Real Estate Market Outlook for the Next Year Appears Bleak. Analysts Warn that 7 out of 10 Developers in Romania Could Face Insolvency.
Adrian Negrescu, Economic Analyst: There are real estate developers with reduced financial capacity, dependent on cash flow and market dynamics, vulnerable to financial changes - such as tax increases, rising operational costs, and declining housing demand. Their financial capacity is currently burdened by the level of contracted loans - the costs of which have increased significantly.
Apartment Prices Have Seen Considerable Growth Over the Past Year.
Among the cities facing issues, the capital city tops the list, followed by Cluj, Timișoara, and Constanța, where apartment prices have seen considerable growth over the past year.
Ingrid Tîrziu, Observer Reporter: This block was supposed to be in use for about a decade, but due to the problems the developer faced, it's now in ruins. Many construction sites in Bucharest could look like this starting next year because 2,300 out of approximately 3,000 real estate developers in Bucharest are at high or very high risk of insolvency.
Developers acknowledge market difficulties but don't see the problem on such a large scale.
Bogdan Ivan, Real Estate Developers Association: As things get tougher, only those with appropriate funding, large firms, and strong developers will survive in this industry.
Răzvan Stroescu, Real Estate Analyst: When you have investments of 5-10 million euros, you have to consider such market interferences. Out of the 70%, probably a percentage will undergo insolvency proceedings, but we can't know at this moment what that percentage is.
Recommended Solutions by Analysts for Developers to Survive.
To survive, developers will need to significantly cut prices, say analysts.
Radu Georgescu, Financial Analyst: Mathematically speaking, to have the same accessibility to loans, either prices drop by 50%, or the IRCC drops to 2%. The IRCC can't drop; we have an inflation rate of 8%, so in the next 6 months, we will see a significant decrease in prices.
The Developers Association Contradicts Financial Analysts.
Bogdan Ivan, Real Estate Developers Association: For new homes, from an economic and technical standpoint, it's not possible for prices to drop. This is because inflation is still high, and we still see high prices for materials.
Those looking to buy a home feel uncertain and are hesitant to invest in real estate.
Man: I don't think it's the right time. We need a little more time. Probably at least six months, if not more.
Data shows that the total level of real estate transactions this year is 14% lower than in 2022. We are witnessing a decline in the European market as well. Recently, the largest real estate developer in Germany and Austria declared bankruptcy. Analysts estimate a lag of 6-9 months until we face a similar situation in Romania.
