Listening to you / Replying to your questions part 1

Today I will only reply to some of the comments I have received. I was really surprised to find out that in just 2 days, without any advertisement or special promotion, we had some thousands of readers. I am very happy to find out that people are really interested in what is going on around them and they have a strong opinion, either we or agree or not (this is the pleasure of Democracy).

Also I would like to thank mrs Cerasela Marin, journalist in the site www.hotnews.ro, as she did an excellent job translating almost all my article to Romanian language, adding also her own approach. So, for the ones who are interested, you can check it on http://economie.hotnews.ro/stiri-imobiliar-3854575-grecia-1999-tarani-ciobani-soferi-taxi-parasit-locurile-munca-devenit-brokeri-romania-2008-senzatie-deja.htm.

(All texts are just copied / pasted. No changes in the way they were written).

So, lets see, what do we have here…

vali Says:

“nice work,I ejoyed reading it.it is imposible for real estate prices to go down.they have only one direction up up up.sound familiar?buying real estate became a national sport.now lot of speculative buyers are wating for the bigger fool.wil he come?I have doubts.”

The bigger fool will not come, Vali. But trust me, the period for serious investments in Romania has just started, just not in the prices some people ask.

Nelu Says:

“Very nice article. I’m sure that some inexperienced and greedy speculators will be roasted like chickens.

But will people learn the lesson?
never!
Traders never learn form past mistakes, unfortunately! ”

If all people had the same opinion about all things, then half of the professions of this world would be… exterminated! Nelu, please do not forget that it doesn’t have to do only with greed and lack of experience. Try to remember how many times some arrogant “Real Estate specialists ” were speculating by presenting false information, how many times a part of journalists did not care to hear the reality of the market but only the new big deal to announce, while publishing without crosschecking whatever some “Specialists” were saying.

Even today (and many months ago), when it is more than obvious to me that in 80% of Romanian properties we need a correction in prices, the majority of those “specialists” just started feeling “uncomfortable with the situation, but still we will see”.  It is not always easy for someone to find out the truth, especially when the truth is not “the most appealing girl of the party”.

So, I don’t like to see anyone burned, this is why I state my opinion, hoping to contribute my small piece in their general information.

An. Says:

“Hello,

I’m a Romanian working for a Greek brokerage company in Romania, nice coincidence is it not, and i agree with you. The situation you described is corect. Congratulations!”

Thank you. I hope your Greek bosses will appreciate your right to have an opinion which many Greeks (even today) still don’t want to hear it.

A Says

“Well, you might categorize me as “a reader who thinks you’re exaggerating”, but I don’t agree with your conclusions fully. I appreciate the parallel you are drawing and I believe there are valuable lessons to be drawn from the Greek stock exchange experience you described. However, it’s not clear to me how the situation you described, which is a classical bubble situation, has to do with the real estate market and especially with salary growth and consumption.

There are a few notable differences, including the fact that salary growth in Romania actually has a solid fundamental explanation: salaries here are still an order of magnitude smaller than in the rest of the EU. Under these conditions, many foreign investors tried to enter the market, for instance looking for a cheap production base to export, once import taxes to the EU have fallen with Romania joining. This created pressure on the job market and on the salaries. It has nothing to do with any bubble fenomenon. Consumption is also related to this, as well as with other cultural aspects, such as many years under socialism, when people were deprived of many things and, consequently a nation-wide embracement of consummerist values.

Now, regarding the real estate market, I agree with you up to a point that there is some kind of bubble, produced by positive future expectations. However, while it may well be that prices will go a bit down on the short term and there can be many over-evaluated properties right now that might suffer corrections, on the long term, as long as the rest of the economy goes well and there is demand, I don’t expect prices to plummet too much, but the contrary actually. Anyway, it’s a bit forceful to compare real estate bubbles of any sort with stock exchange crashes. But again, I agree with you on the part that people should know what they are doing and *think of fundamentals* before they invest, otherwise you get robbed regardless of what you invest in…

Wow. I’d really love to have a coffee with you and discuss more about all these that you describe. I am happy you don’t agree with me, but I think you have misunderstood something. I didn’t combine the salary growth and the consumption with the prices of Real Estate.

I will not start talking about unemployment and jobs, I will just say that all serious investors are happy to see the salaries increasing so as people to live better. The problem is in the cases of exaggeration and the loyalty in a part of the employees, but for this we will talk another time. Regarding consumption, I’m totally with you, but please let us also agree that it is one thing to consume because u couldn’t do this in the past and it is something else to buy a new super expensive car, when you don’t have money for its gas and you live in a non renovated apartment.

Now about the prices of Real Estate, I like a lot your approach. I hope you have a good connection with God and you know that once prices will go down, soon they will go up again. I hope you are right, or I hope you refer to the properties that have potential. For example, the “distinguished gentleman” who is asking for 3.000 euro / sq.m. for a projected apartment in a residential project on Sebastian street, on the way to Rahova, will never get this money, when the real price should be not more than 1.400 – 1.500 euro / sq.m. I don’t think that he will sell anything if his demand will drop to 2.000, so as to rise again. Logic says that prices must return to a fair value before starting rising again.