Eurisko: 2007 will be even better than 2006

Some major investors, now reluctant because of the high yields on the domestic market, seen as a risk factor, are expected to enter the market.
“The major German developers have not entered the market, yet. The managers of such an investment fund are asking themselves a series of questions when they hear about profits of 125%, not being used to such margins. We are at the stage where several US pension and investment funds are testing the market, but Romania does not have enough products that can be bought,” considers Alexandra Dimofte, managing partner with Eurisko real estate consultancy.
Nevertheless, 2007 is expected to be at least as “hectic” as 2006 in terms of project launches, after new projects would be announced each week of last year.
“This year, at least as many real estate projects as last year are going to be announced, and 2007 will be a better year than 2006 both in terms of development and land transactions for future developments,” says Dimofte.
Developers are buying or teaming up with persons who purchased plots of land several years ago, in order to launch projects on all the segments of the real estate market.
“It was a bet won three times by those than invested in plots of land 2-3 years ago, irrespective of location. Most are trying to team up with renowned, more experienced developers or to sell the plots of land at a price that rose at least two times in a year and a half, in the case of appealing locations. There are cases where land prices increased even threefold,” believes Alexandra Dimofte.
Despite the considerable growth the Bucharest market of plots of land has witnessed, there is still room for further growth as prices are below the level of the other capital cities in the region.
A real estate market segment set to witness considerable growth over the following years is that of shopping centres, where demand, both from retailers and consumers, is still above the level of supply.
The office space market is expected to boom again in terms of developments starting 2008, with developers still focusing on the northern area of Bucharest, where high hopes, in terms of access, are put on the building of the highway to Brasov, which would help make traffic more fluid.
Upbeat projections for the development of the domestic real estate market could be upset by the slower economic growth pace witnessed in recent years, as well as by the possible postponement of expected capital inflows.
Eurisko consultants took part, among others, in the sale of Millennium Business Center office building to UK’s Charlemagne investment fund bought for 40 million euros.