{"id":613,"date":"2008-10-17T12:06:27","date_gmt":"2008-10-17T09:06:27","guid":{"rendered":"http:\/\/http:\/\/www.iliaspapageorgiadis.ro\/en\/?p=613"},"modified":"2015-01-26T20:04:59","modified_gmt":"2015-01-26T18:04:59","slug":"real-prices-will-go-up-artificial-ones-will-go-down-aggressively","status":"publish","type":"post","link":"http:\/\/www.iliaspapageorgiadis.ro\/english\/2008\/10\/17\/real-prices-will-go-up-artificial-ones-will-go-down-aggressively\/","title":{"rendered":"Real prices will go up \/ Artificial ones will go down, aggressively"},"content":{"rendered":"

\n\tI am tested, these are my answers (part 3)<\/span><\/strong>\n<\/p>\n

\n\tfor part 1, click here<\/a><\/span><\/strong>\n<\/p>\n

\n\tfor part 2, click here<\/a><\/span><\/strong>\n<\/p>\n

\n\t \n<\/p>\n

\n\tThis is the last part of my answer to the reader who challenged me. 
\n\tDon’t get confused: The are two categories of properties<\/strong>
\n\tI hope you got my point for the economy of the country and my proposal for the future. Let us go now to the Real Estate domain. Last year it seems that I was one of the very few people who described the situation we have now, with the prices going down this year. When I stated my opinion, I was treated in a really very bad way by the majority of the people I was talking with (who even now consider that the crisis will soon be gone, some funny ones predicted in September that there would be a mini explosion of transactions from October until the end of the year!).
\n\tPlease try to separate the properties in two categories. The ones with real prices, that make sense for a deal and the ones with crazy, artificial prices, which are good only for the seller and not the buyer. The first category, representing a minority in today’s crazy Romanian Real Estate market, will continue to be sold easily and their prices will rise in the next years. I am not very intelligent, but in the last two years my limited mind forced me to search just this category for my clients – investors. Yes, I lost endless numbers of deals, that someone else did, but today I am proud to say that I don’t have not even ONE investor who bought a property I proposed and he is blocked now in an artificial price, without being able to sell.
\n\tToday these properties with real prices are real investment opportunities, which allow to the seller to get a big size of cash and the buyer to expect future profits (because in Romania of 2007 – 2008 lots of people forgot that no one invests if he doesn’t expect profits to come).
\n\tBack to fundamentals, we invest in property when we can have a profit<\/strong>
\n\tThe majority of properties will see its prices declining, the right word is “correcting”. This artificial raise was based on one of the typical Romanian models of business: “If I have to pay more costs, I raise the price even higher and who doesn’t like to buy, I send him to hell. Also I do the same if I see the neighbours asking for more money, or if I like to buy something which costs more”. All the prices went higher because the price of land inside the city became more expensive. Developers and investors paid more, believing that they will sell their apartments more expensive. The apartments were really sold for more (but in most cases to funds, not to end users) and the greedy agents told the land owners to ask for even more, while they gave guarantees to the developers that they can raise their prices too. All this “circle of madness” leaded many people to forget the basics of business and to invest money without any strategy or logic.
\n\tSome naïve people say that once the World Credit Crunch will expire, the prices will continue rising. First of all, the Credit Crunch will not finish so soon, we are not in the end yet, some experts say not even in the middle of the way. Secondly, there are just few days that we feel the consequences of this Crunch in real economy. Wait some more months and you will see many things changing. But even if all problems will be solved and automatically banks will start behaving as they used to be in the past (I can easier believe that Andreea Marin will start playing football in Manchester United), still the prices are expensive. The examples are endless and the main idea is just one: The prices will return to reality, because the investors understood that with the prices of today they can not have any future profit, or a profit that will make them invest in Romania and not somewhere else.Same price in London and Bucharest? I don’t think so…<\/strong>
\n\tLet me give you an example: One year ago, the yield for an A Class office building in London was 3.5% and few days ago a transaction was concluded with 6.5%. When someone can find 6.5% in London, why to come in Romania for 7%? He will come for 8.5 – 10%. So, someone in Bucharest who was asking last year for 6 – 6.5%, if he will not correct his price, he will simply not sell. “Yes, but if he will take it from me for 9% maybe in the future he will sell it for 6.5% again” a lovely owner will say. Yes, but he forgets that he will take the money TODAY and this is the fair price now. If he wants to assume the risk to wait for some years, then he may sell again with 6.5%. But finally people should realize that there is not any serious discussion for paying a big price “because you take now the property with the price of after two years, you save two years time so as to have your profits faster”.
\n\tMaybe this correction will affect a part of the mortgages, because some of them were given based on artificially high valuations. Ok, so what?  This is normal and in the near future we will see several people who will sell in a price lower than the price they bought a property. When you make mistakes, you have to pay for them. I know that it is not nice to say this, but as I have always been paying for mine, I find it fair for people to pay theirs too.
\n\tThe biggest problem for a part of the market does not come from the correction of the prices, but from the fact that tens of thousands of people were totally unserious and irresponsible, spending money they didn’t have, consumed valuable resources just to show off. All these people will simply be forced to lose their properties, so as to pay their debts. You may still see them around spending like there is no tomorrow, but soon you will see them begging, as they can not behave in a normal way, for them all is black or white.Correction period until the second half of 2010 – The Real prices will go up – GDP growth is backed up by this correction<\/strong>
\n\tThe reader ends his comment by asking: “So the question arrives: we have fair prices for R-E properties (or we will in near term) but is there any chance of growth or at least stability in the next 2 years? Or are we going to the undervalued zone because of projects remaining unsold, R-E businesses going broke, houses taken by the banks etc…? The R-E sector has been a driver for the Romanian economy for at least 5 years now and a fall in this sector would take the entire growth with it.”        I hope I didn’t make all my readers sleep with my thousands of words. The real prices of properties will go up, the artificial ones will go down, sometimes even to the half of what it was asked some months ago, or even more. If you invest in real values, be sure you will be surprised by the results of your investment. I estimate that the correction period will last until the second half of 2010, more or less.
\n\tI contradict your opinion that the fall of artificial prices will damage the entire growth of Romania, I believe the opposite.<\/strong> Today the prices are high, which caused a halt in transactions. Halt in transactions means fewer deals, fewer developments, less money moving, less GDP produced. You will see that this halt will influence the growth pace of GDP too, there is even a possibility to see the Construction GDP going down next year because most of the projects are cancelled, or on hold. When the prices will be real again, the economy will move, the developments will proceed and the Construction GDP will rise once more.
\n\tDon’t be afraid of reality. It lasts longer, it saves the wiser and it guarantees healthy progress for all.<\/p>\n","protected":false},"excerpt":{"rendered":"

I am tested, these are my answers (part 3) for part 1, click here for part 2, click here   This is the last part of my answer to the reader who challenged me.  Don’t get confused: The are two categories of properties I hope you got my point for the economy of the country […]<\/p>\n","protected":false},"author":3,"featured_media":59454,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[210,17,204,236],"tags":[],"_links":{"self":[{"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/posts\/613"}],"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=613"}],"version-history":[{"count":0,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/posts\/613\/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=613"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/categories?post=613"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/tags?post=613"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}