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Road to real estate market balance

From theoretical real estate wealth, Romanians have woken up poorer than last year, weekly Saptamana financiara writes in its latest issue. 'Romanians have come to see considerable loss betting their present and future incomes on the real estate market, where prices slumped in quite a drastic manner and are continuing to fall,' reads the publication.

Thus, the net wealth of the Romanian population plunged in 2008 by more than 25 percent, down to the level of 2006. According to analyses conducted by Saptamana financiara, the financial wealth of the Romanians stood at 317 billion euros two years ago, made up 83.3 percent of buildings (non-financial assets) and 16.7 percent (53 billion euro) of net financial assets (cash, banking deposits, state bonds, securities).

Given that the price of the buildings, which stood below the maximum level on a liquid market in 2007, shrank by 30-50 percent in 2008, it appears the value of the dwellings fell from 264 billion euros in 2007 to 158 billion euros in 2008.

According to weekly Saptamana financiara, the variation of net financial assets is more difficult to establish. The growth rate has become increasingly slower after 2004, down to less than 20 percent in 2007.

Experts wonder to what level the prices might shrink, in order to calculate how much the wealth of Romanians might drop. At the end of 2007, prices stood at 2,000-2,200 euro per sq m on the average, showing an advance of 200-300 percent in the replacement value. Experts think the price stands now at around 1,000-1,500 euro per sq m, with the market continuing to stay frozen. Construction costs have reached 600 euro per sq.m. Adding up a profit mark of one third to this construction cost, the final costs would come up to 800 euro per sq m. Specialists say that, at this cost level, there could exist both sellers and purchasers, as this is a balance price.

'The calculations did not include the plots of land, which are currently losing value more rapidly than buildings. And this happens mainly because the dwellings traded over the past years were in fact flats in many-storeyed old blocks, in which case the land price is quite insignificant,' the publication comments.

Analysts indicate the Romanian National Bank (BNR) has been taken by surprise by the price developments in the real estate market. Its 2007 financial stability report pointed to 'the possibility of a powerful short-term price correction is quite low, as the gap between supply and demand appears to prevail.'

 

Sursa: http://www.rompress.ro

Tags: euro price estate financial percent market bnr

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