Trying to sell ANL apartments at very low prices:“Too much confusion for no serious reason”

Some months ago I have explained to you what I expected to happen with this story of “selling the apartments of ANL with very low prices”. You can find my analysis here: Selling ANL apartments at low prices: American and English markets tell us what will happen

Now I think that it would be interesting for us to find out what happened with this project…

Very few sales, due to… simple (obvious in advance) reasons
This story created too much fuss in the Romanian Real Estate market, but its results were mediocre. Very few people decided to buy the property they rent and the impact in the State’s revenues was really disappointing (a result which was expected and precisely predicted). Why did this happen? Because…

• Tenants have a multi-decade rental contract.
• The monthly rent is very low, almost ridiculous.
• Even when they don’t pay it every month, usually they don’t face any consequences.
• Even the price of 600 Euro / sq.m. (which was the average one announced) was leading to a “respectable amount of money”.
• Some of these tenants have political connections and they “are not used to pay the normal price for something, they expect something better” (as someone who knows lots of them in Bucharest told me).
• It is stipulated that once they buy the apartment there, they can not sell it before some years to pass.

Logical questions…
If you have a place you rent for almost nothing and noone can kick you out from there, why to go to the bank and take a loan in order to buy it?

• Why to take this loan and pay per month 4-5 times more than the price you pay for rent today?
• If you don’t pay the bank installments, you will lose the property. But if you don’t pay the rent, it will be very easy for you to pay it later, or even “to forget paying” for a period. Why would you choose the bank option?
• If you have the money cash, why would you block it there for 5 – 10 years, when you can keep this place rented and buy another property for you?

Wrong questions…
(Because many people give me contradicting answers…) I would be curious to find out what are the construction costs that ANL pays today? What are the prices they accept for their new projects? Is it true that they accept to pay more than 650 Euro / sq.m.?

Results
Normal people got the fake impression that “the real prices of new apartments should be at the range of 600 Euro / sq.m.” So they misjudged all the rest of projects with higher prices, as they had higher costs too.

• The market got confused for some weeks, which were really vital for many property owners.
• The media found a lovely new story to exaggerate upon, focusing on the package and not on the problem itself (as usually, all around the world).
• At least 4 new investors (whom I personally know) froze their development plans, because they had a simple question: “Why should I start developing now, with people comparing my project and prices with the ones of ANL”.

The result in one phrase:
“Too much confusion for no serious reason” (Greek proverb)

I hope that soon politicians will realize how important is the Real Estate market for the Romanian economy and they will be a bit more careful before announcing measures about it.

PS. I declare that I am not involved into Romanian politics. I don’t know any politician and I don’t have any friends or enemies between them. The text above is just the explanation of the announced measures, plus the results I measured. This does not mean that I am against or that I support the Government or anyone else.