Romania Real Estate

Dan Sucu on the "First home" programme

2009-08-15T00:31:00.003-07:00

I don’t understand how banks can offer much better financial terms to hypothetical clients through the "First home" programme than to their already existing, loyal clients.

I don’t want this to be taken the wrong way, I love the "First home" programme. Everybody stands to gain from it being implemented correctly: clients get a good, affordable price, banks and real estate developers are able to attract new clients, who had not previously qualified for a home loan, the taxpayers benefit from the taxes collected, without significant risk involved; sellers of durable goods, DIY products, furniture and home appliances gain from the higher demand; public sector employees finally learn to build, not just to tear things down.
However, the immediate advantage is the pressure it will put on cutting interest rates on already granted long-term credits. If banks can afford to grant a 5% interest rate on state-guaranteed loans in euros, and ING even said it did not need state guarantees to reach this interest rate, how can they justify the 8-10% interest rates charged on already granted loans, for which they collect interest rates and instalments? I would say the state’s guarantee could not be worth more than one percentage point. Is their attitude an honest one? Obviously not!

Of course we all like margins, and a company cannot grow, be strong and healthy without a profit. However, the first rule of trade (the bank is, of course, itself a merchant) says values are more important than value, meaning that one cannot sacrifice honesty, respect, and confidence for the sake of money and profit. Clients with medium-term loans obviously have above-average economic education. They knew they were paying excessive interest rates – and now this is confirmed.

Are local bank managers not aware that respect is the most prized asset in a client-supplier relationship? And this particularly in Romania and Eastern Europe, where client interactions with civil servants and with utility monopolies are nothing short of humiliating.

This is not to say that in retail we are always successful in making clients feel respected, but we are concerned by it, and, on good days, we actually achieve it. "However, this doesn’t seem to be a concern for bankers – who are also sellers. But not even they can play with their clients in this way for a long time.

Dan Sucu is the majority shareholder of Mobexpert furniture group

Top 10 European Countries for Real Estate Property Investors

2009-08-15T00:31:00.001-07:00

Here’s an overview of the potential on offer in the top ten European countries for real estate property investors right now.

Bulgaria – Bulgaria is in position for EU accession in 2007 and as a result it is receiving massive foreign and domestic investment particularly into infrastructure and construction and the whole country is benefiting from the amount of money
being spent on it.

Those who buy now in Bulgaria are buying into the longest projected period of growth and buying before the expected boom that will begin when Bulgaria is officially made an EU Member State. Furthermore they are buying to target the burgeoning tourism market that heads for the beautiful beaches of the Black Sea Coast in the summer and the snow capped mountains of Bulgaria’s ski resorts in the winter.

Croatia – Another country tipped for full EU membership in 2007, Croatia offers property investors commercial and residential property opportunities. The numbers of international business establishing bases in Croatia has increased substantially in the last couple of years and there is demand for the development of light industrial and office space.

Furthermore Croatia has a strong tourism market that offers a real estate investor further opportunity to either target short term rental yields or to buy off plan or develop for resale to the second and holiday home market in Croatia.

Cyprus – There are two real estate economies in Cyprus – you have the well established Republic of Cyprus property market where an investor should seek to target the retiree audience or the tourism market and then in Northern Cyrus you have an emerging economy currently offering massive growth potential.

Property price increases in North Cyprus have consistently been in double digits for the past three years and there are no signs of a slow down in the offing.

Czech Republic – The majority of real estate investors consider Prague the only city worth targeting in the Czech Republic but the country’s other cities like Brno also offer an investor opportunity to purchase residential accommodation for rent to the domestic and expatriate professional population. Property price growth has been fantastic in recent years and rental rates are increasing annually.

Estonia – Real estate investors should target the local market in Estonia and consider looking for opportunities in the capital city of Tallinn. The Estonian economy is growing at a staggering rate which is affording the local people greater purchasing power which in turn is having a direct effect on the property market in Estonia.

Basically as local demand increases so prices can rise and as local purchasing power increases so it can sustain these price rises. A real estate investor can buy into this growth now and should expect the period of growth to be sustainable for at least the medium term.

Hungary – Property investors who targeted Hungary’s capital city of Budapest last year enjoyed up to 15% growth on underlying property prices and these growth rates show no sign of slowing down currently.

There is local and expatriate demand for property to buy and let in Budapest and the local economy is benefiting from foreign direct investment and strengthening. This means that there are long term prospect for growth in Hungary. Furthermore there’s an emerging market within Hungary’s property sector and that is the tourism market which offers an investor a chance to get in on both residential and commercial property ventures targeting this growing market segment.

Latvia – Latvia is benefiting from substantial foreign direct investment which has helped establish the Latvian economy as one of the fastest growing in Europe and Latvians are on target to receive one of the five largest wage increases in the world. All this means that locally the population can afford to spend more on property either in the form of rental rates payable or property prices payable and real estate investors can buy off plan and flip on to the local market upon completion or even buy to let out in the capital city of Riga or in the coastal port towns.

Poland – Having joined the European Union back in 2004 Poland has received massive aid and investment as a result which has improved the country’s infrastructure incredibly and led to a strong period of economic growth.

Many European and international companies have established bases in Warsaw and Krakow and the demand for accommodation in these cities alone has really soared. Real estate investors are targeting Poland because it offers a low risk, high potential property market. Furthermore investor confidence in Poland is high because the Polish government have already proved that they have a strong commitment to maintaining the good economic growth rates that their country is currently enjoying.

Romania – Because Romania has yet to join the EU and align all its governmental, fiscal and constitutional policies with those of Europe it is quite a tricky country for a foreign investor to get in on. However it offers a real estate investor such exciting opportunities – where else in the world can you buy anything and everything from a castle to a factory at such ridiculously low prices.

Those with a strong appetite for paperwork and red tape will make their fortunes from Romania’s property market, but for the rest of us it’s an economy to watch carefully. As the country moves slowly towards EU membership so it will become easier and more attractive for property investors to target.

Turkey – Turkey is on track for EU accession following agreement that it should begin accession talks in 2005. Since that point Turkey’s economy has been granted ‘Market Economy’ status, the country has received billions of dollars of Middle Eastern funds into its property sector and world wide investor interest in Turkey’s property market has exploded.

The majority of opportunities either exist in Istanbul or along Turkey’s southern coastline where hundreds of thousands of tourists flock every year. Prices for property in Turkey are currently incredibly low so with all the positive data and news coming from Turkey recently there is only one way prices are going to go – and that’s up!

There are so many opportunities available to an investor in Europe that those serious about profiting from real estate property should give the continent careful consideration!

AFI Europe: We pay the price because the market was purely speculative

2009-08-15T00:30:00.001-07:00

He heads the development operations of one of the biggest players in the local real estate market, AFI Europe and left Costa Rico for Romania, in a time when properties were ballooning in price. Tal Roma, Business Development Manager at AFI Europe, says that today Romania is paying the right price for the unjustified increases in real estate prices over the past few years.

“The real estate market is now paying the price for the last years’ frenzy”

In 2007, Tal Roma (photo) left the real estate market in Costa Rica behind and came in Romania to join the Israeli-based AFI Europe, part of Africa Israel group.

He found a similar market to the one in Costa Rica: prices were skyrocketing at an incredible speed, from 10 dollars to 100 within just a few months. Everybody wanted to invest in real estate, the landlords were enjoying the bargaining power, especially those who owned large land parcels and nobody seemed to be wondering for how long the prices would keep rising or by how much.

“It was incredible to see price increases like in Pipera. I’ve known persons who bought large land plots for 5 dollars per square meter and sell them afterwards for 2-3 hundred euros, dividing them into smaller parcels, destined for residential buildings. I believe we are now paying the price of those times, we are paying the price of an infant market, a purely speculative market”, representative of AFI Europe told Wall-Street.

Tal Roma says the crisis will mature players in the real estate industry, who will be more cautious over the next 5-10 years. Today, the prices of properties in Romania dropped to a decent level, affordable to a broader range of buyers. These buyers fall into two categories: persons who want to buy but don’t qualify for a banking loan and persons who afford to buy, but wait for the prices to go down.

“You don’t have to try to predict the lowest point of a market, because nobody is a fortune-teller and nobody can possibly know when the lowest point will be reached. Those who will try to speculate on that and take a guess are doomed to fail. You buy when you think prices are decent. Even though prices will continue to go down, the difference cannot be that big”, said the manager of AFI Europe.

Developers are not forced to sell and there are no distressed asset sales that everybody is talking about, AFI Europe’s manager continued.

“We see many developers freezing their projects and waiting, and not selling. Everybody’s expecting the banks to resume lending. Everybody’s laying their hopes at lending”, said Roma.

The economic crisis has its own positive side for AFI Europe, who will deliver at the end of September AFI Palace Cotroceni shopping center. “The completion of many shopping center has been put off, while others were opened and are almost empty”, Tal Roma explained.

Although the research reports of real estate advisors show price falls and rent cuts for office, commercial and residential at a monthly basis, Tal Roma says the prices didn’t plummeted at the speed everybody says they did. It all happens at a psychological level.

“People are still swarming in supermarkets, at the seaside prices dropped compared to last year, but the decline is yet narrow. Prices for apartments fell too, but the devaluation of the local currency intervenes. The declines are not so dramatic, it is rather a psychological crisis”, Roma stressed.

First Home Program in other countries and Romania – similarities and differences

2009-08-15T00:29:00.002-07:00

First Home Owner scheme was introduced by the Romanian government as an incentive for the housing market. The program is partially similar to other schemes previously established in United States, Poland and Australia. Specialists interviewed by Wall-Street outlined the similarities and differences between these schemes, as well as the shortcomings of the one adopted by Romania.

First Home Owner program in United States

First Time Home Buyer Tax Credit program in United States can be partially compared with First Home Program in Romania, as George Ene vicepresident of US-based Rabobank Group’s Leveraged Finance.

First Home program has three major flaws: 1) it is randomly capped to 60,000 euros, thus favoring a certain class of apartments, 2)it is limited to a total ceiling of 1 billion euros, which means few first-time homebuyers will actually benefit of this facility, and 3)it can pave the way to a softening of lending standards, as the banks are no longer so much concerned on the risk of default, as the government will take the brunt of it.

In contrast, in the first-time homebuyer scheme in United States, the arrangement is strictly between the government and the buyer, the state grant covering 10 percent of the purchase price of the home. This is made through a tax credit, namely an amount which is returned after filing the income statement at the Revenue Service.

Under these terms, conditions are: 1) to buy the house between April 8 2008 and December 1 2009; 2)the purchase price to be more than 75,000 dollars or 80,000 dollars if purchased after December 31; 3)to occupy it and not to be a vacation home or rental property; 4)not to own another principal residence at any time during the three years prior to the date of purchase 5) the income not to exceed 95,000 dollars/year for single taxpayers or 150,000 dollars/year for married couple; 6)you neither buy it from a close relative nor sell it by the end of 2009; 7) to be US resident.

“In Romania, all the risks assumed by the state are related to borrower’s possibility of defaulting on its mortgage under First Home program. The 80% guarantee proposed by the state instead of 100% is much better, because otherwise, the program would result in mounting losses. It is still unclear on the state’s extent of implication over lending conditions”, said George Ene.

In United States, at each guarantee provided by the government there is someone who pays, a small amount, indeed, but there is someone.

“In Romania, someone should pay for this guarantee. After all, all taxpayers will pay for only 20,000 beneficiaries – and the payers of the guarantee fees should be both banks and homebuyers”, Ene concluded.

Poland’s program

The Polish government has introduced a roughly similar scheme to Romania’s First Home program, called “Family’s own home” (Rodzina na swoim). Under the program, the government covers the repayment of 50% of mortgage loan interest due within the first eight years of taking the loan. The program is aimed at enabling married couples or single parents to purchase their first home.

The program imposes certain limits on the surface of the apartment and maximum price per square meter. In a first phase, the program generated poor results, largely due to the low cap of price/1 square meter, where few home purchases were eligible.

“The basic idea is more less the same, although Polish regulations seem to be more flexible (adjusted to the local purchase power) and affordable for the potential buyers”, said Karol Dzieciol, senior consultant at Poland’s real estate advisor Reas.

Reas’ specialist has been writing since May on the major shortcomings of the Poland’s incentive program, effective as of January 1, 2007.

“Within the two years of its operation, however, the program did not generate too good results. This fact can be attributed price per 1 square meter of usable area in residential apartments which according to the original arrangements was not adjusted to the reality of the rapidly growing market. As a result, from the moment the act came into force until the end of 2008, only 10 000 families exercised their right to loan subsidies, and the total amount of mortgages was approximately 383 million dollars”, said Karol Dzieciol.

Therefore, nearly 90% of concluded contracts concerned the purchase of real estate located outside voivodeship cities, and the share of the primary market was simply marginal.

Australia’s First Home Owner Grant

The first home program that pioneered state home ownership assistance was implemented in Australia, in the summer of 2000, under the name “The First Home Owner Grant (FHOG)” and consists in providing a grant of 7,000 dollars for eligible first-time homebuyers.

In order to be qualified to receive the grant, the buyer has to be a natural person and at least 18 years of age and doesn’t own a residential property. In addition, the applicant must be a permanent resident of Australia and must occupy the home for a continuous period of 12 months.

Furthermore, he has to motivate his/her interest for the residential property for which the applicant wishes to receive the grant. Obviously, neither the applicant nor his partner must have received a grant or previously applied for a similar grant scheme.

The Australian Government supplemented the FHOG with another similar scheme, called “First Home Owner Boost". The program is designed to homebuyers who already applied for the first program, FHOG in October 14, 2008 – June 30, 2009.

Therefore, the potential buyer of an already established home, can be provided with an extra 7,000 dollars grant (apart from the initial 7,000dollars). The applicant can receive an extra 14,000 dollars for buying or building a new home.

Romanian’ first home scheme

Locally, the beneficiaries of First Home program are natural persons who don’t own a residential property in common or individually, at the date of becoming effective (June 4, 2009), and don’t have a mortgage loan underway.

Potential buyers must pay 5% in advance of the home’s purchase price, of the price is lower or equal to 60,000 euros. If the purchase price is higher than 60,000 euros, the applicant must pay 3,000 euros in advance, in addition to the price difference between 60,000 euros and the actual purchase price.

Applicants eligible to the mortgage loans under First Home program, will pay interest rates lower by 42-49% in average than current lending conditions, as the minister of finance, Gheorghe Pogea said recently.

On May 28, the Government said the persons who would buy a house under the program will benefit of a VAT reduced by 5%, measure applicable for social dwellings.

Moreover, the persons qualified for the program are compelled not to alienate the purchased house in the first five years. The residential property purchased under First Home program must be registered at the Land Registry Office, to be located in Romania and must be free from encumbrances.

ProLogis Leases 90,000 Square Feet in Romania to Geodis

2009-08-15T00:29:00.001-07:00

BUCHAREST, Romania, a leading global provider of distribution facilities, announced today that it has leased 90,000 square feet (8,400 square meters) of newly developed space in Bucharest, Romania, to Geodis, a third party logistics and international transport provider and subsidiary of SNCF (French Railway), known in Romania as Geodis Calberson.

Geodis will occupy space in a facility at ProLogis Park Bucharest A1, a modern logistics park located along the Bucharest-Pitesti highway, which is Romania's primary east-west interstate approximately 23 kilometers west of downtown Bucharest. Geodis, which currently leases warehouse space from ProLogis in nine European countries, will operate the facility as a regional distribution center for customers with logistics requirements throughout Romania.

"It is not atypical to see a flight to quality as economic conditions soften, and this dynamic is increasing in Central and Eastern Europe," said Ben Bannatyne, managing director for ProLogis. "We are pleased our high quality facilities continue to attract leading companies such as Geodis, and to once again be working with them in one of our parks. ProLogis Park Bucharest A1 is an excellent choice, not only for its strategic proximity to both Eastern and Western Europe, but for its sustainable design and construction."

"Geodis is a global customer of ProLogis; our partnership is strong and on a long term basis," said Pierre Kosc, general manager for Geodis Calberson in Romania. "We know from experience that in order for a business to successfully grow you need reliable partners to help support you along the way. ProLogis is exactly this kind of a partner and together, we believe we can achieve our goal of being the best in the field of transport and logistics. This new agreement with ProLogis is the third lease we have signed with them in Romania, which is proof of our satisfaction with the superb logistical facilities offered by the company."

ProLogis Bucharest A1 consists of four buildings totaling 1.16 million square feet (108,600 square meters) of industrial space, of which 300,000 square feet (28,000 square meters) is EPC (Energy Performance Certificate) A-rated. The award-winning park has been recognized as the "Best Industrial Real Estate Project in South Eastern Europe" by Europaproperty.com as part of their "Project of the Year" awards program for two years in a row.

In addition to Geodis, other customers at the park include Augsburg International Impex, cargo-partner, Centrum Logistics, Flamingo Romania, Gefco, Geodis Calberson, Kuehne+Nagel and Omega Transport & Logistics.

“First Home”: Bankers and developers not optimistic

2009-08-15T00:28:00.002-07:00

Prime Minister Emil Boc and President Traian Basescu asked bankers to limit interest rates for mortgages for the “First Home” program to 5 percent for euro-denominated loans and some 12.7 percent for loans in lei.

This program is part of an effort by authorities to revive the real estate market, hit by the crisis, through the acquisition of homes guaranteed by the state. However, bankers and real estate players are not very optimistic regarding the success of this program. People who contract a mortgage through the “First Home” program will pay a 5 percent down payment for an apartment worth up to €60,000, the amount guaranteed by the government within this program.

If the price of the home exceeds that threshold, the down payment will be €3,000, plus the difference between the price and the guaranteed amount, according to the program application norms, approved by the government yesterday.

