Romanian Real Estate market: Why 2011 will be much more difficult than 2010… (Part 2)

Part 2

(to read part 1, click here)

Yesterday:

• Deny the truth = delay the solution of our problems…
• The new prediction: The crisis ends in 2011
• The main reasons why 2011 will be more difficult than 2010

1. Foreign Direct Investments are down = nothing better to expect in the near future.
2. Exports are weak, except Dacia, Nokia and few more companies

3. Banks are blocked and under attack
Most of the banks in Romania are blocked nowadays. Either they don't lend at all, or they lend only to their very good clients (plus few "Prima Casa" loans), with high interest rates. They call this strategy as "careful expansion" but in reality they carefully reduce their exposure. Many of them have liquidity problems and difficult challenges toface over the following months and especially during 2011. Add in all the above mentioned the latest noise about the new regulation for credits. Let us assume that politicians are right on this. With the way the problem is presented, banks (especially the employees who meet with the clients directly) feel almost under attack.

There is no sign that banks will change their policy and start granting loans. Except if they will receive an additional liquidity by the authorities (as it happened in many European countries, but it is not so easy to happen here any time soon).

4. Politicians continue fighting while the country needs solutions
It is very interesting to watch politicians in Romania fighting while the country needs solutions. They fight nonstop, changing allies all the time. Some of them look ready to cause bigger problems to the country, just in order to… punish their opponents and win political power. Pity…

5. No serious measures = no serious results
We reached a moment that the country needs serious measures. Eitherwise it risks its future. So far we don't see anyone willing to undertake these measures, searching only for "easy solutions", like tax increases. If we don't see some of these measures being implemented, how will we exit the crisis next year?

6. Foreclosures have started and they will increase…
Above I was explaining to you that the banks have several challenges to face over the following period. One of them is the shortage of liquidity. This is why foreclosures have already started and they are expected to further increase during 2011. With foreclosures coming up, we can not really talk about a better period and price increases, can we?

7. Mentality – mentality – mentality…
Did you see anyone treating the investors better than before? Did you see the majority of people improving their approach to business? Or working harder? Creating strategies for the years to come and not just for tomorrow, next week or next month?

When mentality remains the same, I don't think that we stand too many chances to improve our condition during 2011. Indeed I see more people becoming active, trying to improve their life by working. But they are still a minority, while the majority searches for easy money and "for a sucker to trick".

"Ok, if not in 2011, when?"
I am sorry if I made you upset today, at the week's start. The ones of you who remain calm will probably ask the following question: "Ok, I understand that things will not improve in 2011. Then when should I expect the end of the tunnel?"

As I have written to you several months ago, Romania is connected to the major western economies. So, as we are appear to be unable to change the country's direction ourselves, we will wait for them to pull us over as well. Once you see them seriously exiting the crisis, be ready for Romania's turn as well, after 6 – 12 months. The country has still lots of advantages that will help for this move, but only when the western giants will enter into growth first.

End of 2011, but most probably 2012 (at least)
We hope for this to happen in the end of 2011, but most probably everything will be delayed until 2012 (at least). But it would be a pity to wait just for the others to help…

"Goddess Athena will help, but move your hand too"
Ancient Greeks used to say: "Goddess Athena will help, but move your hand too", meaning "pray to Gods, but move your … as well". Can we follow their advice?