“Never let reality destroy a nice story”
This article was published in the last edition for November of Insight Tarom magazine
Romanian Real Estate market, winter 2010
About 10 years (and 10 kilos…) ago… I was invited in an important event, due to my business back then, in the media segment. I was by far the youngest there, as the average age was around 40 – 45 years, but I had no problem to adjust myself in the atmosphere… Watching around me, I could see many famous Greek journalists, discussing while eating or drinking from the buffet. Later on that night I joined a discussion, listening to a “guru” of Greek journalism discussing with a famous one from abroad, who had arrived for the event…
Probably after having drunk a bit more, the 2 famous journalists started discussing about “what people like to read” and “how people prefer to be informed about reality”. I still remember this discussion, but there was one phrase which was “stamped” into my mind… “Never let reality destroy a nice story” said the foreigner and he explained that in his opinion the public prefers a nice story with some questionable details, than a flat reality, with nothing spicy or exciting in it…
As 2010 is about to end soon, Romanian Real Estate market reminds me of this phrase…
- People appear to be “bored” of the crisis and they started “guessing” that investors will return soon, this is why some owners already tried to rise their prices in October!
- Some guys confuse Romania with Poland or Slovakia and they assume that what happens there will soon happen here too.
- Some others presume that the preliminary interest of some investors and the few transactions (at very low prices) by some retailers are “clear signs that the market revives”.
- Any news which is “not very bad” is considered good…
- “Prima Casa III” is expected to boost the residential sales.
- Too many people prepare themselves for a better 2011, “as we exit the crisis”.
This story, with prices rising and investors returning, is a really nice one. But is it the reality we live in?
- The political environment can not be described as “very stable”.
- The Romanian economy has plenty of problems and it will require new taxes and expenditure cuts, in order to remain “as IMF wants it to be”.
- The banks in Romania can not be presented as “very open to lend money for Real Estate investments”.
- The real economy will continue being into trouble, as there are no serious changes / reforms to boost the economic activity.
- The number of foreigners willing to invest into Romanian Real Estate market is limited and most of them search for top properties at unrealistically low prices.
- Rising the “ceiling” of “Prima Casa” project to 100.000 Euro does not mean that the people will run to buy properties which are considered “expensive” or “not appropriately located” or “not properly constructed”. Things will be better, but not drastically.
- Without new, “fresh” money in the market, neither salaries will rise, nor real progress will be achieved.
“Ok, you broke my heart again. So what should I do? Sit and wait?” a friend asked me, to whom I recently explained the above…
No, I strongly believe that this environment is suitable for actions:
- If you find the right property at the right price, don’t hesitate to invest in it! It is sure that you will not find plenty of them…
- If you need to work on your property’s papers, this is the best moment to do so. Add value to it and be ready for better days.
- If you need to restructure / improve / change / diversify, it is the moment to accomplish all your targets.
Reality says that 2011 will be difficult. But whoever takes advantage of this period, will be ready for a (hopefully) better 2012 or 2013… Except if he prefers the nice current story of “problems solved – Real Estate market rises”, which will be crushed by the reality we will live during 2011.
It is just a matter of choice after all…