The interest rate will be calculated based on the three-month EURIBOR index, plus up to 4 percent per year, for euro-denominated loans, and the ROBOR index, plus up to 2.5 percent for loans in lei, lower than the average interest on the market. Bankers say that the government could have obtained even lower interest rates, but that this will have no impact on the eligibility of clients for such loans, given that the required revenues are still significantly above the average, at RON 3,000-4,000 (€700-950).

However, the President of the National Loan Guarantee Fund for Small and Medium-Sized Enterprises (FNGCIMM), Aurel Saramet, said that lowering interest rates will increase degree of accessibility of future clients by some 15-20 percent, as far as eligible revenues are concerned.

President Traian Basescu said that the interest rate for euro loans should not exceed 5 percent. “The Romanian banking system presently has a significant surplus of financing resources and, at the same time, very high interest rates,” he said. “Banks that wish to place their money in this program with a 5 percent interest rate are welcome, because this is an investment that is 100 percent guaranteed by the state,” Basescu added. For lei-denominated loans, the three-month ROBOR rate amounts to 10.54 percent.

The main shareholder of local lender Banca Carpatica, Ilie Carabulea, told Business Standard that banks would have accepted even lower interest rates, below 5 percent. For Horia Ciorcila, the President of another local lender, Banca Transilvania, the main challenge is not lowering interest rates, but rather dropping the minimum eligible revenues of future beneficiaries of the program. The bank will try to lower these revenues to RON 2,000-2,500 (€470-600) for a 25-30 year loan, with a 40 percent degree of indebtedness. However, players on the real estate market are skeptical regarding the program’s success. “The First Home program will not unblock the real estate market,” according to the Spokesman of the Association of Real Estate Agencies (ARAI), Radu Zilisteanu. He explained that the €1 billion allocated by the government will allow for the granting of only 17,000 loans. “Given that hundreds of thousands of deals are made annually on the residential market, the 17,000 loans are a marginal percentage on the market,” he said. For Dan Ioan Popp, President of Impact Developer&Contractor, the program will be to the advantage of old apartment acquisitions, as new ones are more expensive than €60,000.

Disaster on the Romanian real estate market: Transactions dropped 98%, up to 12 million Euros

2009-08-15T00:28:00.001-07:00

The volume of transactions during the second trimester of this year reached the lowest level in the last 5 years. The decline is also significant for the first six months of the year in course, compared to the same period 2008.

Real estate sales in the period April-June cumulated only 12 million Euros, which translates in a 98% drop when compared to last year’s period. In the second trimester of 2008, the total sum from transactions was 119 million Euros.

Not even the review for the first six months of this year is not encouraging. The volume of transactions shows a 90% market drop, compared to last year’s period. According to Costel Florea, investment director of Cushman & Wakefield Romania, the low rating Romania has and the current economical instability is the main reason why companies are reserved in new investments.

Century 21 organizes information seminars on the "First House" program

2009-06-13T06:58:00.000-07:00

Network of real estate agents Century 21 Romania will support the government "First House", by eliminating the commissions charged to customers and by organizing information seminars, free of charge for the program.
"We hold weekly seminars with free information, number of participants find four people. Depending on requirements, the seminars will be present in both real estate professionals, and specialists in the financial sector-banking, insurance or notaries. The seminars will begin in July, "said Gabriel Alexandru, vicepresident Century 21 Romania.

Meanwhile, the network of government agencies required to assume responsibility and what lies in establishing the rules of the game in the economy and to expedite the initiative to regulate the real estate market, which is working at the Ministry of Housing and Regional Development since June 2008, to establish register of agents and the real estate agents authorized to launch an index property, and severely punishing false advertising real estate.

Century 21 Real Estate LLC is the largest global Franchisor of property includes real estate agencies in 8500, owned and managed independently, in 64 countries and territories around the world. Century 21 Real Estate LLC is a subsidiary of Realogy Corporation, USA.

Wienerberger will close the brick plants in Gura Ocnitei and Triteni temporarily

2009-06-13T06:57:00.002-07:00

Wienerberger Romania, the Austrian group subsidiary – the biggest world brick producer – will close the plants in Gura Ocnitei (South Romania) and Triteni (central Romania) temporarily, as a consequence of the current economic crisis that slowed down the construction market development during the last months, Romanian press agency NewsIn informs.

"These measures are part of the Wienerberger group’s extensive restructuring programme for 2009, to adapt the local production capacities to the evolution of the markets and demand. The two plants will be closed only temporarily, meaning the activity could restart at anytime. For the moment, we have no date, it all depends on the future market development", the company’s report shows.

According to the statement, the staff will not be affected and the brick orders will be honoured, as the company has enough stock. "The Romanian real estate market has fallen dramatically within the last months, after a record number of buildings finished in 2008, namely 67,300. The main reason is related to accessing the necessary funds, both by the investors and the buyers. But the demand for new buildings has not disappeared", Wienerberger Romania general deputy Daniel Catanas declared.

He welcomed Romanian Government’s measure to reduce the VAT for buying an apartment from 19% to 5%.

Crediting standards, more restrictive in Q1

2009-06-13T06:57:00.001-07:00

The standards and crediting terms, especially for companies, continued to worsen in Q1, 2009, but at a more moderate pace and the crediting demand fell, according to a poll conducted by the National Bank of Romania (BNR) on the crediting of non¬financial companies and population.

In the sector of non-financial companies, the crediting standards became more restrictive in Q1, however the evolution has slowed down.

The net percentage of the banks, which reported the toughening of crediting norms has reported a slight contraction, however it remains at a high level.

Most banks revised the terms of crediting on the whole. Following the corrections reported by the prices of real estate assets, the requirements of collateral were more attentively scrutinized, whereas the bonuses due to more risky credits were increased.

The risks associated to companies grew, the main sectors targeted from this viewpoint being those of real estate transactions, constructions, transport and tourism.

Eastern Europe sends colourful characters to Brussels

2009-06-13T06:56:00.002-07:00

Riga - Despite generally low turnouts figures in the European elections, central and eastern European countries mustered enough votes to send a selection of intriguing new characters to Brussels and Strasbourg. Leading the list is Latvia's 74-year-old Alfreds Rubiks, who will be taking a seat in the European Union 18 years after backing a hardline Communist coup attempting to keep Latvia part of the Soviet Union.

The former politburo member served a jail term and was banned from standing for political office in Latvia but will now represent the country he tried so hard to keep from the map of European nations.

Rubiks was on the ticket of the pro-Russian Harmony Centre party, which made big gains in municipal elections held on the same day as the European vote.

Ironically, Rubiks will be accompanied to Brussels by a familiar foe. Two-time Latvian prime minister Ivars Godmanis, 57, was a central figure in the Latvian independence movement.

Godmanis, of the Latvia First/Latvia's Way party, will debut in the European Parliament after resigning from office earlier this year as the Baltic state plunged into the EU's deepest recession.

In contrast to grizzled veterans like Rubiks and Godmanis, Romania will be sending pin-up Elena Basescu, 29, the daughter of Romania's president Traian Basescu.

Sometimes called "the Paris Hilton of the Carpathians," Basescu has graced numerous magazine covers but is better known for her love of nightclubs than any desire to reform the Common Agricultural Policy.

However, her victory was overshadowed by reports on the hotnews.ro news website that her father's centrist Liberal Democratic Party allegedly ordered party branches to secure votes for the former model.

Also in Romania, controversial real-estate tycoon and football club owner George Becali was likely to make it to the European Parliament on the ticket of the ultra-nationalist Romania Mare (Greater Romania) party, which was ousted from parliament in the latest general election in late 2008.

Romanian authorities are prosecuting Becali over alleged corruption.

In Slovenia, a slew of former cabinet ministers including former prime minister Lojze Peterle and former foreign minister Zoran Thaler were also set to make it the European Parliament, according to projected results.

Tiny Estonia sprang a surprise by electing independent candidate Indrek Tarand. By day, Tarand is a museum director but in the evening he hosts popular TV quiz show "Are you as clever as a fifth-grade student?"

His mastery of general knowledge is sure to be a boon in Brussels, but if he has any questions he knows someone who can provide answers: his father Andres Tarand is a member of the outgoing European Parliament

Small-size copy of Burj Al Arab in Romania

2009-06-13T06:56:00.001-07:00

A small-size hotel of the famous Burj Al Arab of Dubai will be achieved in Mamaia resort on the Black Sea (south-east) by an investment fund of Asia, starting next year, a construction which aims to revolutionize the architectonical design of the area.
The Asian investment fund has recently bought in exchange for 550,000 euros a plot of land of 442 square metres on the bank of Siutghiol Lake of Mamaia, the construction’s project and the city planning certificate to carry out a small-size copy of the hotel in Dubai.
The Black Pearl project was bought from ECSIF Properties, an investment fund in the segment of luxury real state.
The new construction of Mamaia, situated near hotels Rex ad Scandinavia, will be named Boutique Hotel and will have 78 floors, 17 luxury apartments facing the sea and the lake.
According to representatives of ECSIF Properties despite the financial crisis, the luxury remains a safe and attractive investment in Romania and the plots of land in downtown Mamaia are well assessed and sought-after by real estate investors.
Burj Al Arab is one of the world’s highest and luxurious hotels, a symbol of Dubai, situated on an artificial island of 280 metres away from the Jumeirah beach. The building has 60 floors and is 321-m high.

Global Debt Deleveraging Recession Gets Worse as Government Deficit Grows

2009-06-13T06:55:00.000-07:00

Things That Go Bump in the Night
A Trillion Dollars as Far as the Eye Can See
The Global Recession Gets Worse
Where Will the Money Come From?
The Paradox of Deficits

From ghoulies and ghosties, And long-leggedy beasties, And things that go bump in the night, Good Lord, deliver us! --Old Scottish Prayer

There is something that is bumping around in my worry closet. The bond market is not behaving as if there is deflation in our future, and the dollar is getting weaker. Unemployment keeps rising, but most of all, the US government deficit looks to be spinning out of control. This week we look at all of this and take a tour around the world to see what is happening. There is a lot of interesting material to cover.

But first, I am proud to announce that thanks to your donations the net proceeds from the Richard Russell Tribute Dinner totaled $17,000! A donation was made in that amount to the Autism Society of America, San Diego County Chapter, in Richard Russell's name.

The evening was captured in both video and photographs, and we would like to share those with you. We have put together a DVD that captures all the wonderful moments, including tributes from Richard's longtime friends and family, an entertaining skit by Richard's daughter Daria, and another touching tribute by Richard's daughter Betsy. Perhaps the best speech, however, came from Richard himself -- which is of course included on the video. For those who could not attend in person, we have already made copies of the video and will mail it to you as soon as you order it. The cost is $29.95, and that includes shipping. You may order as many copies as you like.
The photographs were placed on Shutterfly, an online gallery where you may view them and choose the ones you would like to order. We have created a web page specifically for these photos. To access that page, please use this link: http://richardrusselltributedinner.shutterfly.com or you can link from the page above. Now, let's jump right into the letter.
A Trillion Dollars as Far as the Eye Can See

As of this week, total US debt is $11.3 trillion and rising rapidly. The Obama Administration projects that to rise another $1.85 trillion in 2009 (13% of GDP) and yet another $1.4 trillion in 2010. The Congressional Budget Office projects almost $10 trillion in additional debt from 2010 through 2019. Just last January the 2009 deficit was estimated at "only" $1.2 trillion. Things have gone downhill fast.

But there is reason to be concerned about those estimates, too. The CBO assumes a rather robust recovery in 2010, with growth springing back to 3.8% and then up to 4.5% in 2011. Interestingly, they project unemployment of 8.8% for this year (we are already at 8.9% and rising every month) and that it will rise to 9% next year. It will be a strange recovery indeed where the economy is roaring along at 4% and unemployment isn't falling. (You can see their spreadsheets and all the details if you take your blood pressure medicine first, at www.cbo.gov.)

Just a few quick thoughts. This year the proposed administration plan is to borrow 50% of every dollar spent. The CBO projects than nominal GDP will grow by about 50% over the next 10 years (which is historically reasonable), but also that revenues will double, which suggests massive tax increases in relation to GDP. Interestingly, the International Monetary Fund says growth next year will be tepid at best (more below). The deficit in 2010 is almost 10% of GDP. The average proposed deficit is almost a $1 trillion average for the next ten years. Ten years from now, the deficit is projected to be $1.2 trillion. And that is if government costs do not go up and inflation only averages 1.1% for the next six years.
The Global Recession Gets Worse

Let's take a quick trip around the world. In the first quarter, the German economy fell by 14%, Japan by 15%, Mexico by 21%, and England was down almost 8%.

Global trade is simply collapsing. The chart below is the ugliest it has ever been. Chinese exports are down 41%, Japanese exports down 38%, Germany's down by 32%, and so on
Let me quote from the very interesting study the team at Variant Perception did.

"As we have repeatedly said, Spain is set for a long, painful deflation that will manifest itself via a spectacularly high unemployment level, a collapse and general banking insolvencies. Consider this: the value of outstanding loans to Spanish developers has gone from just €33.5 billion in 2000 to €318 billion in 2008, a rise of 850% in 8 years. If you add in construction sector debts, the overall value of outstanding loans to developers and construction companies rises to €470 billion. That's almost 50% of Spanish GDP. Most of these loans will go bad.

"Spanish banks are now facing a very bleak outlook. Spain's unemployment rate reached over 17% last month; there are now four million unemployed Spaniards and over one million families with not a single person employed in the family. Spain and Ireland had the worst housing bubbles in the world and now Spain has as many unsold homes as the US, even though the US is about six times bigger.

"Why are Spanish banks not insolvent? Spanish banks are not marking their real estate loans to market. We've often wondered how it is that our thesis for Spanish real estate and industrial collapse has not created more victims. The answer is simple according to an article in Expansion, the Spanish equivalent of the Financial Times, from the 19th of April titled 'Spanish banks control half of all real estate appraisals.' You can't make this stuff up. We haven't even begun to see the worst in Spain yet."

European banks are in far worse shape than their US counterparts. That is because they utilize far more leverage, on an average about 30 times leverage. How can that be, in what is supposed to be a conservative industry?

"European banks were only restricted on the basis of risk-weighted assets, unlike the US where it is the total leverage ratio that matters, so most European banks bought assets that were rated by Moody's and S&P, who couldn't rate their way out of a paper bag, and for anything that wasn't highly rated, they bought credit default swaps or guarantees from AIG and MBIA. Because of that European banks were able to lever up a lot more than their US counterparties. Given the much higher leverage levels and general worsening of collateral values, we think that all the shoes in Europe have not dropped."

European banks have assets of about 330% of their GDP, compared to US banking assets, which are about 50%. They have over $700 billion in loans to Asian (which are watching their exports collapse) and $1.3 trillion in loans to Eastern Europe, which is in a very serious recession, and so many of those loans are simply not going to be worth anything. Simply put, there is going to be a need for massive amounts of money to bail out European banks, or we'll watch their economies simply implode.

Where is the money for the bailouts going to come from? Germany? That will be a tough sell politically in a country that is in a much worse recession than the US. How do you tell your citizens you need to bail out banks in other countries with their tax dollars? Italian and Austrian banks are going to need a lot of capital, more than their governments can pay. It is going to be a very tough problem.

Governments around the world are responding to the global recession by running massive deficits. In addition to the US, the UK, Japan, Russia, Spain, and Ireland are all running deficits of over 10%.

And, as in the case of the US, these are not going to be one-time deficits. The IMF predicts that England will shrink again next year and the recovery in the US will be modest at best. The US economy is expected to grow by 0.2% (far from the optimistic projections of various US government agencies), the 16-nation eurozone will eke out a modest gain of 0.1%, and the Group of Seven (G7) leading industrial economies will, as a whole, only grow by 0.2 percent. They project that Japan's economy will stagnate next year.
Where Will the Money Come From?

And now let's look at what is bumping in my worry closet. The world is going to have to fund multiple trillions in debt over the next several years. Pick a number. I think $5 trillion sounds about right. $3 trillion is in the cards for the US alone, if current projections are right.

Just exactly where is that money going to come from? The US trade deficit is now down to under $350 billion a year. The Fed can monetize a trillion. Maybe. Look at the yield curve on US government debt below (Bloomberg). US savings are going to go up, but where is the incentive to buy ten-year debt at 3.5%? Four-year debt under 2% doesn't do much for your savings growth. Even with monetization and the Chinese buying our debt with the dollars we send them, that still leaves the bond market about $1.5 trillion short, give or take $100 billion.

The world is deleveraging. Debt is being drawn down. Securitization of various types of debt has seriously slowed. Banks are cutting back on lending. Home prices are dropping all over the world. Commercial real estate is rolling over, and banks all over the world are exposed. "Recession turns malls into ghost towns" is the headline in today's Wall Street Journal. Personal savings are rising and retail sales are flat to down. Unemployment is rising.

All this should be massively deflationary. Interest rates should be falling or at least not rising. But a funny thing is happening. In the past two months, the yield on the ten-year bond has risen by 1%. It has moved 0.38% or almost "4 big handles" in just two weeks. Look at the chart below. What is happening?

According to Merrill Lynch, the size of the world bond market is estimated to be approximately $67 trillion, with the shares of US, Euroland, and Japanese securities each representing less than 50 percent of this total. (PIMCO)

England has been put on negative watch for its debt rating. Bill Gross said yesterday that it is not unthinkable that the US could lose its AAA rating. I think the bond market is looking at the mountain of debt that will have to be somehow sold and wondering where such a colossal sum will come from. Where do you find $10 trillion in the next ten years for US debt?

And that is just for US government debt. $5 trillion for new global debt in the next two years? In a deleveraged world? How much will the other countries need? What about money needed for businesses and mortgages and credit cards and so on?

