A plot in Pipera which was worth EUR 2.5 million in the first part of 2006 is now valued at EUR 6 million. The situation is not exceptional, according to data from real estate agency Asco Properties. A site in Balotesti which was valued at EUR 6 million at the beginning of 2006 would now fetch some EUR 14 million. Although location, development prospects and even adjacent real estate projects are factors in price rises, the difference in asking price is enough to show the increases in prices over the last year.
There are a number of reasons why the price of land went up and, according to pundits, will continue the upward trend. EU accession is likely to lead to an increase in purchasing power and consequently to higher demand on the real estate market, explains Daniel Mitarcu of DTZ. Developers will be more motivated to build new projects, which will put pressure on available land, for which prices will go up, he explains.
The price of land has increased steadily over the last two years. “Plot prices have increased by 200 percent and even 300 percent, depending upon the area and what could be built on the plot,” explains Alexandru Nitu of Asco Properties. The increase was even bigger than that, sometimes reaching 400 percent, believes Mitarcu of DTZ.
He also thinks the increasing pace for land prices has started to calm down after a short period following Romania's EU accession. “The increase in prices in the next period cannot be spectacular,” points out Mitarcu.
Theodor Pallady – Policolor area will see a strong development in the commercial and industrial segments in the following two years, which will trigger an accelerated increase in land prices, explains Sabadus.
He also points out the A2 highway – the east ring road, where the lack of proper plots for development has already led to an artificial increase of land prices. Fundulea, on A2 highway, might also be one of the interesting areas to look at as the highway approaches completion, thus catching the eyes of logistics and retail developers.
The areas previously zoned for agricultural purposes in the outer-lying areas of Bucharest along the main arterial routes have some of the largest rates of increases in value, says Ben Binns of Kingsturge Romania. Areas such as along the A1 highway and DN1 road are prime examples that have seen some of the largest rates of increase.
Areas along A1 highway were available at some EUR 5 per sqm several years ago, while at present they fetch some EUR 50 per sqm, depending on size and location, explains Binns.
Land prices went up by up to 60 percent in 2006, with the increase being experienced mainly in the second part of the year, according to Nitu of Asco Properties. The northern area of Bucharest stays in the top of land prices, with EUR 3,500 per sqm for premium locations. In Floreasca, Baneasa, Nordului or Piata Victoriei – Buzesti, land owners have been asking for some EUR 2,000 to EUR 2,500 per sqm. The limited offer, along with serious interest from investors may be the reasons for which prices are so high in these areas.
Binns of Kingsturge gives the example of the Electrotehnica plot, adjacent to Plaza Romania, which was sold at some EUR 700 per sqm. “The location benefits from good public and road access and from the proximity to high density residential areas,” he explains.
In search of alternatives to the reduced availability of land in Bucharest, developers have already started to focus on Brownfield sites suitable for redevelopment. “One example is [German developer] Soravia's metropolis scheme on Iancu de Hunedoara, which was sold to Generali Accession Fund. What is more interesting is that developers and investors could look at different means of structuring deals using options such as joint venture partnerships with the land owners, points out Ben Binns.
Sabadus of Asco Properties says the best solution so far has been the use of former industrial sites for residential, commercial or mixed projects, but such properties are running short. “Another option is to demolish old buildings and build new projects on the same plot, with the inconvenience that these plots cover only from 500 to 1,000 sqm,” explains Sabadus.