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steve80
MemberThe property market has entered in a prolonged (2-3 years) downturn. If you ever wanted a good lesson in how “experts” go into denial when they're proved wrong by events, then the property market in Eastern Europe, inclusive Romania, has delivered a pretty good one. A year ago, the “experts” all said that Romanian house prices were going to keep rising at a rate well above inflation. After all, there weren't enough houses being built for Romanian “steadily expanding rich population” - how could they ever fall? But more and more people started to understand that soaring prices were fueled by easy credit and manipulation. With simplictic analysis about supply and demand they wanted to convince people that nothing will go wrong with Romanian real estate market. Then the global credit crunch hit, expanding from USA to Europe. Suddenly previous low interest rates were no longer a guarantee of permanently low mortgage rates. The experts started to suggest that house price rises might slow down a bit. They'd still go up, of course - supply and demand, remember? - but maybe they'd be flat in real terms. By the end of first quarter people have been starting to realise it was serious, house prices started to decrease and they have seen low single-digit percentage falls which will roll-over from month to month. The idea of mortgage demand being like a vast reservoir only being held back by the dam of the lack of supply is quite appealing but it makes no sense, economically speaking, as people normally buy only at the right price. House prices have hit record highs – driven upwards by easy money and the speculation it always causes. The effects of the boom have spread, thanks to the impact the feel-good factor of rising house prices has on consumer spending, and hence on economic growth. But can the “boom time” last for ever? House prices can’t rise indefinitely for the simple reason that at some point they become unaffordable. Wages can’t rise as fast as house prices can when a speculative frenzy is underway, so it has come to a point when the average man can’t buy the average house, and prices have to fall as a result. Will it get worse? In my opinion …yes.. There is no sign that the housing market will pick up anytime soon. First-time buyers (the biggest market for new-build homes and for old apartments owners) have all but left the market – driven out by prices that bear no resemblance to their incomes and the disappearance of easy-money mortgages. I really don’t believe anyone who says that the property market is going to recover strongly in the next 2 years from where is now. So…bad news for home builders – soon they’ll have to offer significant discounts. Of course, developers have always offered “incentives”. But a year ago, they didn’t have to bend the knee so eagerly to “get first-time buyers to the table”. Now, they’re starting positively to genuflect. More to the point, with property prices dropping many first-time buyers will wonder what the point is in buying is at all, when they can secure the same property next year for less. This is the fear for developers and fund managers. So my message to first-time buyers – be patient and don’t take advice from desperate estate agents, next year you will buy at 60-70% from the December 2007 prices. Developers might be offering 3-5% off just now, but by the time the real estate slump has run its course, they’ll want to sell as fast as posible. Fund mageres will be also under steam.Posted 3 years ago # -
Mihai07
MemberRe all, This has got to be the best real-estate related discussion i've found recently on the web. Though, i tend not to agree with all your suppositions...i believe some huge mistakes are being made when we are comparing Romania with USA, Japan, Spain... Dear readers, these countries have seen real-estate development and steadily incresing profits ever since the second world war (and before). Of course there would have to be a time for it all to stop and come to an end. Aristotel, your examples about how home users in Romania will be executed for not being able to pay after the 1st year shows me just how much you don't know about the banking system and those who have mortgages. Why are the terms [b:1ffe071679]price correction[/b:1ffe071679] so hard to comprehend? Stop dreaming people, prices for new apartement will not drop. Not from developers. Oh, if you .consider a 5.000 - 10000 Euro incentive as a drop...then YES, they'll drop...but otherwise, no chance. It's not possible. Especially for the development inside city limits. Even if developers will see a sales stagnation, they won't cut their profits. They'll rent the apartments and sell them in 3 years. I'm talking here about the serious projects, not the junks that are being built 20 km outside bucharest in the middle of the field, and have selling prices similar to the ones in the city. In these cases, we might even see some bankrupcies! These are the ones in which we will see drops. Regarding the decreasing numer of transactions, it's very true, but not because there are no buyers left, but because the investors have are gone. Romania is no longer a 'hotspot'. It's turning into a normal market, where the real-estate is a long term business, not a gold rush. Despite all the rumors regarding the crach, the numeber of sales to the end-users have increased compared to last years period. My advice to the ones seeking to buy a new apartment is to buy it in an early stage of a development where the prices are the smallest and you are the first time buyer. Look for projects that offer facilities, are bank financed and have some serious companies involved to avoid problems. If you buy in the latter stages you will pay more or you won't find the apartament that might suit you best. If you buy when the project is completed, there is a big chance you won't find anything left, or you will find at a big price (compared to the launch price). Of course, in your search for an apartment in the development you like, you will stumble upon the investors, who have bought and now are considering to re-sale. This is where you can push, because these investors are quite scared, and if you have some negotiating skills, will get the apartament at a very good price, ever better that the price that the developer is offering in that stage. Other than this, i really don't see any other way the prices might go down. That discussion was for new apartaments only, regarding the old ones - my suggestion is: don't buy. My bet is they will decrease for another year or so. Many new apartments are delivered, and these will keep pushing the price of older ones down. Bottom line - for the ones looking to invest and make an imediat profit from an apartment, that time is gone... For the ones looking to buy for their own use...you have the internet, you have a lot of big agencies - do a lot of research. Find out what is available, what are the prices, info about the area, transportation, construction materials, competition - the are the factors that give value. Be as informed as you can, and then make your decision but rest asured, you won't buy the same property for 30% the next year, it's not possible. Some people just have a pesimistic feel about everything...the prices will fall, huge bubble, people will be executed by banks, recession for the next years... The ression in only on the minds of those who can't buy and hope for a miracle, that's my oppinion. Have a great day, MikePosted 3 years ago # -
steve80
MemberRomanian market started to face buyers’ “strike” while easy and cheap money is not available anymore as the new regulations will come in force and interest rates are still going up. The end of cheap credit means the end of the boom. You can no longer simply buy a house and count on a bull market to raise prices, now prices are going down. There may be a need for housing, but demand is price driven. Personal debt and national debt have reached high levels and this is broadly felt by many people and affects how much they can afford. The speculators have been hitting in the first wave of price reductions and this will continue until they are wrung out of the market. These are tough times for developers/ sellers because it's not the same world it was one year ago, or 5/ 10 years ago. Markets move in great, long cycles and I think Romania and other European countries have entered a long downward cycle. If I'm right, many real estate investments will become financial losses. If you want to sell now don't call a real estate agency and ask for advice, don't bother to discuss it with your neighbors they'll all tell you you're crazy because they've been in an up-cycle so long they think it will last forever, but it won’t go for ever. House prices have far outrun the ability of buyers to pay for them. I do not say house prices can't rise faster than the incomes of the people who live in them. But they can't do it for long time. If you do not believe me check below the opinion of other people/ economists about the real estate bubbles and what the near future of real estate is. http://www.youtube.com/watch?v=11sG3zgE9Hk http://www.youtube.com/watch?v=I5kNJgLwD3Y&feature=related http://www.youtube.com/watch?v=oTAr2e1wktI&feature=related http://www.youtube.com/watch?v=L062Za0Q23Q http://www.youtube.com/watch?v=0vJYW3KoXOM http://www.chrismartenson.com/bubbles If you want to avoid a bad investment/ loss….do not buy now!Posted 3 years ago #