If you add $10 trillion to the current $11.3 trillion (including Social Security trust funds, etc.), that totals $21 trillion in 2019. Let's be generous and suggest that interest rates will only be an average of 5%. That would be an interest-rate expense of over $1 trillion. That is 25% of projected revenues and 20% of expected expenses. And that assumes you have nominal growth of over 4% for the next ten years. If growth is less, tax revenues will be less. It also assumes massive tax increases from carbon credits.
The Paradox of Deficits

I think the bond market is looking a few years down the road and saying that $1-trillion deficits are simply not capable of being financed. And if the debt is monetized, then inflation is going to become a very serious issue.

When you run deficits that are 4-6-8% or more than nominal GDP, at some point things simply back up. Can we ride along for a few years? Certainly. Japan is getting ready to see its debt-to-GDP ratio rise to almost 200%. But everybody can't do it all at once.

Call it the Paradox of Deficits. We have been running a large trade deficit in the US for years, because the people (China, Japan, and the Middle East) who wanted to sell us "stuff" were kind enough to turn around and invest the money in our bonds. This in turn created Greenspan's conundrum, as it helped keep down US (and global) interest rates. Combine that with a massive increase in leverage, a few bubbles, and we now arrive at a true crisis.

Deficits are not necessarily a bad thing if kept in check and restraint is shown. But everyone cannot run deficits at the same time. If we don't buy $700 billion in goods, then that money cannot be recycled back to our debt. It is that simple.

(Sidebar: And now, China and Brazil are moving to do their trades in their own currencies rather than dollars. Very smart on their part.)

Europe, Japan, and the US cannot try to borrow $5 trillion in the next two years without a serious distortion of the bond market, not to mention the entire economic landscape.

I have long thought that "crunch time," the end game, would show up around 2013-14. But I never in my wildest imaginings thought we could run an almost $2 trillion deficit. That crazy guy on the corner telling us "The end is nigh"? He may be right.

Long before we get to 2015, let alone 2019, I think the bond markets will have called a halt to $1 trillion deficits. There will be a real crisis. The deficits will not be funded at anywhere close to an interest rate that will not break the budget. Taxes will get raised beyond what they were in the Clinton years. And Obama's budget makes some very optimistic judgments about how much will be saved in medical costs, as if no one has tried to rein in medical costs before. The crisis may come much sooner if his universal health-care bill is passed as proposed without offsetting cuts somewhere else.

Watch the bond market. Rates should be going down, not up. The bond market is telling us the deficit simply can't be financed down the road. Now, maybe a few cool heads in the Democratic Party will prevail in the US Senate and the deficits will be brought under control. (The Republicans have so far seemed as clueless as they are impotent.) We could (theoretically) run $400 billion deficits for a very long time, as GDP would be growing somewhat faster.

It would be best to run budget surpluses, but the game does not end if there are reasonable deficits. It ends with deficits that cannot be funded except by monetization. And that will tank the dollar, except against all the other countries that are monetizing their debt.

I am increasingly inclined to think that as the world comes out of its current malaise – and it will – US investors should think more globally with their investment portfolios. That is something we will explore over the coming year. But that's enough for today.
Naples, London, and Eastern Europe

Next Friday I go to London to speak at a conference for my friends at Jyske Bank. International investing expert Gary Scott will be there, as well as my friend and business associate Steve Blumenthal. It should still be possible to attend, if you would like. You can see more at www.jgam.com. And then, in theory, I will be home all of June.

The plan now is for me to return to London on July 15th. I will co-host CNBC London Squawk Box on July 17th, see clients, and then be with London business partner Niels Jensen for his 50th birthday party on the 18th. (And here's wishing him a speedy recovery from his back surgery last week!)

And then I am actually going to take a vacation. I am slowly trying to expand the list of countries I have been to. This year I am thinking of venturing further into Eastern Europe. Romania and Bulgaria are on the top of the list, and perhaps Slovenia? I would love to hear from readers in those countries, or from others who have visited them. I will have about 12 days and want to be able to see the sights and relax as well.

Then I come back, go to Maine with young son Trey for our annual get together with all the guys at the Shadow Fed fishing trip run by David Kotok, and get back in time for daughter Amanda's wedding on the 22nd. It is going to be a full, fun summer.

And speaking of Trey, he turns 15 on Wednesday. He is the last of my seven in the house. The rest are all out and (more or less) on their own. But then I get three new grandkids between now and the end of the year, so the next generation is starting.

These are interesting and serious times we find ourselves in, but we should all try and remember to enjoy life as much as possible. I am grateful that I am so busy, and count it as a blessing when so many are not. Have a great Memorial Day, and take a few moments to remember those who have sacrificed so that we can be free.

Talking crisis, real estate and stock exchange

2009-06-13T06:54:00.002-07:00

Dan Ioan Popp, chief executive officer of Impact, the sole Romanian real estate developer listed at Bucharest Stock Exchange speaks in an interview for Wall-Street how Romanian companies strive to seek a loophole out of crisis, and what’s ahead of Romanian stock market.
Scrambling for a way out of crisis

The crisis has shattered the business landscape and created new economic and financial landmarks. It has been the buzz kill to executives ready to feast on bulls. The result, a new concept in the business arena emerged “crisis managers”.

Dan Ioan Popp speaks from the standpoint of a manager in office for the past ten years. His vision to riding out the tough times: a company-wide review of activity. Although it is hard to give some clues to what the future holds for us, Popp says he’s a bit surprised of the European Union’s failure to take issue and do something as well as of US administration’s shift of focus, adding that the old regulations call for immediate change.

“Financial and accountability rules need to get back on the drawing board. Imbalances between economies in China, India, Mexic and the rest of the world must narrow. If these facts remain the same, there is nothing else to talk about”, said Dan Ioan Popp.
Barack Obama and his assumed position in this context is a good sign, he says. US markets and EU markets must even up, and soon.

“If these two markets don’t try to share common pathways, nothing good will come out. Romania will swing back and forth by the news, because we are too little, we will keep depending upon what other people decide”.

Even if the landing will be painful, we have to stay informed around the clock. We have to understand what is happening and to think the unthinkable, to see all the possible scenarios.

“It is smarter to be a tenant than a landlord”

In the last half of the year, Impact, the company headed by Popp, launched four financing facilities for apartments within the Greenfield compound. The first two facilities, CallBuy (lease-to-own agreement) and Find-L (rates to developer), were launched in November 2008, the newest solutions, Piece-by-Piece and Bridge, being available as of this month.

However, the products have something in common: they have 4-year maturity, deemed by the head of Impact as “affordable” both by clients and company.

“If a client failed to repay the loan in four years, he would be extra charged, and clients can react differently to an increase in final cost. Therefore, the market conditions in terms of financial costs make us believe that a four-year maturity is acceptable for both parts."

“We will start second stage of Greenfield project in first quarter 2010 the latest”

The first stage of Greenfield residential project covers 680 apartments, of which only 100 are to be completed, the rest being already delivered. Of 680, 200 have already been sold, but the head of Impact is confident. The company will start the second construction stage in first quarter 2010 the latest, citing “a fabrication cycle”.

The second stage of Greenfield will start with 165 housing units, and the funds will derive from downpayments, Impact’s funds and its financial partners.

The real house demand will be the driver of the residential market

If a year ago, the residential market was dominated by secondary-market transactions (e.n old apartments market), because 85% of the deals included second-hand apartments, Popp says today, it is difficult to even talk about a market with everything on ice.

“Old apartments account for 95% of the residential market and a mere 5% goes to new apartments. But a house is a vital asset, and the real house demand is still running in Romania, which will eventually drive the market back up; not the speculative investors or German funds but the evolution of mentalities, peoples’ aspirations and their possibility to borrow money to buy a house”, Popp explained.

“To Romanians, playing stock market is like playing squash”

Popp’s theory doesn’t apply to the revival of the stock market as well. There is a huge difference between residential market and stock market as it targets different public and involves capitals with totally different purposes, he continued.

If in 2000 surveys founded that only 1% Romanians would be willing to trade in the stock market, now their willingness is probably at the same low level, especially now when people think twice before investing or saving money in banks.

“It was a time when stock market prices were ballooning, with over 90,000 accounts opened. But few months ago, the same person said something about 3,000, of which a mere half is probably active. The number of investors dropped alongside with the market. To Romanians, playing stock market is like playing squash – sports little known in Romania”.

“I don’t believe in a fast-track maturation of the local stock market”

Impact manager weighs the Romanian stock market against a commercial market where marketers (issuers) bring their commodity (stocks) for shoppers (investors) and regulators oversee their activity. All these “still developing” components need to mature.

“I don’t believe in a deep fast-track maturation of the stock market in Romania. Our real problem lies in how much emotions we put in this game, we don’t know how to stay calm in extreme situations. But the capital market has its interesting side, for those who see its aspects even its downsides”, said Popp.

Listed companies’ earnings 60% lower than in 2008

2009-06-13T06:54:00.001-07:00

Companies listed on the Bucharest Stock Exchange (BVB) totaled RON 590 mln (almost €140 mln) in net profit in the first three months of this year, down 62 percent compared to Q1 2008, after registering losses worth some €150 million in the final quarter of last year.
Without including the profit of Petrom, the largest Romanian company listed on BVB, 60 issuers had a profit of RON 78.5 mln (€18.4 mln) in the first quarter of 2009, down a staggering 95 percent year-on-year. According to data centralized by Business Standard, 20 companies posted losses in the first three months of this year, compared to 36 issuers in Q4 2008. “The final quarter is usually a special one due to provisions. Q4 2009 will probably look better, but some companies may still post losses or drops. Small enterprises may not even be out of the woods yet. Actually, not even large companies are out of the woods yet, considering the poor macroeconomic data,” said an analyst within the UniCredit CA IB Securities Romania broker, Adriana Marin.

The businesses of listed companies amounted to RON 14.5 billion (€3.4 bln), a level similar to that registered in Q1 2008. “The big shock was in Q4 2008 and Q1 2009, when companies went through restructuring programs and adopted measures to counter the effects of the crisis, so things should now stabilize financially. Towards the end of this year, we could see an improvement of companies’ situation, followed by an improvement in the perspective of the share market,” said the General Manager of BT Securities, the brokerage division of the Banca Transilvania lender, Rares Nilas. Only three companies registered profit exceeding RON 100 mln in the first three months, (Petrom, BRD-Groupe Societe Generale lender, and Transgaz state-owned gas transportation company), totaling RON 861 mln worth of earnings.

Flood of hotels put up for sale

2009-06-13T06:53:00.002-07:00

The start of the year coincided in the hospitality industry with a flood of hotels put up for sale by their owners in Bucharest, the seaside, the mountains or other cities, in the context where room demand fell by 26.4% in the first quarter, but accommodation prices also went down.
At the same time, as a result of the lack of cash to finish constructions or finance further projects, over 20 hotels, put at 80m euros by their owners, were put up for sale.
"There are a lot of hotels for sale on the Romanian seaside, on Prahova Valley -over 10 hotels, in Bucharest and major cities such as Sibiu, Brasov, Timisoara at this moment," stated Mircea Draghici, project manager with the hotel unit of CB Richard Ellis/Eurisko (CBRE) real estate consultancy.
In the past four years, sustained economic growth and the favourable economic conditions have bolstered lending for hotel investments and have implicitly led to the emergence of new rooms on the market through the development of new hotels.
"The economic crisis raised borrowing costs, though. Also, it eroded demand and implicitly the occupancy rate of hotels in major cities and, last but not least, generated tougher competition amid the permanently falling accommodation rates," Draghici said.
Because of these imbalances, already operated hotel investments are registering cash flow and profitability problems. "Practically, on a cash drained market, a surplus supply of accommodation spaces has emerged because of the lack of a solvent demand," Mircea Draghici explained. Hence the flood of hotels put up for sale on the market.
For instance, businessman Josef Goschy, a major hotel owner in Romania, with 3,500 rooms in 25 hotels through Unita Holding, put up for sale six properties, that is 18.6% of the accommodation capacity. The total sum he could get from these properties amounts to 25m euros.
Another example is the four-star NH hotel of Piata Unirii in Bucharest, put up for sale for 16m euros early this year.
Stil hotel held by businessman Alin Burcea, was also put up for sale at the start of the year, for 3.8m euros, amid the lack of cash to finance other projects, though no contract has been signed so far.

Commerce, constructions and transports: sectors to register most bankruptcies

2009-06-13T06:53:00.001-07:00

Commerce, constructions and transports were the main risky sectors in Romania, registering over 50% bankruptcy cases of the total bankruptcy rates in the economy, a Coface Romania study reveals. By the end of last year, some 14,489 were on the verge of bankruptcy.

Like previous years, commercial companies are the first in the top, registering a 49.85% increase in the number of bankruptcies compared to the previous year. Thus, last year, 3553 companies started official bankruptcy procedures.

Moreover, the constructions sector was the most affected in 2008, with a 56.28% increase in bankruptcy cases compared to 2007. In Romania, this was the first sector affected by the crisis, due to the real estate market blockage and the banks' decision to stop credits.

In transports, data confirms the same trend: the sector was highly affected by the economic crisis as international demands dropped significantly. In 2008, there were 811 bankruptcy cases in the sector, representing a 12.71% increase to last year.

Romania concedes it's ill-prepared for major quake

2009-06-13T06:52:00.002-07:00

Gabriel Serbanescu was enjoying a quiet evening at home when his Bucharest apartment suddenly began to shake.
«The furniture creaked, and then everything started to move like we were on a mattress in the water,» the retired legal expert said after a 5.3-magnitude earthquake rocked much of central and eastern Romania last weekend.
Nobody died, but Romanians were left more than a little rattled.
They've known killer quakes before, including a 1977 temblor that killed more than 1,500 people. And Saturday's moderate quake _ combined with the deadly convulsion in Italy earlier this month _ have many wondering if they're ready for another big one.
Even the authorities readily acknowledge the answer is no.
Romania, Greece and Italy _ where 296 killed by an April 6 quake _ are among Europe's most «disaster-prone countries» in the event of a major quake, the U.N. International Strategy for Disaster Reduction warns in a new report.
In Romania, thousands of lives and properties hang in the balance as officials scramble to improve the eastern European nation's earthquake readiness plans.
If a quake with a magnitude of 7 or higher were to strike, 6,500 people could die and 1,900 buildings could collapse, warns the National Institute for Research and Development in the Construction and Economy of Buildings.
In Bucharest alone, 392 buildings are considered to be at risk of collapsing in the event of a serious quake, with half of those built before 1940, and some 2,000 need to be reinforced in the next 10 years, City Hall says.
Bucharest Mayor Sorin Oprescu this week appealed to authorities to speed up reinforcement work on buildings considered at risk in the capital, and make the most of a downturn in the real estate market.
«The real estate crisis is doing some good,» Oprescu said. Construction contractors «have little work, so they are willing to take on this kind of building work.
Underscoring how little progress has been made, the mayor says only a dozen buildings have been reinforced in recent years in the city of 2 million, and work currently is under way on just four others.
Romania, which shook off communism in 1989, is one of the poorest nations in the European Union and can't afford a large-scale construction upgrade.
After the 1977 quake, the late dictator Nicolae Ceausescu launched a program to upgrade old buildings and introduced tougher engineering guidelines for new ones. But funds quickly ran out and builders became apathetic.
But the problem isn't just bricks and mortar. Officials concede that few Romanians know how to respond.
«The problem is with the population. There has not been yet a national campaign to inform people about what they should do,» said Alin Maghiar, spokesman for the Inspectorate for Emergency Situations. «We don't have enough prevention inspectors ... to discuss things with students and citizens.
Britain's Ambassador to Romania, Robin Barnett, offered to help raise public awareness in schools and the business community as an efficient and affordable way for Romania to lessen risks in the event of a major earthquake.
«We plan to encourage central and local authorities here in Bucharest to promote greater public awareness of the important measures and will be very happy to work with them to spread the message,» he said.
Romania has been struck twice by major quakes in the past 70 years.
One, in 1940, killed some 1,000 people. The other, in March 1977, was a magnitude-7.2 temblor that killed 1,570 people, injured 11,000 and inflicted so much damage on Bucharest it looked as though it had been blitzed by bombs.
Since then, even relatively minor quakes can trigger trauma or terror in people over 35.
That was clear last Saturday, when a moderate quake centered in the Vrancea region, about 75 miles (120 kilometers) northeast of Bucharest, struck as people ate dinner or watched television.
«The walls shook and I grabbed my wife, and we took shelter in a doorway. For a moment, I thought the building would collapse and we would die crushed in the rubble,» Ionel Negoita, 53, who lives near the quake zone, told the Libertatea newspaper.
No deaths were reported, but 10 mostly elderly people were hospitalized with chest pains, and the quake cracked walls and tiles in some homes.
Eugen Georgescu, a Bucharest architect who survived the 1977 quake, vividly recalls dragging the bodies of dead children from the rubble and helping to save the lives of others.
«The problem is our impotence faced with a quake,» he said. «People should be convinced that dangerous buildings must be demolished _ because people will die from negligence.
But George Sotiroulis, whose luxury chocolate boutique on the capital's bustling Calea Victoriei boulevard is next to one of the city's buildings deemed at high risk of a quake-induced collapse, is fatalistic.
«If we die, we die,» Sotiroulis said with a shrug, and then paused to reconsider.
«We should be better prepared,» he said. «But nobody does anything. In Romania, it's just blah blah.

Half of Romania’s lenders in the red at the end of Q1

2009-06-13T06:52:00.001-07:00

About half of the 43 lenders, operating on the local market, registered losses in the first quarter, a first in the last two decades, considering that bankers have pushed up provisions by €0.5 billion in the first two months of 2009. The banking sector lost some €50 million in the first three months of this year, compared to earnings worth about €200 mln in January-February 2008.
The National Bank of Romania (BNR) initiated a checkup in February, suspecting that the banking system has not acted in accordance with market regulations and transferred 2008 provisions to 2009, in order to report positive financial results last year.

