After a couple of tough years the local residential real estate market could see a long awaited pick-up in 2011, local developers hope. Asher Lax, marketing & sales VP at Adama, talked to Business Review about the company’s results so far and future plans for the Romanian market.
Would you say now is a good moment to invest in buying a new apartment?
Yes, I believe it is. The market is showing signs of a pick-up. People’s confidence is returning, they are starting to buy and those who are buying are paying cash as the First Home (Prima Casa) program is not functional presently. Nevertheless the banks seem more willing to grant mortgages, too. This is also a pre-election year and this usually means more money in the market.
I don’t think that prices will further decrease, at least not for projects which have a good location like the ones Adama has in Titan and downtown. Not only do I not think that prices will go down, but I expect a gradual increase towards the end of 2011. The proper price of an apartment located in Titan, let’s say, is EUR 1,100 per sqm, whereas presently it is under this threshold at about EUR 900-EUR 1,000. But I expect prices to reach that level in a year.
What can you tell us about Adama’s results in Bucharest and elsewhere?
We’ve sold roughly 1,000 flats countrywide. In Bucharest we have sold 700 and we have 150 more. Prices start at EUR 55,000 for a studio but the highest demand is for two- and three-room apartments. Outside Bucharest it’s a completely different market. People earn less, but even here we can see a pick up.
In Bucharest Adama has a project that targets high-end customers. Has this market segment evolved differently?
The Evocasa Selecta project is located on Ferdinand Boulevard and it has 77 apartments out of which we have sold 65 percent so far. Prices have decreased less for this sort of apartment but then again we are talking about completely different customers who come and simply buy, no banks, no First Home. Prices start at EUR 90,000, VAT included, and go up to EUR 300,000 and they are still relatively low if you consider the location and the furnishings. This is also a very good investment opportunity. In three years’ time I’m convinced that prices will double.
By that time prices will be going up everywhere especially downtown where there aren’t many new apartments and most have large areas – a mistake some developers made. Since the beginning of the year we have sold eight apartments at Evocasa Selecta which is very good.
What matters most to potential buyers?
First of all I would say that the developer’s credibility. Adama has managed to build a strong and positive brand in the past few years. Furbishing and location come next. Easy access to public transportation, schools and supermarkets will always add more value to an apartment.
How much has the government’s First Home program helped sales?
There has been a lot of talk about the First Home program but since its beginning out of all the transactions made so far, less than 2 percent were closed through the First Home scheme. Out of all the apartments we have sold in Bucharest less than 10 percent were bought through this program. I’m not saying that it didn’t help. The program had a good psychological effect but at the end of the day it wasn’t First Home that mattered the most.
What would you say were the biggest mistakes made by local developers in the past couple of years?
There were two main mistakes. The first would be the chosen locations, followed by the surface of the apartments. Whoever built blocks on the outskirts of town or two-bedroom apartments that reach 120 sqm or three-room ones that have 200 sqm, simply won’t sell them. It was an illusion back in 2007 that one could sell anything.
Has the local real estate market grown more mature over the last few years?
People have learned lessons and they are more cautious. Before the crisis the market was an illusion and those who took out credits are not the only ones to blame but the banks too. I have worked in banking, back abroad, and I can tell you it is not normal to buy a plot of land today for EUR 1 million only to sell it three months later for EUR 8 million. Just recently I met someone interested in selling a plot of land and I feel that sellers are once again asking unreasonable prices. EUR 3 million for 1,100 sqm in Titan is not justified. This is not Champs Elysees. Most people have learned from the crisis but there are still some living under an illusion.
What are Adama’s plans for this year and how do you see the market evolving in 2011?
There aren’t many players left on the market. At Adama we plan to start building two more blocks on the grounds of the already existing Evocasa Optima and Edenia Titan. Construction will start this summer and will probably be finished in the spring of 2013. We are presently selling very well in Evocasa Armonia and we could also start the third block in there.
I believe it is a very good moment to build and it doesn’t have to do with construction costs – which are at a normal level – but in two years’ time there will be no other new apartments in Bucharest. Right now we only have 150 apartments unsold in Bucharest. Outside the capital we don’t have expansion plans at the moment. We are waiting to see how the market evolves.
Are you interested in buying more land locally?
We are not buying but we are open to joint ventures with land owners if the location is good. We are constantly looking at the land offer but some sellers still have unreasonable demands. It is hard for them to understand that a buyer will offer EUR 400,000-EUR 500,000 for a piece of land they paid EUR 2.5 million for a few years ago. Right now we have a steady land portfolio. We own land in Cluj, Timisoara, Oradea and Arad which we bought in 2006, 2007.
How many apartments have you sold through real estate agencies?
We have sold less than 10 percent of the apartments through real estate agencies. Agencies work in a different manner. They are interested in making money fast. If a customer comes and asks for a EUR 50,000 apartment they will offer them an old apartment for that price and not bother convincing them to make an effort and consider a new one for EUR 70,000. It is also the question of commission which they receive from us and from the buyer also.
We have sales offices on the grounds of all the projects. We also had a large-scale billboard campaign on the subway but now we mostly do our promoting via the internet, direct mailing and B2B campaigns with big companies in Bucharest.
CV Asher Lax
Before joining Adama, Asher Lax worked for 19 years – of which 11 were spent as manager – for United Mizrahi Bank in Israel. While in Romania, he was general manager for the West Park and Casablanca projects in Bucharest.