An advantage of the 2008 – 2013 Real Estate crisis: More careful end-buyers
– “We simply did not know, Ilia… we thought that life was a game… our salaries and income was increasing year after year, the prices of the properties were rising week by week… we were not realizing what it meant for us to buy a very expensive property or sign a 30 years’ loan, committing a high monthly cost…”
– “Allow me to add that even when someone was telling you that it was a wrong strategy to follow, you were getting upset and usually you were not listening…”
– “Correct. But you know… we are Romanians… it was easy, we could not wait… we were not ready for all these…”
– “It happens in life. Nowadays a serious part of the society has changed”
– “Indeed. Now there are many people who will refuse a loan that will risk their existence… we know how it is to go up and then land down… you see… we, as a nation, were used to experience only the difficulties of life… then we found out the “roller coaster” and today we understand better when you write about the cycles of economy etc…”
So it is not by coincidence that we have entered in a new, positive and healthy Real Estate cycle. This happens also due to the fact that many of the participants in the market have matured…
End-buyers have changed
My friend, a well-known and respected journalist, could not describe better the changes in the approach of the Romanian middle class when it comes to buying a property.
- From “Today I think – tomorrow I see – the day after I am at the notary”, we switched to “I check, analyze and try to expand as far as my financial ability allows me to”.
- Many end-buyers check tens of properties before to choose the right one. Sometimes they are the best “market analysts”, able to tell you details about every project and a wide list of old apartments in an area, being classified according to the period they were built.
- Educated by Mr. Isarescu’s banking rules, they have abandoned speculation and aggressive moves (I insist that his decisions have helped the middle class so as to build new investment principles)
In 2006 – 2008 the demand for new apartments was speculative:
- Funds were reserving whole buildings, with “10% advance and the difference in the end”
- Banks were financing almost all developments and all speculative moves
- End-buyers were purchasing properties based on “dreams”
- People were extending their risk appetite much more than they could handle
- Prices were rising every month
In 2015 – 2018 the demand is real, solid and based on arguments:
- Speculative funds are not here (as also the banks don’t finance this kind of moves)
- End-buyers purchase what they think that they can afford. So after several years of crisis, they are more conservative
- The banks offer housing loans at healthy, European level interest rates.
- Many people have cash, collected after years of work
- You don’t see citizens with 2.000 Euro / month family income targeting properties of 300.000 – 500.000 Euro
- Prices are quite stable and when they rise, this happens due to increased demand in particular areas
- The interest rates for deposits are almost 0, thus there is no alternative for the middle class so as to add value to its earnings.
- The housing needs of Bucharest citizens are real and will not be covered in the following 20 years
- The salaries paid to people are “post crisis ones”, exaggerations are rare
The fuel for the growth in the years to come
Romania is not “one country”, but “3 countries in one”. So when we talk about the market, we don’t refer to the society as in whole.
The Romanian Residential sector has some excellent years ahead, if of course the challenges will not cause unexpected problems. Still, we witness a healthy market that grows slowly each year, based on real demand, by real people who cover real needs of their families.
Nowadays, this is the reality in Romania and all indicators show us that the country will continue growing in the years to come (for different reasons).
What is your opinion?