"First Home" programme raises apartment prices before it begins

The Romanian Government took by surprise a whole country with the “First Home” programme, but, before the details of the project have been decided on, apartment prices rose in some cases by as much as 30% for a few days, at least in Bucharest.
“The price of old apartments, which sold for 40-50,000 euros rose to 60,000 euros in one day, after the “First Home” programme was announced, and then retreated after a few days, a sign that this project is very eagerly awaited,'” said Valentin Ilie, CEO of real estate consultancy Coldwell Banker.
The “First Home” programme will at best manage to unfreeze the real estate market, but it will not be able to give work to builders if developers are not willing to cut prices of new homes and to remain within the 60,000-euro limit, the maximum amount that the Government will guarantee for a mortgage credit.
Builders and real estate developers say that the “First Home” programme needs to be supported by a medium-term strategy, which should also entail a national home building programme. “The programme brings optimism to the market. Its effect is not quantifiable at the moment. It will take a while until the money reaches the constructor. I think a market analysis should have preceded the launch of the programme. This programme will not have short term effects on the construction market,” said Laviniu Beze, financial manager of Cominco Bucuresti.
The main short-term advantage of this programme is that it will restore confidence to home buyers. “The bank does not gain a lot of business as a result of this programme. But we are fighting to change people’s mentality. We have to work with the client’s psychology. We have clients who come to the bank and ask for information about credits, but they don’t take out a loan because they don’t know whether they will still have a job or not,” says Dana Demetrian, executive manager of the Administrative Pole of the BRD-SocGen network.