Market View on Bucharest Property
In our desire to keep clients and partners permanently informed, Atisreal Romania, a BNP Paribas Real Estate company, offers you the latest Market View on Bucharest Property.
Covering all the relevant aspects of the real estate field, the report is the most realistic overview of the Bucharest real estate market. We are confident it will be a valuable source of information when making important decisions related to the real estate business.
Among the subjects of our real estate report you can find analysis for office, retail, residential, industrial, land and investment markets.
Bucharest office market has continued the trend recorded in the last 2 years with increasing supply surpassed by the growing demand. Despite the significant number of new completions recorded in 2007 the local market is still witnessing shortage of available quality office accommodation.
The office stock has remained focused in the northern and central submarkets. The western part of Bucharest is expected to emerge as one of the most active submarkets considering properties currently under construction or in advanced planning process.
On the investment market the strong demand has been sustained by the important capital inflows coming from investment funds and property investment companies targeting Romania to diversify real estate portfolios and risks across regional markets. Albeit the investment market continues to mature, it is still primarily limited by the shortage of quality investment products offered on the market which are not sufficient to satisfy the ever-increasing demand.
As a consequence of the rapid yield compression the local market has experienced unprecedented trends. New low risk funds have entered the market while some funds have taken the advantages of the lower yields and exit their first investments.
The lack of quality investment products and high level of pre-lease transactions on specific submarkets offer investors the opportunity to acquire off-plan or under construction schemes, especially offices. The market has witnessed a clear tendency towards forward purchase transactions over standing investments as investors are keen on securing better yields and attaining control over the project development.
The local investment market is less affected by the U.S. sub prime crisis and Romania is still perceived as an attractive market. However, the lenders are more prudent in granting finance for real estate projects and transactions.
Under the circumstances of the instability of the international markets, in 2008 the investment funds will become more precautious in their decision to acquire expensive properties, but will still be looking for alternative products with higher yields.
Although the lack of transactional evidence is still making accurate pricing difficult, it is clear that prime yields are moving towards the levels recorded in H2 2006 (7-7,25%).
Perhaps the most significant trend recorded on the local residential market is the increasing number of announcements for large residential projects comprising hundreds or thousands of housing units to support an efficient cost policy. This trend is expected to continue in the future, allowing developers to promote units at affordable prices addressing medium-income customers.
The purchasing power and the sale price per sq m directly influence the required unit size and type of finishing. Most customers prefer to purchase one or two-bedroom apartments while three bedroom apartments and duplexes are currently less popular among buyers as demand is highly price sensitive.
The increasing competition on the residential market enlarges the portfolio of advantages for clients, thus being offered a variety of financial arrangements such as buy-back solutions, favorable terms for mortgage lending or other facilities (furnished rooms, several finishing options etc).
Source: ATIS Real