Housing loan boosts land price, help construction business

It is the house constructors and not those selling flats that will stand to gain the most from the housing loan supply on the market.

“It was sheer bad luck,” admits George C., a potential home buyer. “One month before my loan application got approved, that plot of land cost $20,000. After having been approved by the bank, the market was full of clients and the seller suddenly asked for 40,000. Euros, ’cause the dollar had just sunk too low! I gave up for now, waiting for prices to calm down a bit.” The story of this potential client is not one of a kind, yet not everybody chose to do as he did: many went on and bought, convinced the prices will keep rising.

On the other hand, another phenomenon is becoming apparent: the more accessible housing loans will not only boost demand for flats in crowded blocks, but also the construction of new houses.

“Tapping” into the dream of a 50-60,000 euro home paid in 3-400 euro monthly instalments over 20-25 years is making more and more construction companies or even those in other industries approach this business.

Judging from the demand they have seen, certain companies are expecting surges in this year’s turnover, which may grow as high as ten times the 2002 level. On the other hand, bigger demand for plots of land for such projects has induced a surge in the respective prices.

“Land that used to sell for 6 or 8 euros/sqm in areas like Prelungirea Ghencea is now selling for 25 or 30 euros/sqm,” says Stefanita Lipovicianu, general manager of Systemic Construct Group, a company that develops housing construction projects for purchase through housing loans.
adrian.mirsanu@zf.ro ; bogdan.neagu@zf.ro