The real estate crisis will be strongly felt this summer, when the first bankruptcies and foreclosures are due to occur.
Buyers are waiting for prices to go down, banks are no longer financing large projects, developers will not tolerate to sell for less than they bought the land for – this is the current scenario on the real estate market, players say.
"Romanian developers still won’t sell in the current market situation, even though they have large debts, because they will not admit to their failure. The first bankruptcies and foreclosures of large projects on the domestic market will probably occur in May or June and that is when the real estate market crisis actually begins," says Radu Merica, general manager of German developer ECE in Romania. The German company currently manages the development of Colosseum shopping centre in the Bucharest, after having had a contract to develop a mall inside the Sema Parc project, which was terminated by River Invest, the company held by businessman Ion Radulea that invests in the development of the current Semanatoarea site.
Real estate developers that were cautious in the past years say that many investors have been living in a constant party over the last two years, without thinking of the future. "Everybody in real estate was dancing and singing and nobody was thinking of the future. Developers are now groggy after a party that lasted a couple of years," Merica says.
Still, opportunities will soon arise for those investors that have cash available, once prices drop a great deal. "Everything was too expensive last year. Yet, I think now’s the best time to begin a project, because land has become cheaper and prices of construction materials have dropped, too. After all, the first rule in real estate is to buy cheap land. Whoever starts now, will already have the construction permit ready in a year and a half and the real estate crisis will near its end," Merica believes.
The big projects worth over 50 million euros will be the worst hit by the crisis. The developer has to come up with 50% of the investment value, compared with 20-30% the banks required last year and already have more than 50% of it pre-rented.
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