“Less than half of the banks in Romania ended the first quarter in the red, and they were forced to raise their capital. The whole system lost up to €50 million,” said Nicolae Cinteza, Head of the Surveillance Division at BNR.

The central bank was forced to take special measures in the case of some lenders, where arrears reached 18 percent, but even though provisions increased significantly, the degree of coverage of poor performing loans by provisions fell to 131 percent at the end of the first quarter of 2009, from 143 percent in November 2008.

The profit of Banca Comerciala Romana (BCR), the largest lender on the local market, was affected by provisions, and the bank posted a net income after taxes and the payment of minority interests worth RON 330.3 million (€78.3 mln) in the first quarter, down 13.7 percent year-on-year. The value of risk provisions for loans and down payments surged 27.1 percent compared to the level registered in last year’s final quarter, to RON 308 mln (€72.6 mln), due to the evolution of poor performing loans, especially on the small and medium-sized enterprise (SME) segment and small real estate developers. However, the profit reported by BCR for the first three months was 25.1 percent higher than the result registered in the fourth quarter in 2008. “We continued to perform well in 2009, considering a challenging economic environment. We are doing everything we can to support and help clients to overcome the difficult market conditions,” said Dominic Bruynseels, BCR’s Chief Executive Officer. The lender’s assets rose 4.9 percent, to RON 67.66 billion (€16.82 bln) by the end of March 2009. The bank’s loan market share increased to 22.1 percent, due to growth on the corporate loan segment.

The Banca Transilvania lender posted gross profit worth RON 1.02 mln (€240,000) in the first quarter of 2009, down a dramatic 98 percent year-on-year. The bank set provisions worth RON 289 mln (€67.84 mln) in the first three months of this year, and will set aside RON 350 mln this year for poor performing loans, as the gross forecast profit amounts to RON 85 mln (€20 mln). The lender’s assets soared 15 percent in January-March 2009, to €4.62 bln.

The state-controlled CEC Bank, one of the top 10 players in the banking system in terms of assets, registered a 19.9 percent increase in assets in Q1 2009, to €3.85 bln. The balance of gross loans soared 7.4 percent, to €1.91 bln, but the bank could be forced to stop lending in the fourth quarter, in the event it does not benefit from a capital increase.

Economic crisis is auspicious period for real estate investments

2009-06-13T06:51:00.002-07:00

The Israeli investors consider Bucharest an epicenter of international real-estate developers. Despite its echoes in Romania, the agitated period on international markets did not drive away the investors. Thus, the Gindi Rom Company, a member of the Israeli Gindi Group (one of the largest real-estate developers in Israel), has decided to enter the Romanian real-estate market in Romania, considering that every moment of economic crisis also represents an opportunity for investments.

The company has already developed commercial centers, office buildings and residential neighborhoods in Israel, Hungary and Switzerland, and is permanently exploring new markets. The Israeli Group benefits from the advantages of self-financing and of access to financing offered by banks or capital markets.

According to a communiqué sent to Nine O´Clock, the Israeli investors consider that from the moment it joined the European Union Romania has registered a massive growth in construction works, especially in Bucharest. This growth has transformed the city into the epicenter of international real-estate developers. One of the Gindi Company´s investment plans is represented by a centrally-located residential center in Bucharest´s District 3. ´We are convinced that Romania is still a good market, provided one comes with an appropriate and relevant offer. The people continue to need houses and we are here to offer them the best solution – an excellent design and architecture for buildings and apartments, the highest international standards, all at a fair and very attractive price right at the heart of Bucharest´ Kfir Gindi, the director of Gindi Rom, stated. In fact, according to him the company´s business strategy consists of identifying business opportunities that would answer the market needs.

The first project developed in Bucharest will consist of 4 buildings with 324 apartments, standing on a plot of land of 5.300 square meters. Likewise, the company is engaged in talks in order to buy a 16.000 square meter plot of land in Brasov, where it intends to develop a residential center.

Gindi Group´s target consists of young professionals that want to live in the city center, close to their interest points. Until now the company has built and delivered over 25 000 apartments in Israel and Europe. Gindi Group was created in 1970 and is
listed on the Tel Aviv stock exchange. In 2008 Gindi Group´s sales of apartments and plots of land have brought it revenues of EUR 33.26 mln and an operational profit of EUR 15.95 mln.

Mentor Finance recruits 15 mln euros for a residential project in Romania

2009-06-13T06:51:00.001-07:00

Mentor Finance, a subsidiary company of Mentor Group Holdings said it recruited 15 million euros for an existing residential project in one of the main cities of Romania, without disclosing the name of the project’s owner.

“The project, located in Timisoara is still under construction, and the apartments are already for sale. It is a medium sized compound and negotiations for the financing lasted three months”, representatives of Mentor Finance told Wall-Street.

The developers will have the ability to re-plan their selling strategies according to the new obligations they gave the financiers. They believe they will finish it totally up to 18 months including completing of the sales.

According to the company's statements, the latest recruitment was made following a joint venture between an international fund and a private investment group. The contracts were already signed, but the details remain confidential -regarding all the sides involved in the transaction.

“Due to the financial global crisis, we were facing many difficulties in recruiting any loans or credits for real estate projects. Therefore, we made huge changes in the money recruiting method that will fit to the "today market. In many cases we are modifying the financing structure along with the marketing strategies of the existing project,” says Osnat Peled, Marketing director of Mentor Finance, specialized in financing solutions and Investor relations in Europe.

The solutions may come from a few directions – a fund, an investor to join in, an international or a local bank, or even combination of the solutions mentioned above.

Mentor Finance obtained last year more than 35 financing and loans files in Romania, Bulgaria and Moldova. The company has also stated recently, they represent an international fund seeking for green energy projects with investments over 50 million euros.

The number of real estate transactions in Romania dropped 36.3% during the first 2009 quarter

2009-06-13T06:50:00.001-07:00

The first four months of 2009 saw the number of real estate transactions drop with 36.3% against the same period in 2008. The real estate market recorded a total of 105.793 transactions, the general manager of the National Union of Notaries Public of Romania (UNNPR) Nicolae Liviu Popa declared on Thursday for HotNews.ro. April 2009 recorded a 35.8% drop in sales compared with April 2008. The notaries predict that the number of real estate sales will contract with 30 to 50% in 2009 in Romania.

There were 27.472 transactions in April 2009, a clear drop from 42.821, the number recorded in April 2008 in the real estate sector. The first 2008 quarter recorded 166.213 transactions, as opposed to a weaker 2009 quarter, which saw only 105.793 transactions.

The February prediction of UNNPR vice-president Ion Marin, according to which the real estate transactions will shrink with 30% to 50%, is still supported today by the UNPPR general manager Liviu Popa. The prediction goes on to say the real estate market will bounce back at the end of the current year, but it will not reach the level recording during the last years.

According to the notaries’ data, last year saw a number of 484.765 real estate transactions, still a 7.07% drop compared with the figures recorded in 2007.

Romanian real estate developer records a 75% loss in income

2009-06-13T06:49:00.000-07:00

Romanian real estate developer Impact announced on Friday a 75% profit loss for the first 2009 trimester, in contrast with the same period of 2008. The net profit for the first term of the current year is 1.28 million lei.

The fist 2009 term saw Impact signing 46 contracts worth of 20.1 million lei, out of which 59% were call-buy contracts (renting but with the option of buying), 24% were paid in full and 17% are to be paid in instalments. "The sales volume exceeded our initial expectations, contradicting the pessimism brought at the start of the year by the sales figures recorded during the last 2008 trimester", Impact’s Developer & Contractor financial chief Carmen Sandulescu declared.

But the rest of the company’s financial indicators are decreasing. The turnover shows an 8% drop in value according to the figures recorded in the first 2008 term. The gross profit was 54% lower (2.88 million lei) and the net profit was 75% short of the value recorded in the similar 2008 period. The debt level is 20% lower, as the company managed pay 8.6 million euros worth of duties in February. The drop in revenues is not only the result of the expenditures – income difference. "Foreign investors cancelled contracts worth of 12.6 million lei in total", shows Impact’s report.

Impact aims to finalize the projects in progress by the end of 2009. It will also come up with various housing schemes for residential buildings.

Homes built in 2009 could be 60% cheaper

2009-04-18T23:26:00.002-07:00

The sale price of housing units included in residential projects whose construction will begin in 2009 could plunge 60 percent, to some €1,000 per square meter, considering that development costs plummeted by an annual 70 percent, due to the depreciation of land and construction costs
The final price of a housing unit includes several development costs, such as the price of land depending on the home’s constructed surface, construction costs, and soft costs, which include expenses for architects, approvals, financing (interest), marketing, and sales, plus the developer’s profit margin, an average 25 percent. This profit margin is usually divided throughout the project’s construction period, which usually lasts some two years.

The price of land per constructed square meter is some €100-150 today, down 133 percent year-on-year. The explanation is that, besides the 50 percent decline in the price of land, the Land Use Coefficient, which is considered when land plots are sold and acquired, has also dropped, to 2.5-3 from 3.5-4.

“People interested in acquiring land at present are looking for plots with a construction price per square meter of €120 at most. The price of land halved in semi-downtown areas. The problem is that those interested in acquisitions are targeting good plots of land, which were sold for €1,400-1,500 per square meter in previous years, and which they now want to buy for less money,” said Ionut Ciocan, Head of the Land Department of DTZ Echinox.

“I believe the construction price could be €500 per square meter, a price of €600-650 was possible even last year; but the value per square meter was higher because there were no construction companies available. My opinion is that a project in uptown areas could be cost €400-450 per square meter,” said Cristian Erbasu, Manager of the Erbasu group.

Cristian Tudor, Manager of the Comnord-Procema group, said that developers cannot presently demand a construction price below €600 per sqm, even if certain declines were registered on the construction material segment, because the investor must bear some indirect costs. “The value of land is an important part of the final price, so that those who will acquire plots of land in the near future to finalize work in the coming two-three years will be able to afford to cut the end price, unlike those who acquired land in previous years at double values, who will only be able to afford to cut prices per square meter by € 50-100, because they have loans to pay back,” Tudor explained.

The soft costs halved to €80, mainly due to the drop in the degree of indebtedness that developers may have when accessing financing. Thus, if real estate investors could obtain financing for some 75 percent of the project in 2008, this percentage has now dropped to some 50 percent. “The interest is some € 45 in total soft costs, as it is lower because the degree of indebtedness is lower,” said Ionut Bordei, Head of the Residential Department of CBRE-Eurisko.

Credit Crunch Brings Down Property Prices in Romania

2009-04-18T23:26:00.001-07:00

The credit crunch has brought down the price of both old and new apartments in Romania and made sellers more willing to negotiate and make concessions.

Compared to last year, the price of old apartments in Bucharest has gone down by 30 to 40 per cent and by nearly 20 per cent for new ones. At the end of 2007 in Romania’s capital, 100,000 euro was enough to buy a new one-room apartment or an old three-room apartment, the same sum is now enough for the purchase of a new two- or even three-room apartment, the Evenimentul Zilei newspaper reported today.

“There are so few sales in this period that nobody knows what the prices are as a whole. Some apartments get sold for ‘fitting’ prices and others – for insignificant sums,” a representative of the Association of real estate agencies told the publication.

In Romania’s third largest city, Cluj, real estate has gone down by as much as 50 per cent compared to last year. In Ploieşti, the ninth-largest city, a house of 120 square metres near the centre, costs 45,000 euro. New flats in Timișoara, which is Romania’s fourth-largest town, at the moment are up to 20 per cent cheaper than last year.

Source: www.balkantravellers.com

Real estate agents’ approach – what went wrong and what needs to be changed ?

2009-04-18T23:25:00.001-07:00

At a time when the real estate agents start to feel the pain of empty pockets or of being downsized, their approach to clients are now turning into crucial factors for them to survive the recession. Experts polled by Wall-Street explain what went wrong in the past and what needs to be changed in the approach of real estate agents.
Bogdan Georgescu, president of real estate advisor, Colliers International says many real estate agents have lost their sense of reality over the past few years and focused more on profit-making activities, to the detriment of education and long-term development.

“As long as the market was growing at an annual 50% rate, I would say this approach was rather normal especially in a country where the success is measured in cash or premium cars. I remember that almost a year ago, a Swiss banker was explaining to me the philosophy of asset management in his home country, and I just couldn’t grasp the concepts of «risk classes», «long term», or «financial planning»,” said the head of Colliers.

It is still too soon for a generalized change in Romanian agents’ behavior. Nevertheless, he hopes Romanians understood that the past years’ frenzy was not normal, same as the current lockdown will not last forever.

“From now on, I hope the success of the market will lie upon education, hard work and consistency rather than speculations. What Romanian real estate agents did wrong was their failure to aim attention at education and long-term professional training. Unfortunately, this is a major problem we find in all sectors of the economy, rooted in the outdated and weak teaching system,” said the president of Colliers.

The economic downturn in Romania did not stem from real estate industry, but the other way around, the market being impacted by the generalized economic standstill and panic. We don’t have the experience and wisdom to prudently invest the money earned over night, and this will enable crisis to wipe out many of the fortunes built up over the past three-four years, says Georgescu. However, this downturn will make us understand better what many people in the West learned from their parents and grandparents.

“I wished I had seen an increased focus to consistency, quality and education that could work to establish a market balance and an improvement of the sector’s image. I am convinced that this crisis will lead to an exodus from the real estate industry, and few people will remain in the business, in contrast with the past years, which I hope to lead to an upgrade of services to clients”, Bogdan Georgescu concluded.

Client Care and Quality Control – new concepts for real estate agents

Razvan Gheorghe, Partner and Managing Director of Cushman & Wakefield Romania, says the current economic context has broadened the new concepts such as Client Care and Quality Control in the life of real estate agents and advisors. Clients are now more selective and in default of a professional approach, or an ethical framework, the service will never be earned by agents.

“Every consultant must understand that the standard of the real estate services is high and that it can have only one meaning, regardless to the company you work for. This means that the requirements are the same for all agents and applicable both for small and large companies”, Razvan Gheorghe said.

Source: www.wall-street.ro

1300 euro lump tax for companies

2009-04-18T23:24:00.000-07:00

The Finance Ministry intends to introduce a minimum lump tax for the profit tax and the business tax for small enterprises. The value could reach 1,300 Euros per year, governmental sources declared for NewsIn. The measure targets small enterprises and companies reporting annual losses, restaurants, hotels, transport and real estate companies.

According to a statement made on March 26 by Finance Minister Gheorghe Pogea, 80% of the companies report losses twice the value of profits, thus avoiding tax payment and causing unfair competition on the market.

"Out of 617,525 companies in Romania, 12,000 ensure 85% of the public income by paying their taxes", said Pogea. According to the official, in 2007, 242,000 companies reported losses.

Romanian properties to decrease their value by 20%

2009-04-18T23:23:00.000-07:00

Real estates markets in Romania and Bulgaria will continue to register significant decreases, leading to a price drop by almost 20% a Jones lang LaSelle report reveals. The Bulgarian real estate market registered a continuous increase for the last seven years but now, for the first time since the two countries entered the Union, both countries will have to face a significant stall.

Thus, experts estimate that 2009 will prove to be a difficult year for the residential sector in the two countries, NewsIn informs. The situation got even worse as several projects were not finished in time while others were even abandoned.

According to Romanian data, real estate transactions in the first couple of months of the year dropped by 37.43% compared to the similar period, last year. Thus, in January- February 2009, there were some 48, 610 real estate transactions, a 29,000 drop compared to January - February 2008 with 77,695 transactions.

New apartments sales dropped more than five times in Q3 + Q4 2008

2009-02-28T00:25:00.001-08:00

The number of new apartments sold within residential projects in Bucharest decreased 50% in 2008, compared to 2007, the rough fall taking place during the second half of the year, when the number of transactions dropped to some 600 units, from the 3300 units sold during the second half of 2007, a study by Colliers International reveals.

The buyers are mainly people that already have the cash and don't have to appeal to credits.

Colliers International, a real estate consultancy partnership gathering companies active in 51 countries, saw a 15% decrease of the business in Romania in 2008.

Source: www.hotnews.ro

Apartments' price decrease has no effects for the general population

2009-02-28T00:24:00.001-08:00

The average 20% decrease of prices for older apartments - noted by comparing prices in February 2008 and February 2009 - didn't bring any benefits for the clients, since the credits cost just as much as to cover the old price of houses because of the interests' growth, a credit scenario of the Kiwi Finance credit brokerage company unveils.

Apartments that used to cost 120,000 Euros are now 96,000, but a credit to acquire one will cost now just as the credit of the 120,000 Euros apartment used to cost last year.

In other scenarios, a family earning 660 Euros per month can obtain now a lower credit than last year. To obtain an equal credit, the family would need to earn 28% more.

Source: www.hotnews.ro

The number of transactions could drop by up to 50% in 2009

2009-02-28T00:23:00.000-08:00

The number of real estate transactions could drop by 30-50 percent at least this year, considering market signals and its evolution in January, when it registered an annual 50 percent drop, said Ion Marin, Vice President of the National Union of Romanian Notaries Public (UNNPR).

Marin added that he hopes that the Real estate market will begin to recover this summer, when banks are expected to resume lending. The number of real estate transactions fell some 25 percent in the last four months of 2008, and by over seven percent in 2008 year-on-year.

The downward trend, which began in September, continued in the final month of 2008, when the number of transactions dropped to 33,000, some 35 percent lower than the more than 50,000 transactions finalized in December 2007. However, the sharpest drop, of 54 percent, was registered in November.

According to estimates by the Colliers International consultancy company, some 3,000 new apartments were sold in the first half of 2008, but sales fell to some 500 units in the remaining six months.

