Despite numerous challenges, developers are willing to meet the market’s requests for new housing developments

Despite numerous challenges, developers are willing to meet the market’s requests for new housing developments

Despite numerous challenges, developers are willing to meet the market’s requests for new housing developments 901 600 BUCHAREST REAL ESTATE CLUB

Over 150 real estate managers, investors and entrepreneurs gathered last week at Novotel to discuss the main challenges and opportunities at BREC RESIDENTIAL CONFERENCE: The Future of Quality Living.

The economic impact of blocking the regional urban plans (PUZ) in the Capital is a significant one, Bucharest’s contribution to the national GDP already falling by 2.4 percentage points last year, and for the period 2022-2026 the total financial loss in the economy being estimated at 52 billion of lei, according to a study presented by Iancu Guda at the conference. 

One of the investors affected by this blockage is Speedwell, who bought the Griro platform in Bucharest at the end of 2020. Due to the blockage encountered in obtaining the permits, Jan Demeyere, co-founder of Speedwell, stated that they had to release 10% of their personnel. Moreover, the company’s investors might be looking more into Brasov, Iasi and Constanta rather than in Bucharest. Speedwell’s representative presented the project they have planned for Griro platform that should be executed within 10 years, gathering investment of 500 million Euro. 

Regarding the main blockage of the Bucharest residential market, the PUZ, according to Antoanela Comșa, President AREI and Gran Via Real Estate, there hasn’t been any PUZ approved since 2020, which led to a dramatical decrease of the building permits (in 2000 it has been issued approximately 2800 building permits, while in 2021 their number decreased to scarcely 218). The negative impact is felt not only by the private sector, but also by the public one. According to ISC (State Inspectorate of Construction), in 2020-2022 period, it is estimated a blockage of the public investments in a total value of 5.5 billion euro, thus making Bucharest a capital city fully blocked from the investment point of view.  

Raluca Baldea, Tax Partner at Deloitte has introduced us to the main fiscal changes impacting the residential segment: the 5% VAT limit has been reduced from 700.000 lei to 600.000 starting from January 1st 2023, being be a unique purchase with this facility. There is also a transitory period- thus, to the extent that an advance was paid before January 1, 2023 but the delivery takes place during 2023, the conditions regarding the reduced rate of VAT applicable at the time of signing the pre-contract are maintained. More precisely, temporarily, the 5% rate is also applied in the event that more than one house is purchased with a reduced rate for a maximum value of 450,000 lei, respectively a single house with a value of 700,000 lei, to the extent that they have been paid advances before January 1, 2023 and delivery/sale takes place in 2023. The building tax is also to be modified- the residential buildings will start from 0.1% and the non-residential from 5%, without a maximum cap. 

Within the panel dedicated to affordable housing, Tinu Sebeşanu, CEO of Impact developer presented the company’s concerns in entering a crisis due to the imbalanced offer and request on the market. Doubled by constructions costs and financing costs increases, the PUZ blockage can only make the prices of the new housing units go higher. 

When coming to construction sector, Adriana Iftime, general manager of Construction Federation, stated that the main challenge she foresees is the reconstruction of Ukraine after the war. In the European forums it already appears to be drawn national directions in this perspective for some countries such as Germany, Belgium, Denmark. The reconstruction process would put a pressure on the construction segment – labor force and materials stocks and prices as well, which should be taken into serious consideration by the Romanian authorities. Also, she underlined, a productive dialogue is impetuous necessary with the local and the national authorities for the development sector not to fail.  

According to Andreea Comșa (Premier Estate Management), the affordable segment of the new residential market has been the most affected in the past 6 months due to changes occurred in the financing process, alongside the increases of the construction costs. On this segment particularly, the difference in the future will be made by the financial sustainable developers, the ones that rely solely upon the down payments of the clients to finance their future developments will probably need to find alternative financing solutions.

From the financing point of view, Sorin Cerbu (Libra Bank) stated that the bank financed residential developments are stable and mostly solid ones. The rhythm of sales is directly influenced by the differentiating qualities of the projects, especially ones relating to sustainability. As for the buyers’ financing, in spite of the current challenges, there is still room to grow, Romania having the lowest degree of financial intermediation in Europe – 47% (by comparison, in Hungary, Poland or Czech Republic it is situated between 70% and 80%).  

Akcent Development is looking forward to their new residential development of over 700 apartments to be built in one phase in Bucuresti Noi, an attractive development area in the northern side of Bucharest. The main challenge encountered is the construction costs instability, but, according to Laurentiu Afrasine, the company’s CEO, the middle-upper market cand sustain the price increases on this market, which he estimates to be next year over 2.000 eur/sqm. A mature market should have multiple layers of prices and the differentiation is normal, so that the market should absorb a few new developments.

The middle and upper middle housing development have a constant request on the market, according to Vincenzo Aquino (Nusco), in spite of the general concern on the market during the past months. The company is also taking into consideration of keeping a stock of apartments for rental, as an investment option for the company. The PUZ blockage and the pressure on the construction costs are challenges to be met, but the prices on this segment will not decrease, in his opinion, due to the market’s pressure, besides increasing costs, and also considering that Bucharest has one of the lowest prices per square meter in Europe.  

The former industrial platforms still represent a valid option for development, but according to Catalin Gavrila, partner at Crosspoint Real Estate, the PUZ blockage makes it impossible to make any kind of predictions. The investors on this type of plots are used to some extent to the permitting issues, but this moment is without precedent on the local market and there will be a significant lack of new housing in the next few years. 

As for the individual houses near Bucharest, Mioara Iofciulescu from Atlantis Romania, the request for villas with generous courtyards has increased in the recent years, so that they decided to develop a 28 villas and commercial spaces in the northern part of Bucharest, in Moara Vlasiei. The fast access towards the northern part of Bucharest – 15 minutes from Aviatiei-Pipera area and the energetic independence of the hoses being the main differentiator factors. The company is also intending to develop a 20 villas compound for rental and also are looking into logistic development as long-term plans. 

The final panel of the conference, dedicated to the fine living segment – the premium and luxury segments of the residential market, underlined the new tendencies on this segment.

According to Beatrice Dumitrascu, One United Properties, the sustainability issue is one of the main focuses on the companies’ developments, the partnership with Veolia being a strategical in this perspective. When discussing the quality of life, the clients are focused on green energy, moreover, given the fact that the energetic resources are a crucial issue in these times. Regarding the developments One United Properties have in pipeline, the request on the market is higher than the demand, the company having in their business plans also keeping a stock of apartments for rent. As for the heritage buildings that the company has in ownership and are in course of renovating and reconditioning, Beatrice is confident that they will be an attraction in Bucharest. 

In the closing of the conference, Eduard Beuran has introduced the branded residence concept developed by CERTION in Romania. For a property to truly be a branded residence (private homes curated and maintained by hotel brands), it must meet the highest standards in terms of location, service, design and amenities. Currently, the CERTION portfolio includes 5 such brand residence projects in Olimp (VOGH Olimp, Galileo, Lago-Solantis and Pharos) and one more in Poiana Brașov (Jakob Sonne). The company is also seeking for new locations in Romania for further developments.

The event was organized in partnership with One United Properties, Impact Developer & Contractor, Certion,, Alukönigstahl Romania and Reynaers Romania.