REAL ESTATE TRENDS 2024

BREC MEMBERS INDICATE AN INTENT TO INVEST IN BUCHAREST
UP TO 500 MILLION EUR IN 2024, DOWN BY MORE THAN 50% TO 2023

We surveyed the most dynamic investors for the forces that shape the city skyline in 2024.

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Urban freeze, along with the unpredictability show their effects: Investments intend for Bucharest drops by more than 50% from 2023, BREC members indicating a volume between 400 – 500 million EUR for 2024.

On a scale of 1-5, the community expresses a moderate take on the economic perspectives of the Bucharest real estate landscape in the new year, with a 3.06 average, down from 3.6 in our 2023 survey, and a median of 3. The most interesting change by comparison to 2023 is that the development strategy and refurbishment of existing assets overtake new acquisitions.

”Romania holds a strong position within the Central and Eastern European economy, standing out as an attractive market for foreign investors and currently showcasing the highest yields and profitability in the region and the European Union.

Whether we are talking about the residential or office segment, investors are seeking to place their money in secure, premium projects whose value increases regardless of the context.

The average price for residential acquisitions in Bucharest remains significantly lower compared to other major cities in the region, providing opportunities for both foreign investors and local buyers seeking more modern housing.

Furthermore, the CEE is set to become the centre of gravity for European growth, according to the National Institute of Economic and Social Research, and in this context, Romania becomes a more prominent regional distribution hub, especially for South-Eastern Europe.”

Through the survey, the recurring theme is still the urban planning freeze. Most of our respondents circle back to the topic when estimating their investment pipeline. The urban planning uncertainty has also an impact quality-wise, as the responsible developers, who are building large-scale projects and have high-quality standards, are slowly but surely driven away from the market. Due to limited supply, there is an estimation of 10% in asking prices and rents.

The fiscal changes, including the increase of VAT for residential purchases and the termination of industry incentives for construction labour tax, along with high-interest rates, impact negatively the accessibility of credit and housing. However, the biggest contributor to investor sentiment towards the Bucharest real estate market is the urbanistic uncertainty.

“In 2024, we anticipate an increase in demand for housing units, supported by the general need for new quality homes as the majority part of the actual stock is outdated nationwide.

Accessibility was declining the last 2 years due to the high costs of mortgage financing, but the anticipated decrease of interest rates and expected wages growth can bounce back the solvable demand.

While the construction costs had increased and several changes in tax incentives for the industry and other regulations had come in force, recently a surge in construction prices is observed.

In Bucharest, to these factors influencing the future increase in new dwellings prices we need to add the envisaged downfall of supply for the next 5 years due to the lack of new zoning plans and consequently the issuance of new permits.”

The attractiveness of asset classes changed by comparison to 2023. Industrial & logistics still tops the charts, closely followed by residential, a segment lower ranked 12 months ago. Offices lost further ground. However, hotels are the least preferred in 2024. In 2023 this asset type was slightly higher in the top, which is surprising considering the increase in the number of visitors.

“In the realm of real estate projections for this year, we anticipate distinct trends that are poised to shape the industry landscape. Foreseeable growth is anticipated in the realm of infrastructure development. Romania and Central and Eastern Europe stand as attractive choices due to ongoing infrastructure changes and heightened demand for modern facilities.

The retail sector is primed for continued evolution, marked by a transition from smaller retail parks to expansive, integrated projects. In the industrial sector, despite rising rents impacting the appeal of Romanian warehouses for global businesses, Romania, along with Central and Eastern Europe, remains attractive when considering overall costs.

Projections for the office space sector indicate a period of stagnation, with minimal anticipated growth in 2024. This trend reflects evolving work patterns and preferences, influenced by the aftermath of the global pandemic.

The residential real estate market is expected to witness a status quo this year. While the longer-term demand for well-priced residential units in many areas of the country remains supported, factors such as central bank policy adjustments and robust wage growth are likely to influence buying interest.“