Source: www.standard.ro

Real estate credit to regain market in one year maximum, experts say

2009-02-28T00:22:00.000-08:00

The real estate credit will recover in a relatively short while, of maximum one year. The market still exists and there are clients that still call for such loans and banks that offer it, despite of the crisis, said the president of the Romanian Banks Association, Radu Ghetea.

"It is a transition period for the real estate credit, because there are still major opportunities and a high demand for homes. The time for speculations has passed", said Ghetea. His predictions are based on the fact that all governing programs in Europe (and in Romania as well) take into account supporting the construction businesses.

"The Romanian Banks Association itself has aims at supporting the construction activities, for general infrastructure, but mainly for housing", Ghetea added.

Source: www.hotnews.ro

Voestalpine lost €10 mln on land pre-contracts in Romania

2009-02-28T00:21:00.000-08:00

Austrian steel group Voestalpine, which had been planning a €5.5 billion investment in the Black Sea region, freezing this due to the economic crisis, lost more than €10 million from land purchase pre-contracts in the southeastern area of Romania, sources close to negotiations told Business Standard. Voestalpine was still to choose between four countries - Romania, Bulgaria, Ukraine, and Turkey - for the location of its new steel plant in the region.

As far as Romania is concerned, the company pre-contracted 80 percent of the land needed for the steel plant location in the town of Agigea, close to the Black Sea. It paid 5 percent of the land value to owners of plots. This decision had been made at the time because owners were hiking prices. The negotiated value of the plots was between €10 and €100 per square meter. According to the sale pre-contracts, the Austrian company would have priority for acquiring the land, while owners can keep the down payment if Voestalpine chooses another location for its investment.

The Austrian group's spokesman, Peter Schiefer, told Business Standard that land owners were informed as early as last month that the pre-contracted land is not to be purchased. “We have assumed this loss," he added. The group was targeting some 600-700 hectares in the Agigea area, of which 170-200 hectares were to be leased from the state for 50 years.

Last fall Voestalpine signed a memorandum with the Romanian authorities on the issue, after one year of negotiations.

Source: www.standard.ro

Apartment owners and thermal rehabilitation to drive up the polystyrene market by 10%

2009-02-28T00:20:00.002-08:00

The local polystyrene market will increase by some 10 percent this year, to over €100 million, even if this will feel the effects of a stagnating construction market, considering that demand is still high compared to other segments, especially from end-users, but also due to real estate projects begun in 2008 and the launch in 2009 of the national program for thermal rehabilitation, according to players in the field.

“So far, we have not significantly felt the effects of the crisis, because we signed contracts last year with strong distribution companies and developers. I believe that the market will bounce back in the second half of the year, when most sales on the insulation segment take place. Companies will have to continue their activities, banks will have to unblock loans, and the most important aspect is for the existing general panic to disappear in the coming months,” said Ioan Iteiu, General Manager of the Arcon polystyrene and bituminous membrane producer.

“The polystyrene market will maintain its upward trend in spite of problems on the construction market. Moreover, the thermal rehabilitation program will boost the market’s growth,” said Marian Serban, General Manager of the Swisspor Romania insulation material producer.

The polystyrene market rose tenfold in volume between 2003 and 2008, with an annual 60-70 percent pace, due to the construction market boom. The effects of the financial crisis slowed this pace to some 10 percent in 2008, to 3.3 million cubic meters and some €90 mln. Major players on the domestic polystyrene market include Austrotherm, Arcon, Swisspor, and Europlast.

Source: www.standard.ro

Impact - The successful contact rate at the fair was 60 to 1

2009-02-28T00:20:00.001-08:00

Officials of Impact Development&Contractor, present at the second real estate fair, held from 12-15 February at Bucharest’s Sala Palatului, claim that this year’s contact success rate during the event dropped from last year’s 30 to 1 to 50-60 to 1.

“We managed to some 280 contacts during last week’s fair. While last year’s contact success rate was 30 to 1, now it is a mere 50-60 to 1. As such, we are expecting that contracts made will lead to at least 7-8 sales contracts,” according to a declaration for Business Standard by Carmen Sandulescu, Chief Financial Officer of Impact.

The offers proposed by exhibitors at the Apartment and Condominium Fair are similar as those of last week’s fair, and include discounts of up to 30 percent, fully equipped kitchens, direct installment financing plans through the developers, and parking included in the price of the homes. Most developers who participated in last week’s fair decided to also participate in the second Real estate fair, even if sales were poor due to the financial crisis. Even the representatives of Globe Trade Centre (GTC), one of the main housing developers on the local market, managed to collect some 300 contacts, but expects results only in two-three months. “Contracts are not as good as they were at previous fairs. Clients have a harder time making up their minds and analyze opportunities much more carefully. Those who visited our stand at the national real estate fair were mostly persons interested in learning how the market is doing,” said Raluca Dan, Sales Consultant for GTC’s Residential Department.

Source: www.standard.ro

Real estate assets in Romania still expensive

2009-02-28T00:19:00.000-08:00

Romania does not offer favourable conditions for the investors interested in buying real estate because prices are still high, say BNP Paribas Real Estate representatives, but who, however, see a good opportunity to develop housing priced up to 100,000 euros.

"This year is not a good moment for international investors to buy property in Romania. The market is non-transparent, the investors do not have access to information on the real estate sector, and the difference between the prices requested by the seller and the buyers are willing to pay is still significant", the Deputy Executive Director of BNP Paribas Real Estate, the real estate division of French group BNP Paribas, Henri Faure, told the Mediafax agency.
In his opinion, under these circumstances, the developers that will not adapt to the market by lowering prices will have the most to suffer.

On the other hand, the BNP Paribas Real Estate representative considered that a very good opportunity on the Romanian market this year would be the development of housing priced up to 100,000 euros, to benefit from a payment of 5% VAT.
"The developers must adapt to market needs, to study better its future development. The development of such housing could be a solution to unblock the market," said Faure.
He noted that the most optimistic variant for the real estate market is a change of conditions from the second part of the year, if financing will be unblocked.
BNP Paribas Real Estate is present in Romania through Atisreal company, which acquired the Romanian company Cornerstone International last year. The Bucharest office provides brokerage, consulting and evaluation services on the residential segment, offices and investments.
"This year, we will focus on developing these activities, and, probably, from 2010 we will also bring to the Romanian market other services, namely property management and asset management," Faure mentioned.
The Executive Director of BNP Paribas Real Estate Property Management, Laurie Leclerc, said that, on this segment, the company is interested to buy a Romanian company or to enter into a partnership.

The Group holds three more companies in Romania, respectively Centelem in consumer credit, Cardif - insurance and Arval - leasing.

Source: www.curierulnational.ro

Property market 2009: the year of the buyer

2009-02-28T00:18:00.000-08:00

After years of bustling construction activity, solid price growth and quick profits, the Bulgarian real estate market will see buyers become the trend-setters, analysts said at the BalreAct conference dedicated to the impact of the crisis.

As investors fight for their lives, homebuyers with cash at hand can cut 15-20 per cent off the price of the property, said Tsvetelina Tasseva, director of real estate agency Address.

However, the housing market has skidded to a halt, with deal volumes falling and buyers taking five or six months to make up their minds, not five weeks as they did earlier, Taseva added.

Moreover, hundreds of flats were being offered at prices that were well above what buyers were willing to pay, with the difference between the price asked and the amount paid reaching 12 000 euro in Sofia.

Property buyers have become more choosy and were now looking out for good location, infrastructure and other benefits, according to Tatyana Emilova, housing space manager of Colliers International.

In the past years, the pace was set by investors on the hunt for quick profits splashing cash on buildings offered at exorbitant prices that did not match quality.

Many entrepreneurs took out short-term bank loans at various phases of the projects, hoping to pay back from instant sales. Now, the stagnating property market is bringing them to their knees before banks, analysts said.

Natural selection will help the market get back to business as usual, Bozhidar Neichev of PricewaterhouseCoopers said.

His view was echoed by Mauricio Mesa Gomez, Hercesa country manager for Bulgaria and Romania, who said that the crisis will turn out to be a healthy period as it would cleanse the market.

Construction entrepreneurs and investors should get together to hammer out common price levels because no one would survive this crisis on their own, Sofia chief architect Petar Dikov said.

Creative marketing ciykd no longer sell properties as both investors and consumers now needed to know all the details, said Lindner Immobilien manager, Rossen Plevneliev, who labeled 2009 "a year of truth" for the sector.

Source: www.sofiaecho.com

Eastern European bailout proposed

2009-02-28T00:17:00.002-08:00

EUROPEAN leaders called for doubling the International Monetary Fund's war chest for bailing out financially stricken nations, amid new signs that Europe's former Communist East is sliding into a full-blown economic crisis with worrying implications for the continent as a whole.

Europe's developing economies from Poland to Ukraine are facing their worst economic crisis since the fall of the Berlin Wall 20 years ago. Capital is fleeing Europe's east, sending currencies sliding and threatening the region with deep declines in output and employment, and a deluge of debt defaults. Poland's industrial output in January fell at a painful 15 per cent annual rate; its currency last week hit an all-time low against the Swiss franc.

The spreading trouble -- which on Friday claimed the government of Latvia -- could force more countries on Europe's periphery to seek help from the international community. Latvia's economy alone could shrink by as much as 10 per cent this year, according to some estimates.

The IMF already has bailed out four ex-Communist countries, as well as Iceland and Pakistan in recent months.

This weekend's call by the leaders of Europe's major economies to double the IMF's war chest, to $US500 billion ($774 billion), highlights their concern about the financial trouble brewing to the east. The statement however, was short on specifics. For instance, it didn't say where fresh funds might come from at their Berlin meeting.

The West European leaders' brief proposal falls short of demands by the World Bank and governments including Austria and others for Europe's wealthy West to prop up the continent's vulnerable East.

Until the past couple of weeks, the turmoil mainly hurt Eastern Europe's most financially overstretched countries, such as Latvia and Hungary. But collapsing currencies and markets even in hitherto robust economies, such as Poland and the Czech Republic, show that investors are now fleeing the whole region.

The market slump in Europe's East threatens to undermine years of hard work in former Soviet satellites to build a Western market economy and way of life.

It could also sour the heavy investments by Western European banks in the region. Some analysts are now describing the region as Europe's own "sub-prime" loan market, an analogy to the US sub-prime mortgage market whose collapse beginning in 2007 triggered the global financial crisis.

"There is no doubt that this is the biggest economic crisis in Central and Eastern Europe since the end of communism," says Lars Christensen, chief emerging-markets analyst at Danske Bank. Economies from the Baltic to the Balkans face contractions of up to 15 per cent in gross domestic product, he says. That would be comparable to what Indonesia suffered in 1998, in the thick of the Asian economic crisis.

Central and Eastern Europe today have some features similar to emerging-markets crises in Southeast Asia, Argentina and Mexico in the past 15 years: Risk-wary investors are pulling out money en masse, which weakens local currencies. Weaker currencies make it tougher for locals to pay off their foreign-currency debts. That spurs fear of widespread loan defaults and strips economies of the capital inflows that sustained them.

In much of Eastern Europe, individuals and businesses have sought to catch up with Western living standards by borrowing heavily from overseas. The 10 former Communist countries that have joined the European Union since 2004 have attracted huge amounts of credit and other investment from Europe's wealthier West.

The implied stability of EU membership allowed East European firms and individuals to borrow in foreign currencies such as the euro, the Swiss franc and the yen, which offered lower interest rates than local currencies.

That kind of cross-border borrowing worked fine in smoother times, when local currencies were relatively stable. But now, as the currencies in the East weaken sharply, people who borrowed abroad are seeing their loan payments balloon.

Eastern European borrowers need to repay about $US400 billion in debt owed to Western banks this year. Much of that is denominated in foreign currencies, according to a report by Swiss bank UBS.

Rafal Lyczek did what seemed like the sensible thing last May: He converted the loan on his home in Poland into Swiss francs, using Switzerland's lower interest rates to cut his mortgage payments. The bet seemed safe, since the Polish zloty has been a strong currency in recent years.

But the zloty has weakened severely since July. That means monthly repayments for the 31-year-old economist have jumped around 50 per cent since last summer, now that it takes about 3.20 zloty to purchase one Swiss franc, compared with only 1.98 in July.

"I switched because everybody did it at the time," he says. "My mistake was that I did not take into consideration the stability of the zloty, which is the currency of my pay cheque."

Mr Lyczek says he'll survive. But market fears that many Polish and other regional debtors will default have battered the stocks of West European banking groups that own the bulk of Eastern Europe's lenders.

Debt isn't the only problem. Many Polish companies also face heavy losses on currency options that they bought last year on the assumption that the zloty would keep strengthening. By some estimates, these losses alone could wipe out about 1.5 per cent of GDP.

Poland and others in Europe's East emerged from massive economic contractions after the fall of communism in 1989. Poland, Hungary, Romania and Bulgaria suffered double-digit declines in output in 1990-92, according to the IMF, when their moribund, Soviet-era industries were exposed to market forces.

But by the late 1990s, much of the region had recovered and was growing robustly, thanks to exports and foreign investment, including by West European banks and carmakers. From around 2003, the growth turned into a headlong boom as it became increasingly easy to borrow money cheaply. That cheap borrowing contributed to a flood of fresh investment in Eastern Europe's retail and property sectors.

Governments in the region mostly failed to counter signs of a debt-fuelled bubble. "Policy makers in the region have been cheerleaders of the boom, rather than prudent guardians of growth," says Mr Christensen of Danske Bank.

In Latvia, economic growth topped 10 per cent in 2007 thanks to rampant consumer spending and construction activity. Late last year, Latvia refused to devalue its currency, which is pegged to the euro, despite the country's struggle to finance its huge import bill. It took out a loan from the IMF and embarked on an austerity program of wage and budget cuts. But its economy declined even faster under the plan, triggering Friday's resignation of the prime minister and cabinet in the face of rising public anger.

In some ways, Eastern Europe faces bigger challenges than did Southeast Asia after that region's 1997 financial crisis. Then, the rest of the world economy continued to grow, providing healthy markets for an export-driven recovery. But this time, much of the developed world is in a prolonged funk of its own.

Federico Ghizzoni, manager of Italian bank Unicredit's central and east European operations (with regional loans totaling some €90 billion euros, or $178 billion), says the biggest problem is the rising loan-default rate. But he adds that Eastern European economies have some advantages.

For one thing, he says, they will be protected to some extent by their EU membership, which provides them with money from Brussels to help build up their economies. There is also the large number of Western companies that have set up in the region.

"We have 1000 companies from Western Europe" that have invested in the East he says. "There are a large number of long-term investors who will continue to stay during the crisis."

Eastern Europe's problems have the potential to shake public confidence in democracy and market economics, although public anger has so far focused on the mistakes of specific leaders.

In Poland, the fall of the zloty has intensified a long-running debate over whether to join the euro. Because it is the largest, most-open economy in the region, the zloty, along with the Czech currency, has borne the brunt of recent capital flight.

Despite the zloty's recent nosedive, economists say Poland's economy is in many ways sounder than more financially overstretched countries such as Latvia or Romania. Poland's strengths include relatively strong foreign-exchange reserves. In addition, its banks aren't as deeply in debt as banks in some neighbouring countries.

But in a panicky market, even relatively strong economies such as Poland and the Czech Republic are taking a beating.

Polish borrowers need to repay about $US71 billion of debts owed to Western banks this year, much of it denominated in foreign currencies. Rising unemployment -- expected to reach more than 12 per cent in mid-2009, from 9 per cent in September -- will also reduce spending.

Last year's growth of 4.8 per cent could easily be erased. Bankruptcies will rise by at least 20 per cent this year, according to Euler Hermes, a unit of the Allianz insurance group.

Furniture maker Swarzedz Meble. was founded a century ago. It survived war and communism and became one of Poland's first companies to list on the stock exchange. After several years of sharply declining sales, Lukasz Stelmaszyk, now 34, took over as CEO in October 2007 and embarked on an ambitious turnaround plan.

Last year brought signs of success. Sales in the consumer division doubled in the first three quarters of the year, compared with the year-earlier periods, he says.

But in the final quarter, as the world economy began to stumble, consumer growth slowed, while business customers -- especially in Germany, Ukraine and Russia -- began to put off purchases being discussed.

Things got so bad, so quickly, that a month ago, Mr Stelmaszyk recommended the company be liquidated.

"Because of euro entry in 2012, we were very optimistic about 2008 and 2009," he says. But, "every week as the crisis evolved, customers cancelled discussions."

Many in Poland fell victim to currency swings. As the zloty rose last year, some companies tried to take advantage of the volatility to speculate -- and tripped up.

Sfinks Polska, a restaurant chain, has almost no revenue in euros. But the company in August and October swapped some of its debt into euros. That contributed a loss of 8.8 million zloty ($3.7 million) by the end of the year.

The management was replaced in November, and last week the new management filed for bankruptcy. "In the opinion of the current management, these deals were speculative," wrote Mateusz Sielecki, the current Investor Relations Manager, in an email.

Many Polish borrowers are angry at the banks, who heavily advertised Swiss-franc loans. The trend had started in 2004, but gathered momentum with a real-estate boom from 2005 to 2007, as Poles rushed to buy their own homes. Banks put out posters offering rates as little as 3 per cent for a franc-denominated loan, but included little clear information about the inherent risk of borrowing in another country's currency.

Many banks force borrowers to buy Swiss francs at a rate they decide -- on average 4.5 per cent higher than the commercial rate. The Government has ordered all banks to let borrowers raise their own franc funds, but many don't know how to do this.

Early this month, Mr Lyczek, who converted to a franc mortgage, set up a website called "kupfranki-buy francs," where he has gathered some 1000 borrowers to pool funds so that they can buy sufficiently large quantities of francs to get a commercial rate.

