Consultants: Nobody is buying as prices continue to drop

Properties’ prices have not dropped to the level that should make them appealing to investors that have cash available, who are not buying assets whose value could shrink further, consider real estate consultants.

“Nobody is buying now, at the end of the year to post losses in the first quarter of next year, as there’s still a downward trend,” says Radu Boitan, head of the domestic office of King Sturge real estate consultancy, who believes price slumps domestically are just a return to normal levels for a market with a still low consumption potential. His views on the “downward potential” of real estate prices are shared by other consultants on the market, too. “Under the current conditions, prices can be expected to continue their sliding trend, at least on the short term,” believes Dan Ivanov, head of the assessment department of Jones Lang LaSalle real estate consultancy. Prices of real estate properties of Bucharest and countrywide have already been adjusted, but from values “inflated” through various procedures. “(…) In my opinion, owners should cut prices by as much as 50%, irrespective of urban indicators approved through the local urban planning, so that their offers should be appealing under the current market conditions,” says Mihai Alexandru, a consultant with Cushman & Wakefield. As prices are adjusted, the market will continue to attract investors, primarily owing to the fact that, despite the real estate euphoria of recent years, a low number of real estate projects have been finalised. However, investors and tenants will choose projects more cautiously. Under the circumstances, a significantly lower number of projects will be started until banks resume lending at lower costs and with fewer restrictions. A major hindrance related to the assessment of domestic properties is the very lack of deals, with no recent benchmarks to assess value against. Amid the deal shortage, evaluators are seeking information elsewhere to set market values. As regards the plots of land, most deals this year involved plots under litigation, which investors bought for speculative purposes, too. “(…) I believe prices will drop by 10-30% in 2009 excluding central and prime central areas, where we’ll see a drop by 10% at most,” considers Cushman & Wakefield’s representative.