“What will happen with the Real Estate prices in the following 6 months?”

This is the most common question I have been hearing over the last 3 weeks, since I returned in Romania after my summer holidays (in the glorious and famous Katerini, a… Romanian territory). As the new season has started, this is the first discussion that all people in Real Estate have, plus many others.

My opinion mainly consists of two parts, the period until the year end and the first part of next year. Let us discuss them in more detail:

Last quarter 2011: The prices will stagnate and possibly fall a bit

I do not expect the prices to grow in the last quarter of the year, for various reasons:

·         The Romanian economy is not showing signs of strong growth, due to the local and international environment. Things will be stable and “quiet”, so why should the prices rise?

·         The market remains the same, with the same problems it carries from the past. The minority of some serious people who attempt to improve the situation has not been transformed into results yet.

·         The banks are and will remain defensive. With a few exceptions, the situation will not change, except if we have a major economic incident.

·         The world economy is shaking (and when Europe catches the flu, Romania is sick as well). Every day, every week we have some new problems and challenges to face. This prevents many investments from being finalized.

·         Life will be even more difficult and more people will need to sell in order to pay obligations. These people will have to accept the real prices, so no reason for the prices to rise.

·         “Prima Casa IV” is not as successful as the first three, so the demand will be weak.

·         To cut a long story short: More people trying to sell, the same (or less) buyers = stable prices, or declining ones.

(At the same time, the 5% of excellent properties will continue to sbe in demand, with stable or even higher prices. But this minor exception simply confirms the rule, nothing more…)

First quarter 2012: Some media and market players will try to increase the prices, but without the clients following.

We lived it already 3 times in the near past. By the end of the year we will see some media celebrating the end of crisis, as they did last year as well. In the beginning of 2012 we will also see many people trying to “create atmosphere” regarding the potential price hike. But it will not happen. The economy will, probably, during 2012, but this will not have a major impact on the Real estate segment.

After the first months, people will realize that the crisis continues and the asked prices will return a bit closer to reality.

This is my opinion for the following 6 months. What is yours?