“Too much dust, produced by just few cars” (Part 2)

Part 2

(to read part 1, click here)

(Romanian Real Estate market: The first two months 2011)

My famous, “very optimist” friend: “2011 will be a very positive year”

It was just the end of last year, when so many people appeared in the media, declaring that the crisis has ended. My famous, “very optimist” friend did not lose the opportunity to call me:

– “Hello Ilia, how are you today?”

– “Quite good, what about you?”

– “I have never been better. Have you seen the news?”

– “News regarding what?”

– “The Real Estate market exits the crisis, 2011 will be a very positive year”.

– “Says who?”

– “Too many experts. The figures are clear, the demand is rising and there is no negative news in the market, except one report”.

– “I know, you refer to Coldwell Banker, talking about foreclosures reaching 500 million Euro”.

– “But this is not important. 500 million Euro is just 5% in a 10 billion Euro market, like the Romanian one”.

– “I agree with CB, plus I don’t consider that 500 million Euro will be just 5% of the total Romanian market. The market is not so big anymore”.

– “Look: You can say whatever you want to, there are tens of others who have a different opinion. This time you are wrong, the market will really accelerate in 2011. Maybe it will explode too”.

No sign for dramatic change / improvement this year
After the first two months of the year, we all notice that there are no big differences in the market comparing to 2010. Some things seem improved indeed, but the procedure is very slow. Sometimes you cannot even notice the progress. There is no news, no sign that dramatically changes the market’s direction. This remains positive, but not on short term.

Too much “dust”…
When you see many cars on a street without asphalt during summer, this usually means dust, lots of dust. This is a sign for a busy street, but not always. It could also be that the cars are few, but driven with many manoeuvres. This is why Greeks like saying “let the dust go away, in order to see reality behind it”.

So after too many people predicting for the best, creating too much “dust” in the market, I think that it is the time to check for the reality behind it…

What did we experience in the first 2 months of 2011
The first two months of the year is always an important threshold. You can evaluate the facts and check the following steps ahead. This year was a bit more interesting so far, from Real Estate point of view:

• The residential developers have witnessed a clear rise of interest. “I spent 2010 having 1 – 2 viewings per week, but since January I have about 3 – 4 per day” told me a residential developer, who is not the only one recording more visitors at his site.
• The Real Estate brokers registered almost double requests. Most of the serious Real Estate companies have registered double figures of requests, as clients returned (?) and asked for properties (there were less transactions concluded though).
• More banks appear to be “open to finance Real Estate deals”. At least they say so. Until I will be informed about 10 new major financing contracts, I will be very cautious, but I have to admit that this is the feedback I receive.
• We have more foreclosures “prepared for sale”. Almost every day I get informed about one or two. Sooner or later, some of them will be transformed into transactions.
• The investors’ interest is stronger, indeed. I refer to determined investors, who know what they want and they are ready to make a move, or they already started buying since January.
• Many retail / commercial projects were announced to start. I have already analysed you why this will happen (remember it here). For the moment it is just good news but in the future it will be part of the market’s recovery process.
• Some funds are really active, their investment period is due to expire soon. This is why they will buy properties or developments very soon.
• Last but not least: After the winter of 2010, when the country was buried under snow till March, this year the weather was more “gentle”. Add this to other smaller positive facts and be sure that the GDP will grow positive during the first quarter of the year. Not a lot, but it will, for the first time since the 3^rd quarter of 2008.

Problems are still here as well…
In the same time we keep on watching the same problems that we had in the past as well:

• The political environment is fragile.
• The economic environment “could become more stable”.
• The average person’s life has been further deteriorated.
• Lots of unserious people tried to raise the prices again, without having any client ready to pay 1 Euro more than the past. They don’t understand the damage they do to the market by applying such tactics.
• The buyers do not find the prices they search for.
• Many properties are still “in the wrong place, with the wrong approach and the wrong price”.

Overall: Indeed the dust is more this year, but there are still just few cars which produce it. We need to wait more in order to see something really changing.
It is visible that this year has more potential indeed. I also expect it to be even better in the last quarter. But right now we just witness the beginning of a process, which I expect it to be more visible next year and especially during 2013. All these could happen if we avoid all sorts of “turbulences” in national, European or world level (find about this here and here)

I had shared with you my expectations for this year (you can check them here and here). 2011 will be better than 2010, but without so many… “fascinating” news.