The prices of old apartments in Bucharest could go down towards the end of the year, as this segment of the real estate market has reached an impasse in terms of high prices.
a??Prices for old apartments have exceed the acceptable limit and customers are shifting to new buildings. The current situation on the real estate market could lead to a decline in prices towards the end of the year,a?? said Mircea Cleciu, the general manager of Neocasa, a real estate company, at the seminar organised by Ziarul Financiar, BRD, Neocasa and CarpatCement at the J.W. Marriott hotel under the slogan, a??The road to taking the decision: house or apartment?a??
The decline in prices for apartments could occur when deliveries begin for the new residential projects commenced in the last few years.
The situation on the Romanian real estate market is paradoxical, says Cleciu. a??At the moment prices for old apartments are higher than in residential complexes, even though the new supply only targets medium-to-high income categories.a??
Things are different for new apartment buildings and residential projects, however, which are the subject of most transactions conducted on this segment. a??The growth in the number of transactions in this case is constant and is expected to maintain over the coming period,a?? he said.
Demand for apartments in old buildings accounted for 15% of the entire supply in April, while demand for apartments in new buildings exceeded supply by more than 300%, Neocasa data show. a??While funding for office buildings and commercial space accounted for the bulk of business two years ago, loans for residential projects boomed between 2003-2005, which contributed to an increase in prices,a?? explained Adrian Bulboaca, a lawyer with the local office of British law firm Linklaters.
The supply of new apartments is still lagging behind demand. New apartments costing less than 100,000 euros are practically non-existent.
a??Investors are needed to create a strong supply of new apartments at lower prices through projects worth more than 50-60 million euros. Unfortunately, however, the required land and utilities for such extensive projects are lacking,a?? said Cleciu. He added that demand on the lower-to-medium segment was falling, due to people choosing to build their own homes.
A medium-sized apartment in an old building in Bucharest can cost as much as 73,000 euros, including renovation costs. A similar apartment in a new building, however, costs up to 64,000 euros, while building a comparable house within the city can cost 44,000 euros.
Supply is lower than demand for buildings of between 100,000 and 200,000 euros. The bulk of demand is for 150,000-euro homes.
a??Everybody was expecting a crash on the market of old buildings two years ago, at which time the mortgage credit emerged on the market and the price of the buildings started being related to the euro. These two factors led to an improvement of that situation, so that the market is quite unpredictable right now,a?? Neocasaa??s official concluded. alexandru.cerchez@zf.ro
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