“We are here to earn money but firstly to serve the needs of the 22 million Romanians”

Today I present to you the second part of my interview to Curierul National newspaper. The tile you see here does not come out from the text, but it is my firm opinion and I added it myself (so as not to repeat yesterday’s one). As I discussed with the journalist too, I strongly believe that all us the foreigners are here in Romania not only so as to earn money, but also to contribute to the country’s progress, playing by the rules and avoiding the speculation which can cause problems to millions, just for the interest of few tens or hundreds. I may sound stupid or idealistic, but I can not change this, I am here to stay long, I am not a “one shot player”, so my interest is to see the country and its inhabitants improving in a healthy and steady way.

My interview to Curierul National (part 2)

Banks have sent false signals to the market
The More International Director considers that banks are highly responsible for the unjustified boost of the real estate prices. “Even if there hadn’t been for the world crisis, we couldn’t have continued like this. We need to make a distinction between wants and needs”, Papageorgiadis said, also explaining the difference: “There have been cases of people who purchased houses and were left without any money for furniture or insurance. They hadn’t understood that when they need an apartment, they must first of all be patient. They said «I want an apartment and I want it now», and under normal circumstances, that wouldn’t have been possible. But the bank offered them this opportunity, distorting the market. By easily granting these mortgage credits to people without real ability to pay back the loan, banks have conveyed the wrong message to the market”, Papageorgiadis explained.
In his opinion, the National Bank’s restrictive policy was intended to counteract this worrying phenomenon. “I don’t know if the NBR norms were the best, but they were called for. It was a good thing that the central bank adopted such measures, as in the end, what we need is healthy growth”, pointed out the More International representative, who considers that a relaxation thereof is currently required. However, banking institutions should consider sustainable indebtedness levels. “When your income is 1.500 EURO per month, contracting a credit for EURO 500 a month is normal, anything above this payment is abnormal and can become dangerous”, Ilias Papageorgiadis estimates.

The rack real estate prices, a burden for the society
The real estate market standstill may be an opportunity for the sector representatives to be able to adequately adjust their economic behaviour and eliminate the harmful practices having led to the current consequences. This is also the opinion of Ilias Papageorgiadis. “The crisis is painful, but necessary. It doesn’t only have negative effects for Romania, but also advantages. It is good for Romanians with good jobs, as with a well-paid job, one can currently buy a house for a lower price, turning a wish into reality by healthily accessing a credit, with no over-indebtedness”, Papageorgiadis explained. On the other hand, those who prefer renting will also benefit from better apartments for reasonable prices. “Many rents will go down. It is a bad thing for speculators, but good for the society, as a whole. In the end, we are here to serve the 22 million people living in Romania. They have to be our priority, not the speculative capital. I may seem idealistic, but it is my opinion”, the More International director also added.

About two other troubled years are still to come
Ilias Papageorgiadis does not foresee a fast recovery of the local market. “In 2009 and 2010, no sector will be dynamic, and in 2011 the first one will be the residential sector, but this time for the right product. And when I say the right product, what I mean is apartments inside the city, with small surfaces and flexible prices”, states Papageorgiadis, who estimates that the bottom will be reached in the first half of 2010. “We have not reached the minimum level yet, we are not even half way there yet”, he specified, reminding that the current crisis might last for 2 years, although other specialists estimate a four year-timeframe. However, the More International representative considers that the local market might become more dynamic as of the second half of 2010, in order for 2012 to actually be a very good year. “What that might change the whole scenario outlined above is the implementation of the EURO currency. This is expected for 2014, but if the procedure takes place before that term, then the Romanian economy might benefit from an additional stimulus”, Ilias Papageorgiadis concluded.
So, if the crisis continues for the next years, is it right for the people with cash to sit down and wait for better years to come, rather than investing? “Definitely not” Papageorgiadis states. “The best moment to invest is when the market is down. The breaking of the bubble will allow us to find some real “diamonds”, properties with great potential that people desired to purchase before the crisis, without to be able to. Now, with a fair price they can become the success stories of the future. When we find the right property matching to our investment horizon, we go for it, as “Real Estate diamonds” are always rare to find and you never know if they will exist in few months or wait you with the same prices, after the crisis”

What unblocks the market?
– Simplified procedures for issuing construction authorisations (not normal to wait for a PUZ and an authorisation to build even 12 – 18 months so as to be approved)
– The banking system’s return to its normal status. Lending money based on the income of the client (and not his wishes) and with an interest rate which will not be very high so as “kill” the client on the long run.
– The state’s implementing measures with a lifespan exceeding the timeframe of only 2-3 years
– Accessing EU funds which will re-launch economic activity
– Making the infrastructure work, accelerating these processes countrywide
– Fiscal stimulants for productive activities and job creation