At least ten thousand Bucharest inhabitants who bought apartments in the first half of 2008, when prices had peaked, are seeing their home’s value spiral down as days go by, and in most cases their loans now significantly exceed the price they could get if they tried to sell.
According to data from the Union of Notaries and from the Land Register, 200,000 real estate transactions were sealed in the first five months of 2008, including deals involving land and buildings designed to be used for other purposes than living. It is during this period that a gap started to emerge between prices asked by owners and those that the buyers were willing to pay, which triggered the continued decline in the number of transactions.
Around 30,000 of the transactions were concluded in Bucharest, with at least half of them involving apartments. "The majority of Bucharest real estate transactions involve apartments," said representatives of the Barbu Roxana Maria notary office, located in central Bucharest. According to the ZF index, prices of three-room Bucharest apartments fell over 40% against May 2008, when the average price was 2,070 euros per sqm.
Dragos N., 33, who works in constructions, purchased a two-room apartment near IOR park in Eastern Bucharest during this period. He paid 95,000 euros for a two-room, 49 sqm apartment in June last year, when prices were starting to go down.
"I would say this apartment is now probably worth 70,000 euros at most. When I bought it, the bank appraised it at 97,000 euros and granted me a 30-year, 80,000-euro loan," says Dragos N.
Dragos thought it was a bargain because "when I bought it, two-room apartments in the area cost around 120,000 euros."
"I bought it then because I had money for the down payment and found an apartment I liked. I have a great view of the park, there are three playgrounds close by and plenty of parking spots. I do feel a little frustrated however, because prices started dropping in autumn," adds Dragos N.
Unlike companies, where the bank can ask for additional capital if, following the reappraisal of the collateral, its value is lower than the loan granted, this rule does not apply to individuals, on condition that they pay their instalments on time.
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