ƵileleBiz 2010: More Real Estate / Ilias Papageorgiadis

Piata imobiliara incotro?

Which indicators

show us

the market’s revival (or not)

and when should it be expected

Romania 2010 2011

GDP Declined Stabilize or decline?

FDI Reduced No sign of increase

Exports Higher * Higher *

Agriculture Excellent year ?

Banks In trouble In more trouble

* due to Dacia, Nokia and Ford etc, but the rest of economy does not follow.

Romania 2010 2011

EU Funds Not absorbed ?

Europe / World Bad Austerity Measures

Political stability “Not the best” ?

Business environment “Not the best” (Can it get worse?)

Real Estate environment Still in mess (Can it get worse?)

Romanian Real Estate market

Residential segment:

“Prima Casa” and foreclosures

Banks don’t really finance

The supply still does not match with the demand

Exceptions simply confirm the rule

Still high prices in several cases

Blockage


Retail segment:

Malls bankrupting

Rents declining

New projects

Major retailers expanding

Land transactions at “low” price levels

Very careful decisions

Slow recovery, targeting 2012


Industrial segment:

Limited supply

More demand than the past

Land deals only with “low” prices

Demand expected to slightly rise

A lot of “relocation projects”

Slow recovery, possible increase


Investments:

Very limited supply of good properties

Limited serious demand

Majority of investors remains idle

Few deals, only at “realistic” levels

Too many expect the banks to sell off

Financing is almost blocked

“Diamonds” are still in target

- “Not so bad” in 2011, but no serious signs of recovery.

- Hopes for 2012.

- Exception : Details with retail destination

The main indicators that show us

the future of Romanian Real Estate Market

Foreign Direct Investments (FDI):

Declined in 2009

Declined in 2010

No sign for serious increase in 2011

Usually since the moment money enters, we should count

12 – 18 months in order for the money to spread in the real

economy

2011. Not positive forecast

How this indicator can be connected to a better Real

Estate Market as well :

From the moment we see FDI rising, we should expect

better moments to come in 12 – 18 months.



EU Funds:

Low level of absorption in 2009

Low level of absorption in 2010

Hopes for better results in 2011

Usually since the moment of approvals, we should count


economy

2011. The forecast is related to politicians.



From the moment we see EU fund absorption rising, we

should expect better moments to come in 6 – 18 months.



Major Public Works:

Very few in 2009

Very few in 2010

Without PPP, no serious hopes for much better results in 2011

Usually since the moment of signatures, we should count


economy.

2011. The forecast is related to politicians.

How this indicator can be connected to a better Real Estate

Market as well :

From the moment we see Major Public Works being agreed and

signed, we should expect better moments to come in 12 – 30

months.



Banks:

Too many problems and most of activities blocked in 2009

More problems and unpaid loans in 2010

“War” between clients and banks.

Consequence : Banks even more defensive

2011 is expected to be the most difficult year of the banks

in Romania, for plenty of reasons.

Are we going to see many foreclosures?

Are the banks going to un-freeze loans for Real Estate

Investments (don’t bet on this scenario).

2011. The forecast is negative.

Exceptions confirm the rule.



Banks (2) :

2011. The forecast is negative.

Exceptions confirm the rule



Either when we see many transactions from banks’

portfolios, or when we see many transactions financed by

banks, it means that “the engine has carefully restarted”.

The financing of several retail projects, where the tenants

provide strong corporate guarantees, just allows the market

not to cease.



Foreign Investors :

They were the “locomotive” of the Real Estate Market’s

explosion during 2004 -2008.

Almost ....”disappeared” in 2009.

Extremely careful and selective in 2010.

90% of them search opportunities, also ask the banks for

possible “liquidations”.

10% of them slowly invest on real values, even when the

price is “more than nothing”

They will remain defensive in 2011.

Very few people realize that except the major investors, it

is vital for the market to re-gain the thousands of

“smaller” investors, investing 100.000 – 1.000.000 Euro

on properties.



Foreign Investors (2) :

2011. The forecast is negative



Without more and determined foreign investors, the local

demand is not sufficient in order to revive the Real Estate

Market next year.



Business Environment / :

(Political instability)

4 months of 2009 were “lost”

New measures were announced in 2010, while thousands

of rumours were spread.

Many small problems damage the business environment of

Romania, without any visible solution at the near future.

2011. How will Romanian politicians behave?


Estate market as well:

If measures and solutions will be implemented, then in just

6 – 12 months time the business environment will be

drastically improved.



Europe / World:

Crisis started in 2008

It continued in 2009.

It got worse in 2010.

Romania is connected to Western economies and it targets

to their revival, in order to rise as well

2011. The forecast is negative, except Germany


Estate market as well:

From the moment we see Western economies exiting the

crisis, Romania is expected to follow after 9 – 12 months.



Mentality / Business approach:

Things were unbearable in 2008.

A small minority “woke up” in 2009..

This minority increased in 2010, but not enough..

Too many people still search for “easy money”, no matter

how they will obtain it, regardless the damage they might

create.

2011. More citizens will realize that 2011

has nothing to compare with 2006 – 2008



Mentality / Business approach (2):

Is it possible for a critical mass of people to improve its

attitude towards each other?

How this indicator can be connected to a better or

worse Real Estate market:

- If tomorrow morning the market gets unblocked and the

same people start playing the same games, searching for

idiots to trick, the prices will sky rocket in just few months

and everything will be blocked for some more years.