DARIAN – evaluare & consultanţă

Unfortunately, even if Romania is an emergent country with a significant market and a good potential, the lack of infrastructure, the chaotic urbanism, the pollution, the low quality of life and last but not least the real-estate bubble that created the level of unsustainable values in the past years, will all contribute to a slow and long standing comeback of the real-estate market. The investments that will probably revive starting next year will gradually come back at the last years’ level but they will meet a market with another level of prices. Also, the expected profit will be lower with the exception of high-tech industries and will not come from speculative real-estate any more. Anyhow, real-estate will not be considered the “queen industry” any longer, even if it constitutes a considerable part of the states’ wealth. I believe that in the years to come the global economy and implicitly the Romanian one will have other bases, in which the attitude towards regenerating energy, bio-technologies and limited resources will form new challenges for investors and will determine new directions in business and therefore in rising the fortunes. The evolution of fortunes also depends on the economic capacity to absorb the European funds, funds that can represent an impulse for the revival from the crisis.

Businessmen that proved they have the necessary qualities and the chance to create and administer spectacular fortunes in this last decade will continue to prosper, even if the cumulative fortunes of the rich will not reach the 2007-2008 level, only in the medium term. One of the categories of individuals that we will continue to see in this top is the investors in agriculture, who I believe they will significantly raise their wealth, if they will take advantage of the conditions and they will benefit from a favourable agricultural policy.

The ones that will get rich further on, or they will consolidate their fortunes will be the ones who today have cash and who will know how to take advantage of the crisis and of the difficulties that other investors face. The acquisition of valuable assets from companies that have difficulties, at insignificant prices represents one of the significant sources of growth for some of the businessmen that are on the list.

The end of the crisis will find some businessmen with more wealth than the precedent year and some with no fortune at all. The last ones are particularly the ones that have a high leverage level, who invested borrowed money in projects and developments in incipient phases, thus paying for investing in a period close to the beginning of the crisis.

Dr. ec. Adrian Crivii, FRICS, MAA

Financial Crisis, Real Estate Market financial crisis, fortunes, real estate

The year 2008 was the end of the era of spectacular real-estate developments, of huge profits, of loan expansion and also of solvent demand that could accept everything that was offered on the market, regardless of price or quality. This period of 5 to 6 years in which the economy boomed, brought a fabulous gain to the ones that risked, had the courage and invested intelligently by grasping opportunities, managing to significantly raise their wealth and creating prosperity to employees and their business partners. This unforeseen progress was possible because of the country’s entrance in the EU followed by a significant flow of foreign investments as well as the result of “cheap money” that came from Western financial world. I think we can compare the period that ended last year with the conquest of the West in the XIX century in USA. The engine of this growth was the introduction in the economic circuit of an important asset – the land – which was at the basis of all real-estate developments and of all fortunes, mostly due to the speculative character.

The inflation in the financing area, the cheap loans, in conjunction with low prices and relatively little assets, mostly real-estate – lands- made the value of them to reach exceptional levels in the last years. Unfortunately, this evolution in expansion is not going to repeat soon, as this was followed in the past 12 month by declines which contributed to the significant diminish of fortunes, specifically because of the collapse of real-estate and capital markets. The real-estate investors and the holders of consistent properties will confront themselves with major difficulties and difficult access of financing, being already obvious the lack of appetite for risk from investors. The entrance in the era of “expensive and rare money” will significantly influence the values of businesses and of real-estate. I believe that the period “cash is king” will continue in the following years, and the diminishing of the values of fortunes based on real-estate or personal wealth will continue until they will be adapted for the socio-economic realities. Our GDP per capita – one of the lowest in Europe – will recover probably in the following decades based on the increase of medium income of the majority of the population.

Dr. ec. Adrian Crivii, FRICS, MAA

Financial Crisis, Real Estate Market financial crisis, fortunes, real estate