“All possible mistakes have been made on the Real Estate market”

As promised, today I present to you the translation of my interview yesterday at Curierul National. (I didn’t translate it myself, the official translator did, that’s why it is so good). As my discussion with the dynamic journalist from this newspaper included many more fields and topics, I hope that soon you will be able to read more.

My interview in Curierul National (part 1)
So, the translation of my interview is as follows:

“It was obvious that a crisis was coming”
Not all real estate industry representatives have avoided warning on the imminence of a crisis in the sector, and one of them is Ilias Papageorgiadis, CEO of the real estate company More International Invest, who accurately anticipated a market shift since 2007. “This change of direction could have been easily foreseen, but people were way too concerned with making and counting money”, Ilias Papageorgiadis stated in an interview for Curierul Naţional. In his opinion, it was obvious that the boom period could not be extended for too long. “It’s a mere economy issue. When an apartment or a plot of land reaches a ridiculous price, no one wants to buy it”, said the representative of More International. According to him, at the end of 2007, the vast majority of buyers had already disappeared, but nobody was interested in acknowledging this. “The market started freezing at the last quarter of 2007. To certain customers who called me in March 2008, I was asking them to sell because the market will be going down. As we all know, the market collapsed in autumn”, Papageorgiadis specified.
He also explains that forgetting certain essential market economy rules was the major mistake having led to the crisis we are currently undergoing. “The real-estate sector representatives failed to take into account the economy basics which consider three aspects: the first, according to which the customer is the main factor, the second, stating that it is the cash that rules, and the third, the verified principle «sell with profit and be sorry afterwards, rather than hold on to a property for too long, always waiting for a bigger price»”, the More Director mentioned, adding that a lot of people didn’t hold significant business experience. “This isn’t only about the issues strictly related to the real estate industry specificity, but the business approach in general. People thought that they would always be able to make easy money”, Ilias Papageorgiadis added.

Unfortunately developers’ offers do not match customers’ requirements
One of the main issues highlighted by the Greek business man is that, considering our considerable deficit of new housing units, developers have identified a market opportunity, but projects have disseminated chaotically, not being adapted to customers’ requirements and financial potential. Consequently, projects were developed far from the city centre and stretching over too wide dwelling areas. “It will take us quite a very long time to overcome the crisis, as we have wide apartments far from… “civilization”, with high prices and construction costs. Not even those having the money would buy them. When things settle down, we must build apartments inside the city, focusing on significantly smaller built surfaces”, according to Papageorgiadis.

Real estate prices’ boost now has a boomerang effect
Another mistake made by developers was to promote a completely inadequate price policy. According to the More director, the offers promoted at the end of 2007 and the beginning of 2008 were extremely high. “Obviously, when an apartment or plot of land has an extremely high price, nobody will buy it in the end, no matter what some “market researches” may say”, stated Ilias Papageorgiadis, according to whom the market price should also take into account real costs. “More or less, the right price for a housing unit depends on the area, but can be set in such a way as to cover the developer’s costs, with a 30-50% profit. We will of course have the exception represented by the ones who unfortunately crossed the line and whose construction costs were much too high last year. With today’s market, it will be very difficult for them to sell and make profit. The offer has to be adapted to the consumer’s real potential. Those who targeted huge profits ended up with empty apartments”, Ilias Papageorgiadis commented.
As regards the level of land transactions, the speculative activity has pushed them towards completely unrealistic quotas. “Land prices will drop by 30 up to 80 % as against the top levels reached last year”, Papageorgiadis believes.