“These are mostly real estate developers with low financial capacity, dependent on cashflow and market dynamics, vulnerable to financial changes. Their financial capacity is currently also eroded by the level of contracted loans, whose costs have increased significantly,” says Adrian Negrescu, Frames manager.
In line with statistical data, 5,633 real estate developers of the total of 7,158 were in the micro area, 1,071 firms are valued as small ones, 364 as medium-sized ones and only 90 are large firms, with a significant financial power.
The most challenging situation is in Bucharest, where, out of the 3,000 real estate developers, more than 2,300 had a high and very high insolvency risk.
In line with Frames survey, the 7,158 companies had total liabilities of RON86.2 billion at end-2022, double that of 2015.
The value of stocks topped RON18.3 billion and net losses totaled RON1.5 billion.
Frames analysis also shows that after an excellent 2022 by turnover, 2023 results are likely to point to a first downgrade, a first in the past ten years.
Problems in the field are also obvious by looking at the evolution of building permits.
Thus, in line with statistical data, in September 2023, a number of 3,083 permits for housing were released, down 1.0% from August 2023 and 20.5% from September 2022.
“The real estate development market will undergo a significant change, with only large companies, with access to funding and with well defined plans, likely to survive fiscal changes. Small investors, living from project to project, are likely to need being saved,” concludes Adrian Negrescu.
(English version by Catalina Apostoiu)