REAS: Residential market to recover as prices get closer to a level suitable to buyers

The residential construction output in Romania increased by 17,000 units, including individual housing, with the most active regions in Romania being Bucharest-Ilfov, North-West and North-East. In 2008, the housing construction output in the Bucharest-Ilfov region was estimated at 8,326 units, of which less than 35 percent were delivered in the capital city, REAS found. Despite the large construction volumes, the market still shows a strong demand for apartments. Due to the gap between buyer preferences and price expectations, demand for housing is bound to remain largely unmet, according to REAS. Still, even given the completed apartments in Bucharest in 2008, estimated at 2,867 units, the number “is not impressive” when compared to other capital cities of the CESE region (Central, Eastern and Southern Europe). According to REAS, there were twice fewer apartments completed in Bucharest than in Bratislava, which is one-fourth Bucharest size, and almost 90 percent fewer completions than in the Polish capital comparable in population size. As for the residential prices' trimmed evolution in 2008, REAS advisors argue that “from the local household point of view, the market should normalize and adjust price levels to their purchasing power. For many developers, this phenomenon may indicate a painful necessity to revise financial assumptions for the implemented projects, resignation from the high margins and a significantly longer period of sales and implementation of projects. Consequently, many developers will have to retarget their projects to the popular and mid-market clients”.
REAS predictions for 2009 comprise reduced transactions volumes and lower average prices in the residential market, due to the lack of capital and financing. REAS foresees a relatively robust recovery of the residential market from the present downturn, given this scale of development of the construction market.
Magda Purice