Analysis. Developers push the pedal on residential investments

House prices are expected to maintain their upward trend through to the end of the year, after picking up speed this first semester. In the meantime, developers are boasting of investments in new projects to match the growing demand, according to Business-Review.eu.

”Economic growth, low interest rates and support schemes such as the government-backed Prima Casa program spurred housing demand the first half of the year, which in turn pushed up asking prices throughout the country, data indicate. The trend looks set to continue throughout the rest of the year, despite concerns about how sustainable these price increases are”, says expert Simona Bazavan.

While demand is going up, supply has been more sluggish. “Although most economic indicators look favorable for real estate acquisitions, the existing supply is considerably lower than a year ago. To be precise, our data indicate that supply in the main cities is down by about 31 percent,” said Dorel Nita, head of data and research at Imobiliare.ro, in a recent company report.

And prices are indeed picking up. Over the past three years house prices have posted average quarterly growth rates of 2.5 percent, Imobiliare.ro data indicate. By comparison, the rise stood at 3.1 percent in the second quarter of this year. “Although the growth rate was somewhat justified by the ratio between demand and supply, these fast price hikes are considered unsustainable, including by the central bank. House prices on the local market are growing faster than the European average, according to Eurostat and the National Institute of Statistics,” added Nita.

This has raised concerns about a possible market overheating, especially in cities such as Cluj-Napoca, yet consultants and developers suggest that overall growth remains sustainable. “The local residential market is on a new normal cycle. I wouldn’t say we are dealing with a market explosion, and I do not think there is a risk of overheating. The market is maturing and this trend is led by the ever evolving consumer needs,” Ahmet Buyukhanli, CEO of Opus Land Residential Development, tells BR. He expects prices to go up by between 5 and 10 percent on average by yearend in Bucharest.

As to when property price hikes will ease, this could happen in the event of a mix of factors, believes Nita: house prices going up faster than incomes, fewer properties changing hands, fewer prospective buyers and supply picking up once more.

 

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