A TEMPERATURE CHART OF THE SOCIETY
– Professor Artur Silvestri, president of the Romanian Union of the Employers in the Real Estate Sector (since 1997) is a reputed international expert in real estate. His vision about the evolutions registered of late in this specific market are, without doubt, a milestone for any major investment, made by local or foreign entrepreneurs. „From local to a globalised market“ – this is your theoretical point of view. Professor Silvestri, how do you characterise the Romanian real estate market at this point in the late spring of 2005?
– Real estate is the temperature chart of any society and this is more obvious in our case than in others. Of the two forms of investment or wealth accumulation – real estate versus the capital market – a much higher development goes to the former. This is how the Romanian society took shape ever since 1990. This is why in the real estate investment one can find the main trends existing in the Romanian economy. Certainly, you cannot have a business without the real estate component. In addition, this sector also defines the way of living, which implies the social structure. This results in the development tendencies of the society.
In this respect, Romania is an extremely interesting market, a big market, with a huge potential. It is for a reason that, about six months ago, Le Figaro was describing Romania as a possible El Dorado for real estate investments coming mainly from the European Union. Of late, this market became known as a strong one. Of course, we have certain characteristics. By mid – 2003, we had a local real estate market mainly fueled by the money existing in the country. The phenomena are easy to define, they are foreseeable: the key element is the way of saving money. In the late ’90s, the real estate profitability rate was around 27-30 percent, which is very high. Surprisingly, the volume of private foreign investment in terms of real estate was rather low. But since the middle of 2003, we suddenly switched to the conditions of a globalised market, through the appearance of mortgage crediting. The change not only implies a financial aspect. A lot of money appear on the market, but these are imaginary money, not sums saved by the buyers. The market had a radical, explosive change and the new conditions makes the Romanian market even more interesting.
The precedence is taken by mechanisms also known in other countries. But the market become more fragile, because it depends on the interest shown by capital until the moment when it gets attractive. At this moment, you depend on cash flows that may also go to other markets, in search of maximising profit. The growth of the prices is interesting for speculate oerations but this creates a risk on the market. This must be known and, in a future that could prove to be not so far, it will exist in reality because of this situation, the real estate market has become very expensive. Especially in the segment of homes, the price hikes have gone as far as 200-300 percent within one year and a half and it is a phantastic growth unprecedented on the European markets. In Bucharest, for example, prices are getting close to those in Western European capitals, which is abnormal. Finally, we can observe that the prices are artificial. They will regulate either by themselves, or through the pressure of external factors.
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