Worldwide Property Forums | Hi

Some 50 percent of buyers of homes in new residential complexes are domestic and foreign investors who are making portfolio acquisitions. The profit margin obtained by such strategic investors is some 20 percent, from the moment of the off-plan acquisition to the finalization of the project. The profit margins for constructors and developers can be as high as 80% and for those who buy land at a very low price, sit on it develop and build and then market directly profits can be significantly more. Investors come in during the initial stages of sales, acquiring up to 50 percent of these new projects, counting on forecast price rises, which can yield a high profit, through the resale of acquired units once the project is finalized, according to Razvan Stroescu, Manager Residential Brokerage in the Coldwell Banker Affiliates of Romania Real estate consultancy company speaking at a real estate conference in Bucharest yesterday. Demand for medium-class apartments continues to exist, as the investment in such apartments has a higher yield in Romania, compared to countries in the region. Investments in major residential complexes in Bucharest, which will be finalized this year, exceed 500 million Euro. The projects include 3,500-4,000 new homes, of which 80 percent will target the medium-class and 20 percent will be luxury projects, according to real estate specialists. The price of new homes will surge by 25-50 percent in the coming 3-5 years depending on location and details of the project delegates were told. But what does this do for ordinary Romanians in Bucharest who want to get on the first rung of the property owning ladder? If property investment is underpinned by the development of a middle class is it desirable to keep prices and profits so high that aspiring Romanians are tied to the rental market? Only 5% of people in Bucharest can afford a home valued in excess of 100,000 Euro. To buy a home valued at 100,000 Euro you need a monthly income of 1000 – 1500 Euro whilst for a home valued at 325000 Euro a minimum salary of 5000 Euro a month is required. Currently in Romania there is a debate about the level of the national minimum wage which will be set at something like 140 Euro a month maybe a little less as from January. Thus only a very small proportion of the population can dream of owning their own home. The other part of the equation is the supply of new build property. Only two new homes are produced each year per 1000 of the population. In part this is due to the incapacity of builders to complete projects – a point noted by Simon Blakeborough at the recent PS seminar. Part of the reason behind this is that Romania has a serious shortfall in construction labour many such workers preferring to work overseas for better wages in Spain and Italy. The shape of local property markets within Romania varies enormously it being determined by many factors including logistics and foreign investment. Bucharest is characterised by service industries; Brasov is a playground for the Bucharest filthy rich; and Cluj appears to be underpinned by hi-tech industrial development. Promotion of a middle class is undermined by the greed of a few but occasionally opportunities can be found for hard working and professional Romanians to get their feet on that ladder. Later today I’m going to check out one such development with a promotional price of between 554 and 618 Euro per square metre (semi-finished of course). I wont invest because such prices are part of the formula for the evolution of a Romanian middle class which is something I want to see sustained. Such prices should not be condemned as being ‘cheap’ – I would prefer to class them as affordable for the domestic population.