Real Estate Investment in Romania Most Promising in '08

Real Estate Investment in Romania Most Promising in '08

Land will continue to be the most profitable investment on the real estate market this year. The average rise in prices in Bucharest will be of some 20 percent, compared to 30 percent in 2007, according to analysts, Business Standard daily reports.

On the residential market, Real estate consultants are forecasting a move this year from preferred older apartments to newly-constructed ones, and a slight rise in prices for both, although prices for the former could level off or even drop slightly.

Office space rental will drop 10 percent, due to new offers. As concerns commercial space, Reuven Havar, CEO of AFI Europe, developer of the Cotroceni Park mall said he was expecting rentals in this area to level off at 10 percent, on the basis of constant growth in construction costs of commercial centers.

Havar went on to say that costs will oblige developers to juggle with lower profit margins in 2008, while real estate consultants do not expect these to drop below 20 percent.

According to Havar, the price of land has reached a high, and will either stop increasing or drop by 5 percent. He also stated that the price of new apartments will rise 10-15 percent, because construction budgets are high, driving prices up. By mid-year some 8,000-9,000 new apartments will become available, and a further 3,000-4,000 by the end of the year.

As concerns investment yield, this will drop by 0.4 percent, but will remain at 6 percent, still higher than the region. The price of land will continue to rise, not to exceed 20 percent, according to Mihai Alexandru, Land Department consultant of real estate advisory company Cushman&Wakefield Activ Consulting.

Only in the Pipera-Tunari area did the price of land surge by over 200 times in ten years, up from USD 5/per square meter, to EUR 1,000/sqm. “The fact that industrialists are obliged to move factories outside major cities will give developers a break as they are now facing a lack of space for new constructions,” said the spokesman of the Romanian Association of Real Estate Agencies, Ion Radu Zilisteanu.

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