Source: www.theaustralian.news.com.au

Spanish investors continue to be interested in Romanian market

2009-02-28T00:17:00.001-08:00

The Spanish investors are still interested in the Romanian market and their investments in Romania have increased at an accelerated pace, during the last three years, said Minister Advisor at the Economic Department of Romania's Embassy in Madrid Constantin Ene. Evidence of this is the 5-time increase in the value of the capital the Spanish companies, that tripled their number over the same time span, invested in Romania, Ene stressed.

As many as 3,412 companies having Spanish capital were registered in Romania on Nov 30, 2008, and their cumulated investments were worth 806.49 million euros, which allowed Spain to rank up from 16th., on June 30, 2005, to 8th among the countries investing in Romania, Ene told Agerpres quoting Commerce Registry National Office data as saying. Figure clearly show that the Spanish investors continue orientating themselves towards the Romanian market, Ene added.

The real estate sector continues attracting most of the Spanish investments in Romania, because of the big benefits they give in the short and medium run, the Romanian Minister Advisor explained. The Spanish investors go on being interested in the infrastructure, the energy, mainly the renewable one, growing grains and technical plants, animal farming, tourism, services as well as in industries such as wood processing, chemical industry, car spare parts manufacture, textiles and food.

There are no information and signs that Spanish investment projects are blocked in Romania as a result of the world economic crisis, but the Spanish investment flow to Romania goes on unrestrictedly, Ene said. This is mirrored in the rapid rise in the number of commercial companies with Spanish capital registered at the Commerce Registry and implicitly in the value of the Spanish invested capital, Ene explained.

The Romanian official gave as an example La Caixa Bank, which is among the first three Spanish banks that decided to open a branch in Romania, in late autumn 2008, with the view to serving the ever larger number of the Spanish investors in Romania. Garrigues, the biggest law firm in Spain, has also entered the Romanian market.

Dracula’s Castle a Jewel in Romania’s Crown

2009-02-28T00:14:00.000-08:00

Bran Castle has earned its reputation as one of the most famous monuments of medieval architecture, known to tourists across the world as “Dracula's Castle.”

Although Romania is full of old architecture and history, Bran Castle is one of the most important, and arguably well known, examples. Its claim to fame is the association with the infamous Count Dracula, the main character of Bram Stoker's novel 19th century novel “Dracula.”

With its 17 rooms, Bran Castle is also one of the most expensive properties in the country, with a real estate value of around US$140 million.

An Embattled History

It was built in 1212 by an association of merchants from nearby Brasov, where its main task was originally to protect shipments that passed through the Rucar-Bran gorge that traverses the Carpathian mountains.

In 1920, the City of Brasov donated the castle to Queen Maria of Romania, as a sign of gratitude for her contribution to the country; she restored it and left the inheritance to her daughter, Princess Ileana.

In 1948, however, the royal family was expelled by Soviet troops, supported by the pro-Soviet Romanian government at the time. It then became property of the government, and was opened for the public in 1956, with one of its sections transformed into a museum of medieval art.

Years of official negligence then led the Castle to near ruin, so between 1987 and 1993 it was put through a massive restoration project.

After the Romanian Revolution in 1989, the communist regime was abolished, and the Habsburg family—Bran Castle’s former owners—started legal proceedings to regain their asset. Years of painstaking efforts and a long legal battle later, Dominic of Habsburg, the grandson of Queen Maria, and Princess Ileana's son, got the Castle back, almost six decades after it was confiscated from the family. They plan to transform it into a high-quality museum open to the public.
The Dracula Connection

Bran Castle became famous after Bram Stoker wrote his famous novel “Dracula,” in which the main character is Count Dracula, also known as “the Vampire of Transylvania.” The truth is that the character in Stoker’s novel never existed, neither in Romanian history or folklore.

Dracula, actually, is widely believed to have been inspired by a dark personality of Romanian history: Prince Vlad Tepes. The Prince ruled Vallachia, part of what is now called Romania, during the 15th century. Although never accused of sucking blood, he certainly had a dark reputation.

During his childhood he was held as a political hostage by Ottoman Empire, and spent many of his early years in Istanbul prisons. Later in his life he became Prince of Vallachia, with some support from Hungarian royalty. He then became well-known for the harsh punishments he exacted on Turkish troops: a common practice was to impale enemy soldiers and leave them to die slowly. This is how he got the other name “Vlad the Impaler.” Apparently Vlad saw the cruel punishments as revenge for the mistreatment he received from Turks in his childhood.

He also ruled Vallachia with an iron first. Apart from committing atrocities upon his rise to power, petty theft was also dealt with through ridiculously harsh punishments for criminals; it is said that during his reign nobody even dared to pick money up off the ground.

While the story of the Prince goes some way to explaining the origin of the Dracula character, the connection with the castle is still unclear. This is because, in the end, there is none.

Bran Castle was named “Dracula's Castle” about three decades ago by western tourists who came to Romania in search of Dracula. They were surprised by how the entrance of the Transylvanian mansion resembled the castle described by Stoker in his novel, and therefore named it Dracula's Castle. With the passing of time, it became a common belief that Stoker’s novel had some real connection with the Castle, but for better or worse, it is not the case.
Now, A Popular Tourist Destination

These days, anyone journeying to Bran Castle with Stoker’s terrifying descriptions in mind will find the reality proves surprisingly different: the Castle itself is an old, benign, and beautiful example of medieval architecture. Tourists come only to find it nestled in a tranquil mountain area with shepherds pasturing their herds, and wives weaving beautiful handmade textiles to adorn theirs homes.

While thrill-seekers may be disappointed by all this, they should be pleasantly surprised by Romanian hospitality and cuisine, which are among the best in Eastern Europe. Tours are available for those who want to spend the day at Bran, and overnight stays in the area are also possible.

Tourists also inevitably learn about Romanian folk legends during the stay. They might find out, for example, that if a garlic clove is placed above the door entrance, the house will be protected against evil spirits. Safe from harm, tourists return back to their homes with fond memories, and the desire to visit Dracula Castle’s and its beautiful surroundings again in the future.

Source: www.theepochtimes.com

BNR could intervene to calm the exchange rate

2009-01-22T14:36:00.000-08:00

The controlled floating exchange rate allows the National Bank of Romania (BNR) to intervene without announcing its intervention, say BNR officials, who warn that they will not use the foreign currency reserve to maintain a specific exchange rate.

For the third consecutive session, the benchmark exchange rate posted by BNR marked record-levels since the euro was introduced, at a RON 4.3127/€1 exchange rate.

Financial analysts say that the level of the exchange rate is already over-depreciated and dangerous for the economy. BNR’s foreign currency reserves dropped by more than €1 billion in December alone, to €26.22 bln.

The real estate market will not bounce back by year-end

2009-01-22T14:30:00.000-08:00

Businessman Dan Adamescu, owner of the Unirea store in Bucharest and the Baumeister construction company, does not foresee a rebound of the Romanian banking system in 2009, prompting him to postpone real estate investments for next year. “We are currently in stand-by. Until international funds start investing again, there is nothing we can do.

As things stand now, there are no signs that the market will bounce bank this year, because local banks also have problems. Maybe next year,” Adamescu told Business Standard. The businessman is no longer looking for plots of land even if prices are plunging in most towns around the country. In Bucharest alone, the price of land, which surged in the past four years, is estimated to drop by up to 60 percent. Regarding plans for the future on the Real estate segment, Adamescu will continue to focus on the retail and office segments in central areas of Romania’s main cities, even if competition is fierce. Unirea Shopping Center ended last year’s first quarter with RON 45 million (€10.44 mln) in net sales, according to the latest financial reports on the Bucharest Stock Exchange (BVB). In the city of Brasov, the Adamescu family has invested some €35 mln in the Unirea Shopping Center it opened there last March. In November 2008, Dan Adamescu became shareholder of InterContinental hotel, after acquiring a 14 percent share package for €3 million. In 2006, the businessman purchased the five-star Rex hotel in the Mamaia resort from the Paunescu brothers, for some €10 mln. The family has expanded its business to the insurance sector, with a 73 percent stake in the Astra-Uniqa insurer, whose market value is €23.5 mln. Dan Adamescu was ranked 11th by the “Adevarul 500 billionaires,” with an estimated fortune of €600-650 mln.

Source: www.standard.ro

Some 3,500 new apartments sold in Bucharest in 2008

2009-01-22T14:28:00.000-08:00

About 3,500 new apartments were sold in Bucharest in 2008, of which 3,000 in the first half of the year. This number is less than half the 2007 level, of 7,300 sold units, according to the Colliers International real estate advisory company.

Sales in last year’s final quarter were a disaster, even for large Real estate advisory companies, which used to compete in terms of sold units.

“To date, the fourth quarter of 2008 registered the lowest sales since 2005,” Ilinca Paun, Head of the Colliers Residential Division.

Colliers sold only seven apartments in the fourth quarter of 2008, DTZ Echinox, sales were 47 percent lower than in Q4 2007, Coldwell Banker is patting itself on the back for the sale of 70 apartments, while officials of CB Richard Ellis-Eurisko will say only that the company sold fewer apartments than in 2007.

Source: www.standard.ro

BNR agrees to less restrictive conditions for mortgages

2009-01-22T14:26:00.000-08:00

As of January, Romanians are free to access mortgages for which they offer collateral of homes and in town plots of land with a maximum degree of indebtedness of 60-65 percent, provided they make a down payment of at least 10 percent. This is the first decision on less restrictive lending in 2009, insistently requested by bankers, and approved yesterday by the National Bank of Romania

Bankers are preparing to grant mortgages with a minimum down payment of 20-25 percent of the value of the home, said Radu Gratian Ghetea, Chairman of the Romanian Banking Association (ARB), while lenders are expected to finalize the new regulations in about one week.

In spite of this decision, bankers are skeptical, considering that less than a fourth of the 42 banks in the system are expected to modify their lending conditions. This because mother companies halted financing these banks, and because the new conditions will apply differently for each bank, depending on poor performing loans these have in their portfolios. “Some banks have announced they wish to maintain the degree of indebtedness based on the existing regulation. Once this is modified, banks send the regulation to BNR for approval and if this is too optimistic, we send it back. We hope to give them a response in two-three days from receiving theirs,” said Nicolae Cinteza, Head of the Supervisory Division of the central bank. Cinteza excludes the possibility of a zero down payment on mortgages, which could only be applied if loans are guaranteed with an additional deposit.

However, BNR’s decision to limit the effects of the international crisis on the Romanian economy, considering the acute lack of funds, could boost the Real estate market.

BNR officials indicated that banks can compute “a higher degree of indebtedness for loan applicants, if they provide good quality real estate properties as collateral for the loans. However, the evolution of lending depends mainly on the capacity of banks to mobilize financial resources. The degree of indebtedness could be raised differently for each bank, depending on the loan history on this segment, from the current level of 30-55 percent.

Ionut Dumitru, Chief Analyst of Raiffeisen Bank, said that the most important factor in the slowdown of lending is without a doubt the reduction of the availability of foreign financing and its substantial higher price.

The growth rate of the non-governmental loan fell to 38.3 percent in November, and to 44.8 percent in October compared to similar months of 2007. Analysts forecast an annual growth pace of 15-20 percent for the end of 2009.

Yesterday’s decision will modify Regulation no. 11/2008, published at the end of August in Romania’s Official Gazette, and put into effect by banks as of October 2008, by which BNR harshened the conditions included in BNR Regulation no. 3/2007, regarding the limiting of the loan risk on loans for individuals.

Source: www.standard.ro

Central Bank approves mortgage credits relaxation

2009-01-22T14:25:00.001-08:00

The Romanian Central Bank (BNR) board decided on Thursday that banks may accept a higher debt/income rate for clients that guarantee their loans with "quality real estate properties", a press release of the institution informs. The reason, according to the release, is that a recent analysis revealed that clients with mortgage credits are less likely to fail refunding the credit, compared to other categories of debtors".

Radu Ghetea, president of the Romanian Banks Association (ARB), had declared on Wednesday that such a modification would bring back the appetite for credits, for both clients and banks.

The BNR release also indicates that different conditions for different guarantees is a rule that may also play a role in limiting the effects of the international economic crisis.

Still, the responsibility for the credit conditions belongs to the ones who offer credits. Analysts consider that the new rule is welcome, but not enough to bring the credit market back to growth. Raiffeisen Bank chief economist Ionut Dumitru declared for The Money Channel that the main cause for the credit slowdown lays in the problems with obtaining financing from mother-banks abroad.

"Even if BNR accepts a higher debt/income ratio, the banks would still be prudent, because of the international circumstances", said Dumitru.

Source: www.hotnews.ro

The economic crisis did not affect yet Romania's household constructions

2009-01-22T14:24:00.001-08:00

Despite the world real estate crisis, the Romanian market continued to have the most dynamic development within the EU in 2008, a National Prognosis Institute report shows.

Thus in the first semester a 33.3 % increase registered with a GDP contribution of 8.1%.

In the first 8 months of the year, the activity of the sector increased by 31.5% as compared to the similar period, in 2007. Eurostat, gathering up data from all 27 member states, showed that Romania registered the fastest growth pace in the EU despite the decrease of the sector in other EU countries.

An important indicator for the real estate dynamics is the number of authorizations released for the construction of residential houses:

* in the first eight months of the year, there were 41,290 authorizations, a 11.2% increase as compared to the similar year in 2007

* in August 2008 there were 6,057 authorizations released, with an increase of 3.7% as compared to July 2008

* of the total authorizations, 61.7% were for the rural area

Source: Despite the world real estate crisis, the Romanian market continued to have the most dynamic development within the EU in 2008, a National Prognosis Institute report shows. Thus in the first semester a 33.3 % increase registered with a GDP contribution of 8.1%.

In the first 8 months of the year, the activity of the sector increased by 31.5% as compared to the similar period, in 2007. Eurostat, gathering up data from all 27 member states, showed that Romania registered the fastest growth pace in the EU despite the decrease of the sector in other EU countries.

An important indicator for the real estate dynamics is the number of authorizations released for the construction of residential houses:

* in the first eight months of the year, there were 41,290 authorizations, a 11.2% increase as compared to the similar year in 2007

* in August 2008 there were 6,057 authorizations released, with an increase of 3.7% as compared to July 2008

* of the total authorizations, 61.7% were for the rural area

Source: www.hotnews.ro

Eka Investment Group cuts €50 mln from real estate budget

2009-01-22T14:22:00.000-08:00

Local Eka Investment Group company, controlled by businessman Emil Pop, lowered its real estate investment budget for 2009 by €50 million.

According to Pop, who also owns Only For You fashion store chain, the funds were to be used for two residential projects, which are to be suspended. “We will not focus on the residential segment until next year, because there is insufficient market absorption. If this situation persists, we could change the projects into hotels, because the locations are good,” he told Business Standard.

However, Pop did not completely rule out the Real estate field. This year, the businessman plans to start work on three office buildings, because demand is high on this segment for both purchase and rental. The projects will be financed with the company’s own funds and bank loans. Pop said obtaining a loan could be easier, as the land has already been acquired.

Last year, Eka Investment Group announced it owns several plots in Bucharest on which Pop plans to develop logistics and residential projects, in partnership with several Austrian investment funds.

The local real estate market has been seriously affected by the global crisis, with a deadlock especially on the residential segment, due to harsher lending conditions.

Source: www.standard.ro

The ailing real estate market affects Centrofarm’s expansion

2009-01-22T14:21:00.001-08:00

The Centrofarm chain included 59 drug stores by the end of 2008, five units less than the initial forecast, due to problems on the real estate market and the decision of real estate developers to postpone a series of projects. Even so, the network doubled in 2008, from 34 stores at the end of 2007, with national expansion. This expansion is expected to lead to an 80 percent annual increase in 2008 net sales.

The company adjusted its 2009 budget downwards, because of the latest evolution of the financial crisis, and will slow the pace of opening new stores this year. Dorin Catana, the firm’s General Manager, is expecting a growth rate of the business above the general growth pace of the pharmaceutical market. Analysts in the field estimate an 8-12 percent market growth rate, twice or three times lower than in previous years.

Centrofarm ended the year 2007 with RON 62 million (€18.7 mln) in net sales, almost double year-on-year, and posted RON 0.9 mln in losses (€0.27 mln). The company registered losses worth RON 5.5 mln (€1.5 mln) at the end of last year’s first three quarters, while its business increased 71 percent, to RON 72.9 mln (€19.8 mln).

The enterprise’s main shareholders are Generalcom, controlled by businessman Bonte Alain Louis, with a 74.06 percent share package, and Fondul Proprietatea, a fund established to compensate persons whose assets were confiscated by the communist regime.

There are more than 5,000 drug stores in Romania at present, most of which are independent, operating on a drug market valuated at €1.8 billion.

Source: www.standard.ro

Most small real estate brokers could go bankrupt

2009-01-22T14:20:00.001-08:00

Up to 80 percent of the 10,000 real estate agencies active before the financial crisis could go out of business in 2009, as they do not have the financial resources needed to survive, considering that real estate deals are virtually non-existent.

Coldwell Banker Affiliates of Romania is countering this phenomenon by launching a franchise system, which means on the one hand that it will expand countrywide, and on the other that it will act as a lifeline for small agencies that will have the advantage of operating under a known brand, in order to over-come the crisis.

“Of the 10,000 Real estate agencies active before the crisis, 80 percent are small, with one or two employees. These are most exposed to the crisis, and will suspend their activities. There will be no bankruptcies, rather just a freezing of their activity while they wait for better times,” said Ion Radu Zilisteanu, Manager of the Intermedias group and spokesman of the Romanian Association of Real Estate Agencies (ARAI). According to Zilisteanu, only some 8,000 agencies are still operational, and the number continues to drop. The volume of housing units for sale in November 2008 not only interrupted the upward trend in sales of the previous month, but lead to a sharp 42 percent decline for studio apartments, a 35 percent drop for one and two-bedroom apartments, and a 21 percent fall in offers of three-bedroom apartments, according to the monthly report of the anunturiparticulari.ro portal.

