of 2019 have been quite rough, with some commentators claiming that the residential sector was overvalued and was about to go into a crisis. The Romanian currency continued to lose ground against the euro and rumors emerged regarding the potential change of the government-backed program for first-time homebuyers called Prima casa. The index based on which the cost of mortgage loans is computed was changed from ROBOR to IRCC, which in the first phase led to a slight reduction of bank installments paid by debtors.

Ovidiu Sandor, the CEO of Mulberry Development, who is building apartments in a mixed-use project in Timisoara, suggests that demand for housing has bounced back in the second quarter of the year.

“The market certainly has room to grow, and the need to live in big cities is far from being covered. We see a real interest in the new, as the share of transactions on the old segment decreases from one month to the next. In terms of prices, the stagnation period that marked the first half of the year will probably be followed by a period of growth generated by the resumption of transactional interest,” says Sandor.

CLUJ-NAPOCA TRAILING BUCHAREST ON RESIDENTIAL DELIVERIES

Data provided by residential property consultancy SVN Romania shows that some 35,000 residential units were delivered in urban areas last year, out of the 60,000 dwellings delivered at the national level.

“We estimate that in 2019 there will be a slight increase in the total number of units delivered to the largest residential markets in Romania. In Bucharest and its surroundings, about 14,000 units are currently being developed and could be delivered in 2019 if developers were to follow their assumed building pace, which would mean a significant increase compared to nearly 11,300 units delivered in 2018,” says Andrei Sarbu, the CEO of SVN Romania.

In regional markets, Cluj-Napoca will rank first with deliveries of new housing units expected to exceed 5,000. More than 3,000 units will become available in Timisoara and Constanta, if the surrounding areas of the cities are taken into account. Similar figures might be recorded by Sibiu and Iasi.

Brasov, meanwhile, will have more than 2,000 residential units finalized in the city and its outskirts, while Oradea might see over 1,000 homes delivered this year, according to the head of SVN Romania.

In terms of transactions volumes, the first five months recorded a fall compared to last year in Bucharest and its surrounding areas, but the number is similar to the same period of 2017.

Sarbu suggested that the conditions for the housing market are positive as transactions are overwhelmingly concluded by end-users, accessibility has continued to improve and the macroeconomic picture is favorable.

Approximately 105 average wages were needed to fully pay for a 2-room apartment in Q1 2019 compared to 114 wages at the beginning of 2018, according to SVN Romania computations.

“We are witnessing an auspicious stabilization of prices. Good projects continue to sell at the project stage, while the demand for housing is above the supply. In the second part of the year, we will probably see a resurgence of the trend of price increases on certain segments and a growing gap between the new and old residential stocks,” says Andreea Comsa, managing director, Premier Estate Management, a residential consultancy firm. However, Sarbu of SVN Romania suggests that developers should face the new market realities in which “build and sell” is over. “Each project needs to be very well adapted to the current market and investors have to carefully assess the existing demand and its characteristics,” he suggested.

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