Hercesa: residential price overvalued

Prices on the residential segment of the real estate market in Romania are overvalued and will witness a downward trend in the near future, says Alejandro Solano, Hercesa Inmobiliaria”s head of operations for Romania.

He says the homes delivered by Hercesa in Spain for the middle class customers come with a final price of about 1,200-1,300 euros per square metre built. The same price is operated in Bucharest. A 240 square metre house in a residential district developed by Hercesa in the outskirts of Madrid has price tag of about 330,000 euros.

“We chose the Romanian market because the Spanish market has slowed down its growth considerably. Moreover, the growth in Spain is almost flat,” stated Solano.

The Spanish company has been involved in two projects on the Romanian market thus far, a 900 apartment district on the location of the former bakery Titan (which could entail up to 40 million euros in investments) and an apart-hotel in the former Cismigiu Hotel, a project put at 6 or 7 million euros.

“We set out to have 75% of our residential buildings in Romania aimed at the middle class, a category of customers whose development is in full swing,” Solano added.

“We are now at that stage when we are spending money on the Romanian market, when we are investing our funds as efficiently as possible. We cannot talk of sure revenues in a short term,” Solano said.

The annual yield of the real estate market in Romania is of approximately 10% in euros or even higher, Hercesa”s official believes. The market in Spain yields about 6-7% a year.

“We are constantly looking for land for new residential projects. The project on the location of the former Titan factory already has its urban development area plan approved and the first homes will be delivered in the third quarter of next year,” Solano specified.

The Spanish company estimates revenues to stand at 320 million euros this year in Spain and Portugal, where it has been involved in residential projects. The company officials expect 2006 revenues to exceed half a billion euros. alexandru.cerchez@zf.ro