LaSalle expects price development in 2012 will see a “more pronounced correction”.
“Projects that were launched for sale to the market with post-crisis designs have certainly been better adjusted to current demand, also in terms of pricing and, principally, in the total price dimension. However, there are still many projects in the offering that have been supplied to the market during the boom years and in the early crisis days that still need to adjust their price expectations to reality,” reads the report.
LaSalle said Bucharest’s residential market still shows limited growth perspectives this year. “In a moderately optimistic scenario, one can expect stables sales, while only few developers will be active in supplying new projects to the market. Prices are likely to experience further correction.”
“Market players will need to put effort in to building trust and strengthening their image. Developers with a strong financial position that plan a long-term market presence, might use the time to invest in a proper land portfolio for future investments,” according to LaSalle.
Bucharest witnessed a significant decrease in dwelling completions last year. Some 1,600 homes were completed in the capital in 2011, down 41% on the year. Moreover, this is the worst result in eight years, shows the report.
“In fact, housing construction of Bucharest’s CEE peers also lost pace as a result of the crisis period. However, the number of completed dwellings in similarly populated Warsaw still reached around 9,700 in 2011 and even crisis-ridden Budapest produced twice as much as Bucharest. It is surprising that a city with such a huge shortage of housing and gap of quality housing products has not been able to significantly surpass a level of 3,000 dwelling completions a year, in its post-socialist era,” LaSalle said.
Housing demand was weak both in 2011 and at the beginning of 2012. Crediting for home purchases in Bucharest increased slightly in the second half of last year, while the last three months have been less dynamic.
“Interest rates are still high and banks’ lending policies have remained conservative, both hampering growth in demand for housing. In addition, prices are still too high for many households to participate on the primary market. However, the major problem lies in psychological factors. The residential development market in Bucharest and its suburbs witnessed an incredible number of developers’ announcements related to new housing estates. However, until today, not only have few of these projects have been built but, worse, many projects and developers vanished, including bankruptcies and insolvencies,” reads the report.
LaSalle considers that the lack of trust for the development market hinders pre-sales during the construction period.