Can land become the “locomotive of change” for Romanian Real Estate market?
Last week we discussed about the positive and negative scenario of the Romanian economy (you can find the texts here ). On Monday and Tuesday I shared with you my personal opinion regarding the economy (here) and the Real Estate market for this year (here). Many of you complained to me that "I was quite negative in my estimations", or that "I don't see anything positive" etc.
Lands' era?
Yes, I find it difficult to be very positive during a year like 2011, during a major economic crisis and while the properties in Romania appear as "not interesting at all" at the eyes of investors. But except all the negative signs, I think that this year is the first one from a new era. As a new investment cycle is expected to begin soon (next year or 2013, if Europe exits its crisis during 2011 or 2012), I have tried to think of the characteristics that this new period might have. It was not difficult to reach the conclusion that after several years, land is about to become avery important choice for investors. Can we call this new era as "Lands' era"? Let us check some facts…
Lands for retail: Strong interest already exists
Retail was the most active segment of Romanian Real Estate market during 2010. As the networks of major international retailers will expand in Romania, new requests will be added and more deals will be sealed this year. One a retailer finds a price "attractive" enough, he proceeds in buying the property. Or another alternative for him is to agree with a developer, who will buy, develop and deliver it at "turn key" status. Like this the retailer will just rent the box created there, for 15 – 30 years.
Bucharest is the top priority, with other major cities following. Retail developments will pour some serious sums of cash in Romanian market this year.
Lands for development: Waking up?
There are lots of signs that good lands inside a city have started to be "interesting again" for investors. Either for a residential or commercial project, or simply for speculation (more rare to find), there are several investors and Funds which check the market for properties. Ofcourse things are far away from being described as "a rebound in demand", but we have plenty of people who started asking for lands suitable for developments.
Agricultural lands / Forest: Steady through the storm
The compact agricultural lands have probably posted the least decline of price during the last 2,5 year. As the supply of good properties is limited (or cultivated already), their price has not collapsed like it happened with other market segments. And with the products' prices up in the sky, there are more and more people thinking of entering in food production business.
Lands for expropriation: Is it their time?
If Romania wants to change its economy's direction, it should construct more national and local roads (between many other priorities to do). I hear that the government might be more active in this field, trying to speed up for plenty of projects in the same time. If this is true, then thousands of lands will be expropriated by the State (in order for the road to be built) and this will definitely move not only Romanian economy, but the Real Estate market in specific. For many reasons.
2012. Finally… Foreigners will be able to be owners of a land, as physical persons, without a company: This is a revolution!
If you are a foreigner and you want to invest in Romania buying a land, you need to create a company. This means: Creation costs, lawyer, headquarters, accountant, higher property taxes, VAT, minimum tax imposed by the State, plus many more. Are all these attractive for a minor investor, having 30.000 – 100.000 Euro to invest in this country? No! This is why he will try to avoid this option, either by investing in something else, or (the most usual option) not investing at all.
Where do we find lands at this budget? Around the city. What happened to these lands, once the foreigners stopped speculating on them and avoided companies? Their prices collapsed, more than any other category in Romania…
But this is about to change now. Romania entered in European Union in 2007, but already since 2005 there is a law specifying that "foreign citizens will be able to acquire lands in Romania five years after its entrance in European Union. The country entered in E.U. in January 1st 2007, so in January 1st 2012 any foreign person will be able to purchase a land just with his passport, without a company etc.
This is revolution! All of a sudden, the background changes completely. And if there will not be a serious move during the first months of this change, I strongly believe that it can attract lots of minor foreign investors, who are thinking of buying a piece of land here. This means that the market will stop falling and slowly it will start stabilize, before recovery period starts.
Land: Can it be the locomotive?
In or out of the city, for buildings, villas or speculation, land was and will be a vital component of any Real Estate market, Romania included. Nowadays we have the first signs that something might change in the land segment, especially starting with 2012. Can land become the locomotive of our market?
Only time will tell.
What do you think?
On Thursday: The "lovely" people started over again…