Cordia

2024 Trends with Mauricio Gomez, Cordia Romania & Spain

2024 Trends with Mauricio Gomez, Cordia Romania & Spain 900 600 BUCHAREST REAL ESTATE CLUB

26.01.2024

Mauricio Gomez, General Director, Cordia Romania & Spain

What are the main challenges & opportunities for the residential market in 2024?

“The main challenge for the Bucharest residential market in 2024 is the urbanistic blockade. Its effects are already showing, with building permits being issued in 2023 for 0,8 mil. usable square meters versus 1,7 mil. usable square meters in 2022. In this context, the new supply of apartments will be one of the lowest in the history of Bucharest’s residential market, and, as the demand is still strong, this will put pressure on the prices, which have already grown by 10%, YoY, in December 2023.

The last quarter of 2023 showed us that the demand is there, as residential sales picked up the pace. It is true that this growth was driven by the elimination, starting with January 1st, 2024, of the minimum 5% VAT quota, but this only shows that the right product, adapted to the demand’s fundamentals and purchasing power, is set for success.

The demand is currently somewhat affected, for the time being, by the fact that the National Bank of Romania keeps the key interest rate at 7%, and this means the accessibility of mortgages and loans for potential customers is still difficult, but things will improve in H2 2024 from this point of view.

At the same time, as real estate developers are not able to start new projects because of the suspension of the PUZs, there will be a ripple effect on multiple horizontal and vertical levels, from the drop in property taxes for the municipality and in labor-related taxes for the central authorities to decreasing demand for building materials and services of construction companies.”

What are the company’s business targets for 2024?

“In theory, our objective is to develop 500 new apartments each year on the residential market in Bucharest. We are not able to start a new development in the coming months because our projects are heavily affected by the urbanistic blockade and by the lack of dialogue with the authorities.

We support responsible real estate development and have six major urban regeneration projects in Europe in our portfolio, totaling 7,000 homes, 300,000 square meters of office space, 150,000 square meters of commercial space and 110,000 square meters of green space. Despite this significant experience, which involves partnerships with local authorities in cities such as Budapest, Warsaw, Poznan, and Birmingham, we have not managed to establish such collaborations in Bucharest, although we have always shown our willingness and have even taken steps in this direction.”

What were the main business results for 2023 – in terms of apartments sold?

“We obtained the occupancy permit for the second phase of Parcului20, our project in Expoziției area in northern Bucharest in February 2023 and we reached, in December 2023, a 95% level of sales of the total of the 485 apartments comprised in both phases of the project.”

Urban congestion reduces the accessibility of Bucharest

Urban congestion reduces the accessibility of Bucharest 1200 600 BUCHAREST REAL ESTATE CLUB

27.09.2023

The lack of predictability currently manifested by the project to modify the fiscal measures affects not only the business environment, but also consumers and will generate major imbalances in the market, believe the representatives of the largest real estate companies, members of the Bucharest Real Estate Club organization (BREC). They participated yesterday in the debate Residential Conference – The Future of Quality Living, the main topics being the turbulence affecting the fields of construction and real estate in Romania.

Even if, fundamentally, the developers agree that the Government’s plan to increase taxes is reasonable, considering the fact that their level is lower in Romania than in other countries, they believe that such changes must be announced in time so that the environment businesses to adjust their investment plans accordingly.

Andrei Diaconescu, co-founder of One United Properties, spoke in this regard about transitional provisions that should have been adopted as part of the plan to modify the tax package. “I find the Government’s plan reasonable, even if I do not agree with the tax increase. When European money comes through PNRR or other mechanisms, I understand why tax facilities are removed for some categories such as builders, but there are private investors who do not benefit from European funds and who have large projects that develop for several years. In their case, it would have been reasonable to benefit from transitional provisions, which would give them time to adapt their plans”, said Andrei Diaconescu.

Tinu Sebeșanu, CEO of Impact Developer and Contractor, disapproves of the way the fiscal changes were debated and the short implementation time. “In Germany a tax increase of 1% was announced 3 years before. The German state recently announced incentives for residential developers. Romania’s budget has been bleeding for years and we are permanent blood donors. The impact of the new measures is not major, but it creates pro-cyclical measures and we would have liked more predictability”, said Tinu Sebeșanu.

The lack of predictability is the reason why Cordia, part of the Hungarian group Futureal, changed its plans regarding Romania. “Our plans could not be developed in Romania as we originally proposed. As an international investor, we had to move to other markets for the time being, where conditions are favorable and predictable. In Spain we have a project under development and we bought two other plots, the last transaction, worth 46 million euros, being among the largest in the Costa del Sol in 2023. This money could have come to Romania, a market in which we will remain and in which we will continue to develop residential projects”, said Mauricio Mesa, General Director, Cordia Romania and Spain. The company announced in 2019 a budget of 120 million euros for the development of projects and 40 million euros for the acquisition of land, currently having a portfolio that allows it to develop more than 2,000 apartments.

Also speaking about predictability, Laurențiu Afrasine, CEO of Akcent Development, referred to an official meeting of real estate developers last year with Prime Minister Nicolae Ciucă, who assured them that the Government had no intention of changing taxes. “There will certainly be an impact on many levels, especially the emotional one for the buyer, who will be faced with the new prices.” Afrasine said.

Developers continue to face the urban gridlock that is chronically manifested already in Bucharest and is beginning to make its effects felt in other large cities as well.

What are the solutions for unblocking Bucharest? Andrei Diaconescu claims that the first step is the unblocking of the Zonal Urban Plans (ZUP) by sector, the next is the adoption of the General Urban Plan (GUP). “GUP should have been ready much faster, it’s already been going on for several years. If you don’t have a GUP, you can’t develop anything on a plot of land of over 3,000 square meters.” said Diaconescu, and in the end everyone suffers. “We all bear the burden of traffic, the city is developing towards the periphery, but schools, theaters, workplaces are in Bucharest, so transit traffic is increasing, a situation that I don’t know if it is taken into account by the local authorities”, Diaconescu also said.

The consequence of the urban uncertainty is the decrease in the accessibility of Bucharest, as the demand for apartments and new office spaces will recover, but the supply will decrease.