2011: A bit better than 2010, a bit worse than 2012 (with too many uncertain factors involved…)

Part 2

(to read part 1, click here)

Last week I had described to you the main arguments of the optimists and the pessimists for 2011. You can find their opinion here. Also yesterday I had described to you what I expect to happen in the Romanian economy during 2011, you can check it here. Today I would like to share with you my opinion for this year from Real Estate point of view…

A bit better than 2010…
This year will definitely be a bit better than the previous one. There are many reasons for this approach:

• The local demand is stronger and despite the low prices offered, there will be some more transactions, as many owners will have to accept "more realistic" prices.
• It seems to me that a serious minority of Real Estate professionals has… found somehow a way to survive throughout the crisis. They sellsome properties, promote themselves better, approach their client in a more decent way. This will be even more visible during 2011.
• In the last part of the year I expect the market's psychology to be improved = some more transactions as well.
• Foreclosures will be more than in the past, probably more than their sum during the previous 2 years. This means transactions as well.
• Some major investors will finally place their investments, once they find opportunities in the prices they target.

But not so much…
In the same time, there are many reasons which make me sure that we will not experience any dramatic change in the market's fundamentals:

• The Romanian economy is still weak and there is no sign that it will be significantly stronger during the year.
• The majority of foreign investors still consider Romania as "not the place to invest". (Here I don't tell you that I agree with them or not, I just mention the fact).
• The banks are not really expected to surprise us, by increasing too much their lending.
• There is still not sufficient offer of the combination "good product offered at decent price".
• The majority of the market's players still suffers from a wrong mentality. Don't be tricked by their words today. They are always ready to start exactly what they were doing in the past, seeking any excuse which would justify (in their mind) this behaviour.

More interest for lands and income properties
There are many reasons why there is more interest for lands this year. I will analyze to you all these reasons tomorrow. I just want to tell you that today, having 4 serious clients who want to buy lands for development in Bucharest, the offer is really limited. So this demand will not be covered.

Something similar happens with income properties as well. I have more than 20 clients searching for properties of this category, I have finalized plenty of transactions in 2009 – 2010, but we don't have enough attractive properties to offer to them.

This trend will be stronger in 2011, but without supply of properties and a big more help by banks, it will not lead to many transactions.

Residential: The prices will definitely stagnate once "Prima Casa" programme is covered this year too
There are many people out there searching for properties. But very few of them are able to purchase what they are asking for. There is something that no one talks to you about: Have you noticed that almost everyone complains that "Prima Casa III" did not start on time, causing a halt in transactions? So, the market would be almost "dead" without this programme…

Something else. I have read that "Prima Casa III" is at the size of just 200 million Euro. For a whole country. What will happen once the financing of this programme expires for this year? Definitely the prices will stagnate, as there will be a limited number of people able to buy properties without the State's help.

Who will benefit? The limited number of serious people. At least this is my personal opinion.

Retail – Commercial – Industrial: Better than 2010, worse than 2012
For these segments I will write to you in the near future as well, but it is clear that they will face one more year of challenges. But there will be also a more active year for them, comparing to 2010. More transactions are expected, especially in the retail and industrial field, with the commercial one following. The majority of market's players expects that 2012 will be a better year though.

2012. A bit better than 2011. In theory yes, but this is not sure at all
Yesterday I explained to you why I expect 2012 to be a better year than this one. Especially because the politicians of this country have 2 major elections (local and parliamentary ones) plus a minor one (Euro – parliamentary) to finance and they need a better "market's psychology".

Also, if Europe exits the crisis this year, Romania will probably follow. But there is nothing sure at all, as there are too many factors of instability, which can block this progress. Last year I had doubted for the expected positive growth of Romanian economy, stated by lots of people. This year I am sceptical too. I would not be surprised to see just a minor growth. Ofcourse there is always the chance for an artificial one, in order for the market to believe that "the bad days are over". But most probably I think that the chance to witness serious growth of GDP is limited, only for the last 2 quarters of the year.

Tomorrow: Can land be the "locomotive of change" for Romanian Real Estate market?
On Thursday: The "lovely" people started over again…