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Land price decline worsens

Tracking the trend on the loan market, land business had been the most affected following the bank financing halt. To this end, the worst affected market segments are the plots of land ranging between 500 and 2,000 sq m, mainly accessed by the end-users interested in the construction of a home and former industrial platforms, acquired in the past years by specialized companies in real estate development or by investment funds.

As such, after in 2007, significant transactions with former industrial platforms and big-dimension plots of land were concluded in Bucharest, in H1 2008 the market was directly affected by the developers' cautiousness, dictated by difficult financing and the activity slowdown on some other market segments, according to a report released by Atisreal Co. As a result, the number of transactions dropped steeply and major discrepancies appeared between the sellers and buyers expectations as for the price. Moreover, this market decline occurred in the context of an economic backdrop characterized by the sellers' bolstering prices, which started to limit investments profitability rates.

In H1 2008, sale prices of land located in Capital's center and north advanced on average by 10-15 percent compared to H2 2007. This was mainly due to the limited offer on the market and increased demand from developers, who sought to reduce risks through the acquisition of some small-dimension plots of land in the most attractive zones. In general, prices continued their stable level in the secondary zones, with a slight increase of up to 10 percent in certain ones.

However, mid-2008 already, the trend started to reverse, an evolution mainly noticed in the city's secondary zones. An increasingly slimmer layer of buyers and the exit of a long range of middlemen, who speculated land sales, had as a result a healthier land market.

In this context, Shimon Gallon, GTC Romania executive manager, one of the main real estate developers in the country, told Saptamana financiara that the land owners commenced to lower prices this year, accepting discounts of 30-40 percent compared to the prices for similar properties sold last year.

On the other hand, 'an inflation' of offers is expected on the market.

On the same financing crisis background, if in the previous years there were a lot of speculators who bought the land in order to re-sell it at the moment of infrastructure works finalization, of the project's design or the land division into plots, their number would decline dramatically in 2008. Many investors were not able to re-sell the land, now being in a delicate situation to be submerged in debts.

Speranta Munteau, real estate leader PricewaterhouseCoopers manager, says that in maximum two-three months the land acquired, based on 50 percent banking loans, are to be put up for sale and financially strong investors will took advantage of that. Munteanu also says that the 'overdue corrections' are taking place on the market because the prices were ways too high.

Another land source is represented by opportunistic investors, who purchased properties in the past 12-14 months and now wish to re-sell them in order to draw capital for some other projects. But they are also confronted with difficulties, the initial acquisition prices contradicting the current demand levels.

 

Sursa: http://www.rompress.ro

Tags: prices market decline

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