“Do you think it is possible the price for an apartment to be lower than the price for a car?”
Part 5
- to read part 1, click here
- to read part 2, click here
- to read part 3, click here
- to read part 4, click here
- to read part 6, click here
- to read part 7, click here
On Tuesday, 6th of July I had given an online interview to www.hotnews.ro, the number 1 news site of Romania. I was replying live to the readers' questions and after this I also gave a short recorded video interview. You can access this interview here.
Today I present to you the fifth part of this interview.
"In the end of 2010 and during 2011 we will enter into the period of foreclosures. Then we will reach the real prices"
"In 2008, Ilias Papageorgiadis – A real estate player in Romania – was warning that property prices in Romania are inflated. Few people would stop from the madness of buying and selling at huge prices, most of them having contracted a loan in this regard. Now although the market is totally blocked, many owners and developers kept their prices high. Ilias Papageorgiadis Ilias a former journalist from Greece, talks on-line about the future of the real estate market in Romania.
Ilias Papageorgiadis will answer our readers questions
Question no 9 Ove
1. Is it possible to maintain a certain price of a property through false ads?
2. Did the "First Home" project mess up the real estate market in Romania?
Ilias Papageorgiadis
1. For a short period, yes, it was possible. But my father used to say that "the thief and the liar are not happy for a long time". The crisis and the new economic background will punish these people.
2. No, the market was not messed up (by "Prima Casa"). In fact it helped many foreign investors understand that here they can't develop projects as they do in their own country. It was a good lesson for everyone, but I think that – sooner or later – we will have to move on to the next phase .
Question no 10 BX
The prices for apartments and houses were artificially inflated for many years, until the moment when the average Romanian had no opportunity to acquire a property. The profit was taken by the money lenders (Banks), which dried up the money from people. It seems natural that the real estate prices begin to decline, perhaps significantly. The question is: do you think that such a fall will be allowed or there will a continuous attempt to keep the prices as high?
Ilias Papageorgiadis
Everyone will try to defend their interests. But I strongly doubt this will be possible for a long period of time. As I already said, I expect the beginning of foreclosures. As long as we don't solve the structural problems we have today, we will continue falling. Also, remember that without trust there will be no investment. Without investment no artificial price can be sustained for long time.
Question no 11 Luca
Do you think it is possible the price for an apartment to be lower than the price for a car? Do you believe that the price for an apartment in Romania might fall below the price of an Audi, BMW … etc? Please keep in mind, that in Romania 90% of Romanians are owners and almost everybody purchased their apartments for small money in Ceausescu's time ………..so I don't see a price crash below 40.000 euro for a two rooms apartment. It might occur some desperate cases which will sell below this amount, but they will not be able to cause a dramatic fall of the prices.
Ilias Papageorgiadis
First, of all the catch of comparing the purchase price of an apartment with the one of a car is very nice for a journalist to show how much the prices have fallen. But is not the correct way to compare things. Let us presume that a new apartment costs 1.200 Euro / sq.m., having a decent quality of construction. If a new apartment costs 1.200 Euro, than the old one in the same area should cost much less, especially if it is older than 1977, when the last earthquake took place.
As far as I am informed, apartments in Romania have remained at the price range of 10,000 dollars for several years. .This changed when the foreigners appeared and people began to have much more money. So the people's ability to spend more, allowed them to bid for the same apartment paying a higher price. The foreigners accelerated the procedure in 2007-2008, so that a property became unreachable for an average Romanian = bubble. Without "Prima Casa" project, the trading prices for an old apartment of two rooms fell to 25,000 to 35,000 Euro. This was the market offer, whether we liked it or not. When you calculate the price of an apartment, have you ever calculated the additional costs you will have in order to renovate it at the 2010 standards? Last but not least, remember that an apartment is an investment that can be sold again in the future. So buying something old, you should know that when you will try to resell it will be even older.