Coldwell Banker will introduce a franchise program as of next week for neighborhood agencies with problems. “We are not just trying to protect our brand. We are willing to help them with money in exchange for a percentage of company shares. We will give them access to all the properties in our portfolio. This is a measure to counter the crisis, because together we will be stronger,” said Valentin Ilie, Coldwell Banker’s Chief Executive Officer.

The grim situation is further aggravated by the salaries of sales agents. Sales and Project Managers in the real estate field were among the best-paid employees on the Romanian market a few months ago, with monthly salary packages in excess of €10,000. At present, not only is recruitment frozen in this sector, but also the fixed salaries of employees now rarely exceed €3,000. In spite of the fact that bonuses for agents have doubled and even tripled lately, very few are able to meet their targets. “Restructuring, limiting expenses, smart marketing, and targeting niche segments of the market are measures to be taken in this period,” said Liviu Ureche, General Manager of the mid-sized SATO Imobiliare company, and former President of ARAI.

One of the market segments which seems to be a winner in this time of crisis is property management, which is not accessible to small agencies, as there is no experienced personnel in this field of activity. On the other hand, Cristian Popescu Ialomita, ARAI’s Vice President, said that there will also be bankruptcies among companies which took out loans for land acquisitions on which they intended to build housing units.

Source: www.standard.ro

The real estate market will limit itself to completing ongoing projects in 2009

2009-01-22T14:18:00.000-08:00

The financial crisis has begun directly affecting the local residential market segment in the second quarter of 2008, when the sales volume dropped 50 percent.

In September, the price of old apartments registered a downward trend. Offers began to multiply, as owners were afraid that housing units would lose their value, which had increased unreasonably in the past years. Buyers remained on hold, seeing lower prices by the month, and waiting for these to hit bottom.

The Romanian Real estate market was almost totally blocked in the fourth quarter, when many significant projects were postponed or even canceled. By year-end, prices fell 5-10 percent for new homes, and by up to 30 percent for old homes.

Players on the real estate market expect 2009 to be as dark as 2008 at best, if the loan market recovers. The price trend remains down, despite bonuses offered by developers. Main transactions forecast for 2009 will be between investors who have liquidity and companies facing significant financial problems.

Source: www.standard.ro

Prices and demand will stabilize in spring

2009-01-22T14:17:00.000-08:00

If the authorities will know how to manage the crisis situation, the real estate market will stabilize in spring, in terms of both prices and demand, Iosif Pop, President of the Imofinance group, told Business Standard

Pop said that only Professional companies will remain on the market.

Imofinance, through its Imoinvest Real estate development division, has six projects in stand-by, waiting to be authorized, which will start in 2009, depending on the evolution of the market.

The group is also considering new property acquisitions in the coming year, mainly projects whose owners have liquidity-related problems. In 2008, Imoinvest finalized work on two real estate projects, located in Sibiu and Cluj. The company official is expecting investments worth some €5 million in 2009, similar to the 2008 level.

Source: www.standard.ro

The Complete Guide To: Transylvania

2009-01-22T14:15:00.000-08:00

Transylvania: a real place?

Some people assume Transylvania is an invention of Bram Stoker, ripened by bloodthirsty Hollywood directors. However the "land beyond the forest" – as the Latin name translates – is genuine enough. This region, three times the size of Wales, is located right in the heart of one of the EU's newest members. While the Romans called it Trans-Sylvania, the name is Ardeal in Romanian, Erdely in Hungarian and Siebenburgen in German. The latter translates as "seven fortress towns", and hints at the significance of Saxons shipped in during the 12th century from Flanders and the Moselle Valley to defend the sparsely populated region from repeated invasions.

Those seven towns (Bistrita, Brasov, Cluj-Napoca, Medias, Sebes, Sibiu and Sighisoara) are great survivors. They emerged relatively unscathed following the brutal years of Ceausescu's communist tyranny from 1965 to 1989 and have since been restored to their former imposing elegance. Any of the seven makes a good base for exploring Transylvania, though Sibiu, Brasov and Cluj-Napoca offer the chance to dine like nobility and sleep in regal surroundings for bargain prices.

Film fans might imagine that Transylvania is a dark, foreboding region filled with mountains, creepy castles on crags, pale-faced nobles with sharp teeth, and a menacing menagerie of wolves, bears and flapping bats. The real Transylvania is more of a daylight fantasy: flower-filled meadows, lost-in-time villages, sun-drenched plains dotted with Saxon churches and castle ruins, and family-friendly ski slopes. This complex and exciting region makes a superb holiday destination.

So no vampires?

Transylvania still pushes the Dracula link, as the tourism bosses seek to get their teeth into the European market. Bran Castle, close to the city of Brasov, is always advertised as "Dracula's Castle", though Vlad the Impaler, the man behind the myth, stayed here only for a few nights. Bran Castle museum (00 40 268 238333; brancastlemuseum.com) opens 9am-4pm daily except Monday in winter, and 9am-6pm daily (Mondays from noon) in summer; admission 12 lei (£3). The castle is ringed with stalls offering Dracula mugs, T-shirts and tea cloths.

There are plenty of other creepy castles where you might imagine the old count flapping his cape and laughing in sinister fashion. The Saxon fortress town of Sighisoara is an essential stop on any tour of Transylvania, Dracula-hunting or otherwise. Sighisoara has a Dracula café, Casa Dracula (00 40 265 771596; Str Cositorarilor 5) within the citadel walls. This has a much-photographed plaque referring to the father of Vlad the Impaler, which reads enticingly "Vlad Dracul". Endless shops proffer vampire tat. For a full-blooded experience, stay at the Dracula Country Club (00 40 265 772211; dracul.ro) located just out of town on the road to Medias. A double will cost you 130 lei (£32), including breakfast.

Another entertaining hotel, the Dracula Castle (00 40 264 316850; huntercastle.ro), is found in the fragrantly named town of Turda. It has bathrooms created from stone grottoes and an over-the-top medieval banqueting hall with gory murals, skeletons and skulls. Doubles cost 204 lei (£51), including breakfast. The castle makes an ideal base for visiting the beautiful Turda gorge and the excellent salt mine (00 40 264 311690) open 9am-3.30pm daily; admission 8 lei (£2).

Favourite fortresses?

Transylvania's beautiful, unspoilt landscape is dotted with imposing medieval castles, elegant palaces, Saxon fortress-churches and crumbling ruins. Visit the magnificent Corvin Castle at Hunedoara (00 40 254 711423) to see an icon of Transylvania. Patrick Leigh Fermor, who travelled through the region on his long walk from France to Turkey, called the castle "fantastic and theatrical". It is next to a communist-era steel factory, but transcends the dour location. It opens 9am-3pm (until 6pm in summer) daily except Monday, admission 6 lei (£1.50).

The chunky Fagaras fortress recalls the 17th-century battles of Transylvanian prince Gabor Bethlen, though in the 1950s the Communists turned it into a prison for dissidents. The restored castle (00 40 268 211862) is now used as a museum and library, opening 8am-4pm daily except Monday from October to April, to 6pm in summer.

In the Prahova Valley, renowed for both wine and skiing (though not at the same time), the sumptuous Peles and Pelisor Palaces were homes to the English-born Queen Marie (1865-1938), who preferred their elegant rooms to the draughty Bran Castle.

Peles Palace (00 40 244 310918; peles.ro) has 170 rooms. It was the first castle in Europe to feature electric lighting, an electric lift and central heating. Peles opens 9am-5pm daily except Monday (Tuesday from 11am), admission 9 lei (£2.25).

And outdoors?

Nature lovers will feel they have stepped into an unspoilt medieval landscape of rolling hills, lush meadows, oak forests and fence-free fields dotted with haystacks. Traditional, wildlife-friendly agriculture makes Transylvania one of the best places for fauna in Europe.

The region has four national parks, two biosphere reserves and three of Romania's five natural parks. Retezat National Park (retezat.ro) protects more than 300 species of flora and 50 species of mammal including brown bear, wolves, lynx, foxes, deer and chamois. The rare monk eagle has been spotted.

Dan Marin, an award-winning guide, leads tours around the gorgeous Piatra Craiulai National Park. "There is a very healthy population of red and roe deer and wild boar," he says. "The variety of habitats – flood plains, river margins, hay meadows, forest hills and high mountains – is home to an impressive number of butterflies, birds, mammals, reptiles and amphibians." Dan and his wife, Luminita, created a lovely guesthouse, the Transylvanian Wolf House (00 40 744 319708; transylvanianwolf.ro), in the village of Zarnesti. A double room costs €45 per person per night with all meals included, €25 for B&B accommodation. The day walks cost €70 per group, with transport paid separately at a rate of €0.30 per kilometre.

Dan takes visitors bear-tracking, birdwatching and on visits to the local Roma community, while Luminita prepares Romanian and Roma dishes. Some two million Roma (the official name for Gypsies) live in Romania, though the similarity in the names is coincidental. Many Roma communities are based in Transylvania on the outskirts of larger towns.

Transylvania is watered by many rivers, and large lakes provide the venues for sports, fishing and relaxing holidays. The spooky St Anna Lake is the only intact volcanic lake in Europe; nearby are rare peat bogs and sulphur caves. In summer, a tent city grows at the waterside as locals come to swim, go boating and have barbecues on old-fashioned family breaks.

Wintry temptations?

Mountains surround Transylvania. The borders of the region are defined by the swooping crescent-shaped loop of the Carpathians enclosing all but a small stretch in the northwest. Transylvanians love winter sports, and with the arrival of the first snowfall they head for Poiana Brasov, the best-equipped resort in Romania. The slopes suit beginners and intermediates and there are excellent nursery slopes.

Iglu Ski (020-8542 6658; igluski.com) offers seven-night, all-inclusive packages departing London or Manchester from £465. The gigantic Hotel Piatra Mare (00 40 268 262064; piatramare.ro) has every luxury under the sun, while the Vila Zorile (00 40 268 262286; vila-zorile.ro) provided a comfortable base for Nicole Kidman and Jude Law when they were filming Cold Mountain nearby.

South of Brasov, en route to Bucharest, the Prahova Valley holds a clutch of ski resorts. Sinaia, the "Pearl of the Carpathians", boasts a collection of cable cars that sway up to the towering peaks at 2,000m. Busteni is a health resort and gateway to the dramatic Bucegi (bucegipark.ro) mountains and Natural Park, and is filled with houses that wouldn't look out of place in The Addams Family. Meanwhile, Predeal (predeal.ro) is the highest town in Romania, at an elevation of 1,033m.

Some living history?

Head for Saxon villages such as Biertan and Viscri to see a way of life that hasn't changed in centuries. Many Saxons left for Germany in the 1980s under a "cash for countrymen" deal paid for by the Federal Republic. Some, though, such as the Fernolend family, remain in Viscri. Caroline Fernolend now works as director for the Mihai Eminescu Trust (mihaieminescutruest.org.uk) arranging accommodation for visitors in traditional houses in villages such as Viscri, Biertan, Crit and Malancrav. In Malancrav, remaining Saxons hold a "Kronenfest" every July with suitable bacchanalia.

Other places to stay?

How about an heir's house? Prince Charles liked Transylvania so much he bought a property in Viscri, and he is a frequent visitor. The house was sensitively restored by another noble, Count Tibor Kalnoky, and you can book HRH's property through the count's company (00 40 742 202586; transylvaniancastle.com).

At his family seat of Miclosoara, Count Tibor Kalnoky has created a wonderful holiday complex of rooms restored in the tradition of Szekely (Transylvanian Hungarians). Guests spend the day birdwatching or visiting caves, waterfalls, fortress churches and historic cities, then taste delicious Hungarian cuisine under an arbour in the garden. In winter, the 17th-century wine cellar is at guests' disposal by a roaring fire.

For yet more noble nights, aim for Zabola. Countess Mikes returned here after decades in exile. Her sons Gregor and Alexander work on rebuilding the estate and its many buildings. Gregor's wife, Zsolna, converted the interior of the Machine House into an elegant boutique hotel (00 40 267 375547; zabola.com) in traditional surroundings.

Brasov, Targu-Mures, Cluj-Napoca and Sibiu offer urban comforts and sophisticated hotels. But to get a taste of Transylvania it is better to stay in a village and watch the evening cow parade or the regular traffic of oxen-pulled carts, wandering wild horses and trailers piled high with hay.

At Rosia Montana, in Transylvania's gold-mining country, a Belgian woman named Françoise Heidebroek has restored a farmhouse, Ursita Inn (00 40 723 230790; ursita.ro), where visitors can bathe in mountain streams and mingle with the ethnic Moti shepherds in the village.

Transylvania survival kit

Getting there

The only direct flights from the UK to Transylvania are on Wizz Air (00 48 22 351 9499; wizzair.com), between Luton and Cluj-Napoca. Otherwise, the best route is to Bucharest's Otopeni airport from Heathrow on British Airways (0844 493 0787; ba.com) or Tarom (020-7224 3693; tarom.ro). Budapest is another possible gateway, with a fine train ride into the heart of Transylvania.

Getting around

Rail services are the cheapest in Europe, and reasonably efficient if not exactly express; see infofer.ro for times and fares. Buses and minibuses ("maxi-taxis") cover the region; schedules are patchy.

A hire car is a tempting option, though road surfaces and local driving skills are erratic. A home-grown Dacia Logan (sometimes advertised as a "Renault Logan") understands the potholed roads like a local horse. Cars4Rent (00 40 72 334 7192; cars4rent.ro) delivers to the airports and all over Transylvania.

Eating

Transylvanian cuisine is hearty peasant fare, ideal after a day's hike. Pork is king. Sarmale are cabbage or vine leaves stuffed with spiced meat; mici are grilled meatballs. The substantial national dish, mamaliga, is cornmeal mixed with tangy sheep's cheese. For vegetarians there is zacusca (a ratatouille spread on home-made bread) and salata de vinete, a fabulous aubergine paste.

Drinking

The beefy red wines from the Prahova Valley complement the hearty dishes. The best beer comes from Miercurea-Ciuc and is known in Hungarian as a Csiki sor (pronounced 'cheeky sure').

More information?

The Romanian Tourist Office in London (020-7224 3692; visitromania.com) is a good source of information for potential visitors, as is Lucy Mallows' Transylvania: the Bradt Guide (£14.99)

Sink your teeth into the real Dracula

The Irish author Bram Stoker never actually set foot in Transylvania, and he claimed that Dracula, published in 1897 was "born of a nightmare following a supper of dressed crab". However, the man he used for inspiration, Vlad III Tepes (pictured left), was a real 15th-century villain whose deeds were even more dastardly than those of the vampire count.

Vlad III Tepes was born in Sighisoara, the Transylvanian town, but spent much of his life in the region of Wallachia to the south, where he was a voivode (prince). Tepes helped to keep the Ottoman army at bay but he was ruthless with his own people. He earned the nickname Tepes ("Impaler") through his preferred method of dispatching his enemies. He liked to bind victims spread-eagled then hammer a stake through the poor soul's rectum as far as the shoulder.

The prince was killed in 1476 in battle against the Ottomans near Bucharest. Legend tells how his decapitated head was preserved in honey and taken to Constantinople as proof of death for the sultan. Vlad's headless body was reportedly buried at a monastery on Snagov Island, in the middle of a lake 36km north of Bucharest, although many doubt he lies there.

ATTILA'S DESCENDANTS

Separated from their mother country by vast swathes of deserted countryside, the 700,000 Hungarian-speaking Szekely people live mostly in Transylvania's eastern counties: Covasna, Harghita and Mures. They claim to be descended from Attila's Huns. In Stoker's Dracula, the Count is a Szekely and tells Jonathan Harker "Our ways are not your ways, and there shall be to you many strange things".

Szekely villages can often be identified by the beautiful carved gates guarding each yard and occasionally on the road leading into a village. The picturesque road between Odorheiu Secuiesc (Szekelyudvarhely in Hungarian) and Miercurea-Ciuc (Csikszereda) has some good examples. A slight detour to the pottery-crazy village of Corund will satisfy all ceramic cravings.

The Kalotaszeg region near Cluj-Napoca comprises 40 villages inhabited almost exclusively by Hungarians. Old people wear traditional costumes on Sundays and travel by horse and cart as life continues barely touched by the trappings of the 20th century.

The Hungarian composers Béla Bartók and Zoltá*Kodály drew inspiration from the rich tradition of folk melodies found here. In Sancraiu (Kalotaszentkiraly), visitors can stay in the guesthouse (00 40 264 257580; davincze.ro) belonging to local Istvan Vincze-Kecskes.

Many people nominate Rimetea (Torocko) as the most beautiful Hungarian village in all Romania. The collection of white houses set in rows nestles in the shadow of the mystical Szekely Stone, a looming 1,129m-high outcrop.

Source: www.independent.co.uk

Credit loosening, the right measure to unlock the residential industry ?

