Life after crisis: How will the new generation of homes be like?
Last week I gave an interview to www.imobiliare.ro and to Adriana Dragusin. Among other Real Estate experts, I expressed my opinion for the situation today and what I expect to happen in the near future. You can find the whole text of the article here:
Viaţa după criză: cum va arăta noua generaţie de locuinţe
Source: www.imobiliare.ro
Author: Adriana Dragusin
"Life after crisis: How will the new generation of homes be like?
Although there are plenty of apartments for sale, few people can really afford the majority of them. To move forward, the market needs (also) something else.
If you have a budget of maximum 60,000 Euro and you are looking for a new apartment, you probably felt on your own skin that you don't have so many real options. Although the developers offers abound, and real estate exhibitions are presenting as many housing projects as possible. Andrei {C}Sandu, general manager of MediaCity Agency, notes that despite the relatively high number, most of the available homes on the market do not match with the current consumer profile. Victor Zaharia, director of the Coldwell Banker Opera agency, gives the example of some housing units developed during the boom, with surfaces of 150 sqm for a three rooms apartment with consequently matching prices. "Most of the buyers who would want three rooms don't have money for such an apartment" said Zaharia.
Residential construction, at a minimum level
For the moment being in order to start the acquisitions most buyers are still waiting a new reorganizing of the Real Estate market. The few offers of new homes that due to the crisis do fold on the thin pocket of Romanians are sufficient to meet the needs of several buyers who are determined to conclude transactions at the time being.
However, Andrei Sandu, notes that in the past two years, no real estate investment was started. Minimizing of the construction engines is already visible in low supplies of new housing in the first months of this year. According to a market report of Jones Lang LaSalle and Reas, in the first quarter of 2010 were completed only 346 housing units approximately 25% less than the same period last year. "The pace of new residential constructions is already very small compared with the other East European capitals. Given the limited activity within the residential construction in 2010 we see a significant drop in housing delivery " according to the quoted study above. In comparison with the figures announced by the developers earlier this year, the difference is significant. According to, MediaCity data, corroborated in spring 2010, 2,600 homes were announced for delivery in 2010. In theory among these, there are some other thousands units announced for delivery in 2008-2010, whose delivery date has already been exceeded.
Reasonable prices and surfaces
In this context, the need of housing units adapted to the current market conditions, is an imperative – despite the recession.
The supply of new housing is to some extent limited. Customers who are interested in buying a new apartment have to choose between the same few residential projects. However the customers are already familiar with these projects, observes Adrian Erimescu, general manager of www.imobiliare.ro. Precisely for this reason, he added, new projects that might propose something else would be welcomed on the market – under a single condition – the prices should be in line with the expectations of the end user.
Victor Zaharia shows that despite the general atmosphere of expectation, the demand for new housing exists . He gives the examples of several transactions that began last year and have been postponed but not due the lack of money, but to see how will the market evolve. "I think now is the time for developers to build, because when we will get out of crisis, they will come up with new products," said Zaharia. He states that after the residential sector will rebound, not everything will be sold at any price or with any division of the surface. The market needs affordable housing projects with proper surface states the director of Coldwell Banker Opera. In his opinion, in order to be sold, a two rooms apartment should be located somewhere within 60 sqm and a studio within 40 sqm. In addition, the price per sqm should not exceed 1,200 euro (excluding central areas). Another important point is a favorable location.
Finnish investments in housing projects addressed to the middle class
Although not many, this year were some timid attempts by developers to adapt themselves to the current market conditions. In May, the Finnish investment fund Ahlström Capital has announced the development of Scandinavia Residence housing project through a locally owned company. When completed, the project should include 420 apartments arranged in seven blocks, located on Alexandria highway.
According to Adrian Demuşcă, the developers representative, the first phase of the project is now in the shell home stage and the first two blocks with 100 apartments will be delivered in December. The cheapest studio in Scandinavia Residence costs 41,000 euro and the cheapest two rooms apartment reaches 67,000 euro. " We have many visitors. The will is there, people want to have a higher degree of comfort. The question is how will they obtain the necessary financing for this "says Demuşcă. He states that the buyers are looking, ideally for large surfaces at the lowest possible price, but the limits are dictated by their financing possibilities. In his opinion the market needs clearly well-constructed apartments.
Two rooms apartments for 50,000 euro
Another project announced in July this year is Avalon Residence developed in Tunari by the South Pacific company. It will include 46 apartments with two rooms, arranged in three blocks, which will be built according to sales trends and will have a locative surface of 52 sqm and prices range to 47,775 euro for an apartment with a terrace, and 49 875 for one with its own garden.
Our market research showed, that there is still a demand for affordable housing if the price is one affordable (under 50,000 euro with VAT included), and a funding is available. There are many young couples interested in two rooms apartment, and this is certainly an appropriate option for them, in terms of price, and area, stressed Andrew Perle, CEO of South Pacific.
Another attraction for buyers with limited budget is the construction technology used by the developers, allowing quick builds of homes and promising 40% lower costs at the maintenance.
Ensemble of studios, for young people
A testing step of the actual crisis market is the rebound of the residential assembly Quadra 2, developed in Military- Politehnica by the local company Conarg. Originally launched in 2008, the project should include 850 apartments, from one to four rooms. The originally investment was estimated at 75 million euro. However two years later, Quadra 2 suffered a major "cosmetic reshape" in order to fold on the new consumer possibilities. Now it is promoted as a residential project for young people, which includes 226 studios and only 16 apartments with two rooms. The surfaces of studios are somewhere between 37 and 51 sqm and the prices start from 39,000 euro. The two rooms apartments have 75 sqm and their price start from 76,000 euro. According to the developer the housing project will be delivered in the last quarter of this year. The estimated investment in Quadra 2 construction stands now at 12 million euro.
The bloggers feedback
For a customer with an average budget of 60,000 euro, the search for a home depends on his actual needs and priorities. There are few opportunities, but we cannot say that the market is full of offers. First, my advice for the buyer is not to panic. Most mistakes in real estate transactions are happening due to this case. I hear people saying "I did not find anything, so I bought this." If you really cannot find what you searching for, then wait.
Unfortunately, most of the offers we have today is not adjusted to the requirements of the end user. Dozens of residential projects were designed on a totally different basis for a different market. They have been focused on completely different customer needs, and now it is hard to change and adapt to the reality of today. The prices are not so bad, but the problem is usually the surface (useful and built surface), location and a lots of details which affect the image of the project.
In the next few years, I think that there will be very few new developments, since banks do not finance new projects and developers are afraid to do it on their own. The upcoming new projects will have a better location (since one can buy a land in better area at a lower price), smaller surfaces, very carefully designed common areas and many small apartments on each level. We will also see a few luxury examples, located in central areas and sold at very good prices.