The Romanian Real Estate market 2012. Walking in the middle of a snow storm, wearing sunglasses…

* the article was first published on the 7th of February 2012

2012 brought us one of the coldest periods we have had in Romania during the last decade. But this is one of the few changes that we have experienced. Most of the key factors that create the business environment in Romania remain the same:

·         The European economy may return to recession, thus Romania will be influenced as well. Even if the country has exited the worst part of the crisis, the economy cannot be considered as “rising”.

·         The Romanian people decided to show their discontent towards the government, which was reformed. In an election year, this created fears and instability. I hope that they will soon pass.

·         The economy has improved, with all its important figures looking “under control”. This is very important if we compare Romania to the majority of European countries.

·         People’s disposal income has been stabilized. It is mainly directed towards consumption, as property and car sales have dramatically decreased.

·         European grants remain unexploited, with the target for this year to be set at just 20% of the disposed sum, while 2013 is the last year for Romania to contract the rest 80%.

Meanwhile in the Real Estate sector…

·         The banks don’t lend or lend to a limited number of people.

·         “Prima Casa” is an exception, but its impact on the market gets weaker every month.

·         There is a limited number of new projects, most of them being developed in the Retail segment.

·         Everyone is waiting for the foreclosures to increase, but we need to wait for the decisions of European leaders for the banking system.

·         The habit of some “experts” who appear in the media and predict price increases and the continuation of the glory days. (I wonder… all these people… aren’t they tired of telling the same stories every year? Don’t they feel uncomfortable when reality proves them wrong? And about the media… I give a declaration and they come after me in one year, to crosscheck if what I said was accurate. Why does no one checks what all these “hopeful sellers” state?)

·         It is not by coincidence that the majority of property owners continue asking for crazy prices. Sometimes they prefer to lose their property to the bank, than to sell it with a smaller profit. “All or nothing”, like the gamblers in the movies…

·         Also the majority of end users are not educated on Real Estate issues, plus they show little interest in finding out how to protect their own interests. They prefer buying “blindly”, saving some money today and crying for the next 10 – 20 years.

·         The majority of Real Estate players continue behaving as if there is no crisis. Arrogance, little interest for real work, 0 attention to details, constant look-out for “easy, fast deals” (and usually empty pockets too).

·         The minority, though, has really taken advantage of the whole situation. Serious, hard working Real Estate consultants see their activity rising and their schedule filled, as a part of the market recognizes the necessity for their existence.

·         This minority, together with the “healthy” part of the market create the best hope for the Romanian Real Estate world. They live in a… parallel universe, where people work, projects proceed, clients are respected and transactions are sealed, even if with difficulties.

During a snow storm…

If you live in Romania, you know that the country is buried under the snow. It is like we are facing an endless snow storm. And what do you do during such a period? You stay indoors, avoid unnecessary moves, keep yourself warm and wait for the weather to warm up. You go out only when you have a good reason, always dressed appropriately. Plus you should take advantage of this situation and plan your next moves for the spring.

This snow storm reminds me of the economic environment around us. Isn’t it pretty much the same? A heavy “snow storm”, where you move only when it is necessary, with careful steps and well dressed. This is what the majority of investors are doing nowadays. Invest only when they find the ideal combination of location, quality and price.

…we go out wearing sun glasses

Unfortunately the majority of Romanian Real Estate market players continue ignoring the reality around them. It is like they go out in the snow storm wearing sun glasses. Like this, they show “how cool they are” and how “smecheri” they can be. If they catch a cold, they blame the weather. They are never the ones responsible for something wrong (but always they are behind any success).

This ignorance of reality will keep the market blocked during 2012 as well. As the majority has 0 interest to improve, change will come only by external factors or by the minority’s work. So it will take a long time.

What is your opinion?