\n\tThis article was published on 15.06.2010\n<\/p>\n
\n\tIt was just 2 years ago. The summer of 2008 was about to start and Romanians were ready to break again any possible record of consumption. Foreigners followed (if not surpassed them), creating together a totally artificial world. Noone was paying attention to the fact that the Real Estate market was already blocked since the autumn of 2007. After just few weeks the world (and Romania) woke up and learned about Lehman Brothers. That year's September changed our life forever. We entered into a deep crisis, which most people had not predicted.\n<\/p>\n
\n\tBut crisis is not always bad. People usually learn their lessons through difficult situations, because during the good periods they don't pay too much attention to details. And this major crisis had taught us many precious lessons about Real Estate, economy and life here in Romania. Let us checktogether some of them:\n<\/p>\n
\n\t1. When an apartment costs more than its client can pay for, its price will go down<\/strong> \n\t2. Foreigners are willing to believe but they are not stupid<\/strong> \n\t3. Wrong location: big trouble…<\/strong> \n\t4. Romanian middle class was never the one described, ready to pay 200.000 – 300.000 Euro for an apartment<\/strong> \n\t5. Most owners of commercial spaces were so greedy that signed very bad contracts just to gain few more Euro. Result? Punishment…<\/strong> \n\t6. 90% of all speculators got trapped and crisis found them having speculated all their money into new "bubbles".<\/strong> \n\t7. A land of 1.000 sq.m. with PUZ to build… 10.000 sq.m. is a land where we will build 4.000 – 5.000 sq.m. maximum<\/strong>One of the typical techniques that every one of us used in order to increase the value of a land was to work for a new PUZ (new urbanistic parameters) increasing the number of sq.m. you can build on it. Some owners really exaggerated on this and obtained parameters which were either not realistic or too expensive to be used. Reality showed that there are very few properties which were built with a coefficient more than 4 (so for 1.000 sq.m. of land someone built 4.000 sq.m. or more) and the result was matching with the developer's expectations.\n<\/p>\n \n\t8. If you don't sell and materialize your profits, you just have "money in paper"<\/strong> \n\t9. Agricultural lands in the middle of nowhere are not "potential intravillant properties, suitable for villas as people will need more oxygen"<\/strong> \n\t10. 10 Malls or other retail developments in a city of 200.000 citizens don't mean 10 success stories, but probably 9 holes where someone buried his money and maybe 1 successful project<\/strong> \n\t10 + 1. All these lovely Real Estate consultants who guaranteed your tremendous profits simply disappeared or suffer from amnesia<\/strong> This article was published on 15.06.2010 It was just 2 years ago. The summer of 2008 was about to start and Romanians were ready to break again any possible record of consumption. Foreigners followed (if not surpassed them), creating together a totally artificial world. Noone was paying attention to the fact that the Real Estate […]<\/p>\n","protected":false},"author":3,"featured_media":59454,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[216,17,236],"tags":[],"_links":{"self":[{"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/posts\/5501"}],"collection":[{"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/comments?post=5501"}],"version-history":[{"count":0,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/posts\/5501\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/media\/59454"}],"wp:attachment":[{"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/media?parent=5501"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/categories?post=5501"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/tags?post=5501"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n\tWe had reached the moment when almost every property had a crazy price. Just 20 months ago, you could not find a new 3 room apartment with less than 200.000 Euro! (exceptions just confirm the rule). Nowadays the situation is completely different and everything is adjusted to the client's budget. Whoever developed residential projects based on fake assumptions and didn't sell fast, simply saw his prices collapsing and his sales declining.\n<\/p>\n
\n\tThe Romanian economy and Real Estate market rose since a "river" of billion Euro started flowing into the country. This "river" was either Foreign Direct Investments or Real Estate investments. In few years time, we reached the funny situation when the majority of people had something to sell which was very expensive due to a "fairytale" which was sold with it, as package. Foreigners stopped buying "fairytales" and the market fell.\n<\/p>\n
\n\tAfter the top locations became extremely expensive, people turned into the good ones. When they also became "untouchable", investors moved to the "simple ones". When they also became "too much money for such a property", some of them chose wrong locations, just because their price was affordable. Result: Big trouble…\n<\/p>\n
\n\tAs prices skyrocketed, a new generation of "market reports" appeared. Most of them were "proving" that "Romanian middle class family in Bucharest can easily pay the amount of 200.000 – 300.000 Euro for an apartment". Most of the projects focused on this market segment, having to face their high costs (land acquisition, construction, soft costs etc) and their even higher expectations for profits. But even at its most glorious moments, Romanian middle class was not able to sustain such an investment. Already since 2009, initiated by Prima Casa I, they returned to the properties they could really obtain, with value from 40.000 – 100.000 Euro.\n<\/p>\n
\n\tWith the prices changing every week and all companies trying to expand their retail networks, the owners of commercial spaces were feeling like kings. They thought that prices will always – only go up. This is why 95% of them signed very bad contracts, with 0 guarantees. 3 – 6 months penalty for the tenant (= nothing), "sweet" clauses like "in 3 years from now we will renegotiate the price according to the market's standards then". They wanted to make sure that they would receive even more in the future, but like this they became "sitting ducks". Result: They were VERY vulnerable when the market crashed and they had to choose between much lower rents or a vacant space.\n<\/p>\n
\n\tToo many people were buying properties, keeping them for 6 months and then reselling them for a much higher price. There was always someone else to buy their property, at any price. So they thought that this can last forever. Result: even if they had multiplied their initial capital by 10 – 20 times, they used it all into new investments, blocking their money and losing the biggest part of it (except if they will wait for many more years).\n<\/p>\n
\n\tToo many people were rich during 2007 and 2008 "because they were owners of properties with high prices". When the prices collapsed, they realized that this was an artificial wealth which did not provide them what they were expecting to get. The ones who just wanted more and refused to cash out some of their profits, simply discovered an ugly truth.\n<\/p>\n
\n\tWhen properties inside civilization became expensive, several people started promoting agricultural lands as "new areas for villas, for those who need more oxygen, out of city's pollution". There were many investors who also said "I want to buy now very cheap and forget the property for 5 – 10 years". Well, the first 3 – 4 years have passed and probably they are still "under water". And civilization didn't reach their properties yet…\n<\/p>\n
\n\tAs someone said at Ceder conference 2 weeks ago, "adding too many retail developments in an area doesn't mean that you also increase the citizens' consumption power". It was proved that most of Malls and retail developments did not follow basic rules of the business and failed, as most of them overestimated the consuming abilities of people and their potential. Ofcourse if the developers sold to investors, then it is another story (and someone else is in trouble now).\n<\/p>\n
\n\tJust 2 – 3 years ago, there were too many people who were promoting properties with a "guarantee of profits". Some even advertised on media their calculations for the project's cost and "safe profitability", without knowing the basics of how costs were estimated. Some others were promoting themselves using the slogan "Double your money in 6 months time", many others were upset with the investor if he would dare to ask questions about the proposed investment, they were furious why he could not see the opportunity. All of them today either disappeared or suffer from amnesia. And they will try to convince you that all these never happened.<\/p>\n","protected":false},"excerpt":{"rendered":"