When We Can Expect the Revival of the Real Estate Market
During these troubled times of uncertainty regarding the overall economy and the real estate market specifically, it is advisable to review new visions and more optimistic sides of the future, which is inevitably going to produce some positive effects out of the crisis we are all passing through at the moment.
Although an increase of taxes (hard to handle by the private economy) was avoided in the last minute, it is certain the decisions taken now will not meet the desired effect. The curve of sacrifice was preferred today and it will mainly affect the budgetary employees and the pensioners, but an increase of taxes can not be postponed in the near future. They try to make this measure a pro-cyclic one, applied when the first signs of economic revival will show up.
Therefore, not only 2010 is a compromised year if we refer to a revival, but 2011 seems also threatened from the point of view of the real estate industry.
The prices re-establishment, so that they could meet the deeply fallen solvent demand, will continue in the next period of time.
Going back to a more optimistic tone, let us see which could be the positive effects the crisis could generate for the real estate industry:
- Higher expectations from the buyers and a better understanding of what we define a good quality property
- A good understanding of financing (terms, costs and information transparency)
- Pressure applied on increasing the quality of the services and the standards used by the real estate and financial consultants
- Increasing the real estate market transparency, mostly regarding the real value of the sold properties, which is going to lower the speculative side of the market we have noticed in the previous years
- Increasing the quality of the real estate products and a new price-quality relation which will reflect those market segments
- A significant decrease of land prices, with a major influence in the final unit price (per square meter)
- The competition between the well-known developers and also between important construction companies, which will lead to a market free of amateurs and speculative players
- A significant decrease of the profit margin of all real estate industry participants
Once the first signs of economic revival show up, which we hope it will happen as soon as possible (perhaps in 2011), the market and the real estate developments will start on a new path, from others levels of construction, land and labour force costs, with a brand-new quality and proving the real estate industry in Romania has finally grown up.
Dr. ec. Adrian Crivii, FRICS, MAA