2009-01-22T14:14:00.000-08:00

Although the National Bank of Romania (BNR) decided last week to relax the credit standards, real estate advisors say this was a necessary measure, yet not sufficient to steady residential market. In this segment, things will continue to move slowly, while the consumer confidence will be harder to regain. “Relaxation of the mortgage loan rules will surely reinvigorate the residential market, but both buyers and lenders will focus more on the quality of products and reliability of the developers. The sales’ squeeze in October 2008 has dramatically dented the poorly planned and marketed projects”, Eduard Uzunov, chairman of Regatta told Wall-Street. He added that only large developers with marketable projects would be able to sustain a competitive advantage in the coming period. Three months ago, Uzunov said the lenders would need to adapt to market conditions so that persons who need a housing unit to be creditworthy, as the population medium wage is increasing and is directly influencing the demand for real estate products. Calin Bucur, consultant at Residential Department at Colliers International and the head of the team that set up BREI indice (Bucharest Real Estate Index), said BNR’s decision was an important step in the path to unlocking the residential market, yet not enough if we were to consider the gloomy forecasts for the next two-three months. “The confidence in the market of end-users must be restored, and they should use the utmost of the new credit rules, and the banks should be stabilized. However, things don’t happen over the night”, Calin Bucur added. On the other hand, representatives of Credit Team loan brokerage firm highlight the importance of eliminating the stress test, which was designed to determine a certain credit rating afferent to scoring used by lenders when they review the loan applications. The credit report also determines the indebtedness degree. “The removal of the stress test will definitely have a positive impact on buyers who wanted to buy dwellings and were drawbacked by this test. The fact that borrowing will become possible for high amount of debt for which the applicant to be qualified for, will be helpful also for those stand-by buyers whose credit reports were qualified only for low amounts,” said Anda Marian, Head of Residential Department at MediaCity real estate advisory firm. Once with the amendment of the new mortgage rules, she said, most of the end users who were unable to contract loans, or just waited for the market confusion to vanish, will resume procedures for house acquisition, especially given the price fallout and special offers existent in the market. They will focus on real estate projects near to completion deadline, such as finalized constructions or near to delivery. “However, the financial-economic context that caused these measures, remains, and this is not the best time to make medium to long term plans or investments. This is why the clients’ behavior in selection and acquisition process will remain cautious”, Anda Marian concluded. BNR board said on January 15 it would eliminate the stress test for mortgage loan applicants, but maintained the regulation on calculating the 20% margin of incomes declared previous year at the Revenue Office.

Haralamb Georgescu's midcentury Pasinetti house renovated

2009-01-22T14:13:00.000-08:00

Architectural gem headed for tear-down is respectfully upgraded.

In Los Angeles, where it seems every architecturally significant modernist house has been documented, studied, photographed and published several times over, the 1958 Pasinetti residence has proved to be that rare surprise: a little known midcentury gem that intrigues visitors not just because of the design, but also because of the man who built it -- not Neutra, not Schindler, not Ain, but Georgescu.

Architect Haralamb Georgescu (1908-77) designed dozens of buildings in Southern California, but he never gained the same level of fame as his midcentury contemporaries -- at least not here. Before he fled Communist rule in Romania and immigrated to the U.S. in 1947, Georgescu had a successful career in his native country; today many of his modernist buildings in Bucharest are landmarks, and the architect is considered one of Romania's most important. An exhibit last summer at the University of Architecture and Urbanism in Bucharest honored Georgescu and included a symposium on his work that included Wim de Wit, curator of architectural collections at the Getty Research Institute. An architecture museum under construction in Bucharest is to be co-named after Georgescu and Frank Lloyd Wright.

Georgescu's Pasinetti house in Beverly Hills was originally featured in the influential Arts & Architecture magazine 50 years ago, but the house fell into obscurity. It was put up for sale as a tear-down and marketed with plans for a large Tuscan house when real estate developer Tim Braseth came upon the property in 2007.

"When I first walked into the house, it struck me as something unique and very, very special. It took my breath away," says Braseth, who knew nothing of the home's provenance but was impressed by the effect Georgescu had achieved -- "the allocation of space, the distribution of light and the use of textures and materials."

The design of the house, simple and utilitarian, is governed by its geometry: a series of perfect cubes. The main space is a dramatic living room 20 feet wide, 20 feet long and 20 feet high. Another 20-foot cube is set behind the living room and divided horizontally into two floors, with the home's entry and an open loft work space upstairs and a dining area below. A third cube intersects with the second and provides space for the master bedroom and bathroom upstairs and kitchen and guest quarters downstairs. The carport and outdoor deck also are based on 20-foot cubes.

The result is a distilled organization of space that makes the house feel larger than its 1,872 square feet -- and remarkably harmonious.

A solid wall of mahogany bookcases on the western side ties the two downstairs cubes together to create an illusion: The built-ins appear larger than they are without consuming much floor space. A builder today might line the wall with picture windows to capture canyon views, but Georgescu called upon the solid wall to reinforce the home's geometry.

For light and panoramas, 20-foot-high glass walls open up the house to the south and east while maintaining privacy, and the spaces have an indoor-outdoor quality that doesn't overwhelm the design of the interior spaces.

The beneficiary of Georgescu's design was Italian writer Pier Maria Pasinetti (1913-2006), who taught Italian and comparative literature at UCLA and was a close friend of Georgescu. Murtha Baca, head of the vocabulary program at the Getty Research Institute, was one of Pasinetti's students and later became a friend, confidant and an executor of his estate. Baca recalls Pasinetti's "intensely social" nature and productivity, adding that he wrote his best-known book, the 1960 novel "Venetian Red," along with film scripts and other fiction while living in the house.

Pasinetti frequently entertained fellow intellectuals and friends, such as directors Franco Rossi and Michelangelo Antonioni, and the house became something of a party place. Neighbors called the host Passionetti because of all the women he attracted.

Through it all, the house was cared for over the years, and most of its original elements were kept intact. When Braseth came along, he wanted to preserve the defining Georgescu qualities but adapt the house to the sophisticated expectations of the marketplace so it would live on for another 50 years. The goal: Enhance the past rather than mitigate it.

"We tried to channel Georgescu's spirit to find out what renovations he would make now with the house," Braseth says. "What materials would he use?"

For some of the answers, Braseth got help from fashion designer Trina Turk, a member of the Los Angeles Conservancy board of directors, who happened to know the architect's son, sculptor Chris Georgesco (the change in spelling reflecting Georgescu's desire for his family to assimilate). Braseth met Chris Georgesco and asked about his father's design philosophy. The son's answer: Use as few doors and walls as possible, and open sightlines.

Work began accordingly. The house was brought down to the studs so it could be packed with insulation for the first time. The wood panel tongue-and-groove ceiling, while providing a rich decorative detail, did little to keep the house cool during the day or retain heat at night, so a reflective foam seal was put in place on the roof. Single-pane windows were replaced with double-pane thermal glass, and window frames were rebuilt to eliminate drafts.

The more visible changes are in the private areas of the house. Upstairs, the close proximity of the master bedroom and bathroom to the front door was an issue. Now, the front door opens by a new entry closet, beyond which lies the loft's home office area. Beyond that lie the master bedroom and bathroom. New glass in the upstairs shower window turns from transparent to an opaque blue with the flip of a switch -- views or privacy, on demand.

Downstairs, what had been a small galley kitchen was opened to allow a greater social flow to the dining room and living space. The Formica countertops were replaced with a smooth white quartz. To reduce the scale of the kitchen appliances, the refrigerator and freezer were placed in separate drawers with cabinet fronts that match Georgescu's cabinet design and proportions, and a new mahogany finish connects them to the bookcases in the main living area.

The fireplace had been partially covered in drywall, possibly as a cost-saving alternative to brick when the house was built. Braseth saw it as a missed opportunity to highlight the continuous structure on two floors. After a search through salvage yards and other sources, vintage bricks were found to match the size, pattern and groove depth of the existing bricks.

Baca, who lived in the house during the summer when Pasinetti was away in Italy, says the renovation captures the original spirit of the home.

"Pier would love it," she says, adding that it remains ideal for "a single, studious person who likes to have parties."

She considers the laundry room a welcome addition and recalls how for decades Pasinetti "never did his own laundry and had it sent out twice a week." The Murphy bed downstairs is in keeping with Pasinetti's view of overnight guests, who were not necessarily invited but were accommodated in the aftermath of festivities.

The most striking addition to the exterior is a garden sculpture, seen from a new sightline in the master bedroom. About 7 1/2 feet tall, the white metal geometric piece is the work of Chris Georgesco and represents his appreciation for Braseth's efforts to preserve his father's legacy.

Although the renovation of the house took more time than expected, Braseth and his partners are in no hurry to sell. They say the house already has potential buyers in Europe, but they want to use the project as proof that "developers do not need to replace a house in order to gain a maximum return," Braseth says.

The house will be open for architecture and design events -- a chance to resolve their separation anxiety before moving on to another project.

Source: www.latimes.com

Romanian mortgage restrictions eased

2009-01-22T14:12:00.000-08:00

Romania's central bank has moved to ease restrictions on mortgage lending after research showed it is less risky than other forms of lending.

National Bank of Romania (NBR) introduced mortgage restrictions last year in a bid to avoid the kind of borrowing-related problems seen in other countries, such as the US.

It was thought the risk management regulations relating to residential property loans would help to stabilise the country's economy but, against a backdrop of falling inflation, the body has now decided they are no longer necessary.

The central bank's board explained in a statement that it had analysed default figures and discovered that mortgages are less risky than unsecured consumer loans.

As a result, NBR has decided to differentiate between mortgage and unsecured lending, meaning that "lenders would have the possibility to calculate a higher indebtedness level for the borrowers that would have high-quality real estate assets as collateral for their credits".

Although the decision appears to be good news for overseas investors considering buying Romanian property, it is not yet clear whether the country's commercial banks will be able to raise the funds needed to increase mortgage lending.

The crisis drives properties to lose one third in value

2008-12-24T00:06:00.001-08:00

The value of real estate properties - malls, office buildings, houses and land – has declined by an average 30-35 percent since January, after a sound 15 percent annual increase since 2004, according to Colliers International consulting company Managing Partner, Bogdan Georgescu.

The depreciation is caused by the global financial crisis, which had sharply affected the local Real estate sector, making investors think twice before acquiring a property.

In present circumstances, the value of buildings and land plunged to their 2005 levels. The sharpest decline was registered on the retail segment, especially in cities outside Bucharest, where numerous malls were announced. However, developers realized that so many malls cannot be supported by the purchasing power.

However, specialists are expecting the drop in prices to end in 2009. “The value of real estate properties will not decline significantly next year. It will drop a further 10 percent, and then begin appreciating,” Georgescu said.

Source: www.standard.ro

Immoeast postpones or cancels projects in Romania worth €2.4 bln

2008-12-24T00:05:00.001-08:00

The Austrian Immoeast investment fund, one of the most active investors locally in the past two years, is postponing or cancelling 54 projects in Romania, worth €2.4 billion, according to a financial report by the fund for the first half of 2008. The fund’s financial year begins in May.

Romanian projects make up the largest share of postponed or cancelled projects in Immoeast’s portfolio internationally. The report for the 1 August - 31 October 2008 period shows that Immoeast’s Romanian portfolio includes 80 properties, with leasable surface exceeding 2 million square meters, and an estimated worth of slightly over €1 bln. As such, the number of projects dropped by from 134 reported in the May-July 2008 period to 80, not counting those that have been postponed or cancelled. By the end of July, the market value of the 13 projects was estimated at €3.44 bln.

Financial analysts are considering a RON 4/€1 exchange rate

2008-12-24T00:03:00.000-08:00

The leu yesterday reached the lowest value in the past four years, at a level of RON 3.9530/€1, but financial analysts are considering an exchange rate above RON 4/€1 by the end of December, in the absence of a massive intervention by the National Bank of Romania (BNR).

The bad feeling investors have in relation to the leu, and a rise in volumes traded on the interbank market, combined with a drop in foreign currency sent home by Romanians working abroad have led to the depreciation of the national currency.

“The context is negative for all currencies in the region, because we have to correct the current account deficit. The market is much more developed and the foreign currency Romanians working abroad are sending to the local market increased by a mere 2-5 percent compared to the double-digit growth registered in 2007,” said Lucian Anghel, Chief Analyst of Banca Comerciala Romana (BCR), the largest local lender in terms of assets.

A 20 percent depreciation of the national currency would result in a 0.05 percent direct loss in gross domestic product (GDP). Clients who took out foreign currency-denominated loans in August 2007 now have installment payments 25 percent higher, due to the depreciation of the leu and a rise in interest rates.

Source: www.standard.ro

Patriciu offered €50.8 mln for Fabian Romania shares

2008-12-24T00:02:00.000-08:00

Businessman Dinu Patriciu, Chief Executive Officer of the Rompetrol Group, made an offer worth €50.8 million to take over the shares of the Fabian Romania investment fund.
This price, which translates to €1/share, is almost double the value of the company’s shares listed on Alternative Investments Market, administered by the London Stock Exchange, according to the announcement made by the fund on the Stock Exchange.

The offer was brokered by the Black Sea Global Properties (BSGP) company, subsidiary of Rompetrol Holding. In October-November 2008 period, Rompetrol Holding acquired 25.2 percent of Fabian’s shares, through Finite Assets, and transferred this package to BSGP. For the remaining shares, Patriciu will pay a further €37.6 mln.
“Our cash offer is a guarantee for Fabian Romania’s shareholders in a period of economic turmoil and considering that the price of Real estate assets in Romania continues to drop,” said Patriciu. He added that emerging real estate markets will continue to attract investors with liquidities, in spite of the global financial crisis.

Source: www.standard.ro

Real estate market is frozen, investments decrease

2008-12-24T00:01:00.000-08:00

After the boom that went on throughout the past few years, the real estate market is currently frozen and there are signals that the investments appetite from large operators decreased, the latest circumstance poll conducted by the Romanian Central Bank (BNR) indicates.

The insufficient demand and the financial blockage are the main causes for the diminishing of the activity in industry and constructions, managers estimating an accelerated decrease of their number of employees in both fields.

The BNR study reveals that expectations for the industrial and construction businesses in December have worsened. In industry, the most affected area is the raw matters processing.

Managers responding the poll indicated as main volume affecting factor the low level of demand (37%), the financial blockage (11%), the high interest rate in banking (9%) and difficulties in acquiring the raw matters (3%).

Source: www.hotnews.ro

Economic growth in Romania outstrips rest of Europe

2008-12-08T22:37:00.001-08:00

The Romanian economy displayed the fastest growth rate of all European Union countries during the third quarter of 2008.

Official figures published this week reveal that Romania's economy expanded by 9.1% year-on-year in the third quarter, meaning its gross domestic product has increased by 8.9% during the first nine months of the year.

"This performance definitely looks good considering the global crisis," commented Adrian Ciocoi of the Bucharest-based Riedel Research Group.

According to the Guardian, Romania's economy has doubled in size over the last four years due to an influx of cash from overseas, with many companies modernising the operations and the real estate market experiencing a boom.

The Romanian statistical office is due to publish a detailed breakdown of the latest figures on December 15th.

Last week, Reuters reported that infrastructure developments are currently high on the agenda in Romania.

US ambassador Nicholas Taubman said that improvements to road and rail networks are now the "number one priority" for the country.

Source: www.ready2invest.co.uk

Romania will Begin the Economic Recovery in 2010

2008-12-08T22:36:00.000-08:00

The estimate of the bank shows a shrinking of the private consumption in Romania, from 9.5 per cent in 2008 to 3.7 per cent next year and 4 per cent in 2010.
The economic growth of Romania will slow down to 3.7 per cent in 2009, vs. 8.5 per cent this year, on the background of a strong shrinking of the internal demand, the chief economist of Alpha Bank Group, Michael Massourakis, said yesterday at a seminar on banking and financial problems. But he has also good news. According to Massourakis, the growth will return to a higher level in 2010, when the GDP will advance by 4.7 per cent. “We see a slowing down of the economic growth in the whole region (Southeast Europe – editor’s note), during the whole next year. The dynamics of the economy of the region will fall to 3.5 per cent in 2009, from 6-7 per cent this year. In 2010 we shall see a recovery, but not up to the potential of growth or to the levels to which we got used in the region. The growth will be below the potential, which we estimate at 6 per cent for Romania and Bulgaria, and 7 per cent for Serbia,” said the chief economist of Alpha Bank, quoted by Mediafax. Alpha Bank’s estimate points to a contraction of the private consumption in Romania, from 9.5 per cent in 2008 to 3.7 per cent in 2009 and 4 per cent in 2010. The growth of the credits will also slow down to 20 per cent in real terms already since the end of this year and will decrease more, to 15 per cent in 2009. The past year, the loans to firms and population advanced by 51 per cent. “We expect in the last quarter a dramatic decline of the growth of credits. The mortgage loans which have been our pride until recently, will be affected even more than the average of the system,” Massourakis added. “On another hand, you will not have the current account deficit and the inflation of today. Everything will slow down,” he added.

The credits are blocked psychologically in Romania, and have ceased not because of the Norm 19 of the National Bank, but because of the fact that the commercial banks await new norms likely to be adopted by BNR, Adrian Vasilescu, advisor to the governor of the central bank, declared at the same seminar. According to him, the current account deficit could fall from 13 per cent to 10 per cent in 2009. “I hope to stop at 10 per cent, because the deficit expressed the ratio between our consumption and our production,” Vasilescu said, quoted by Agerpres. The same added that currently the American Government tries to avoid a social bomb, and the measures meant to support the commercial banks are intended to avoid such a situation. Vasilescu explained the causes of the appearance of the world financial crisis, generated by the crisis of the mortgage loans and of the subprime credits from the US and considers that the main cause is the “greed” of the people, and also the lack of prudence of the banks. This did not exclude a disastrous effect at social level in the United States, in the case in which, in order to recover the loans, the banks would shift to the forced execution of the debtors and said that these cannot turn into real estate agencies, in the moment when a client who took a mortgage credit comes and remits the key of the house, informing the bank that he cannot pay the installments. The same also presented the types of scoring applied by the American banks, in four stages. The top clients with big and safe revenues, the clients with sure and permanent revenues, the clients whose revenues may be assured, but they are not sure and permanent, and the poor for whom the doors of the banks are closed.

The outstanding loans in Romania have reached RON 2.15 bn (EUR 577 mln) at the end of September, being 117 per cent bigger than in the same month of 2007, in the conditions in which almost three quarters are overdue in the case of the loans in RON. The firms and the population of Bucharest have, according to the data of the National Bank of Romania, the biggest overdue loans in the amount of RON 630 mln. The Bucharesters and the firms from Bucharest are on the first place in regard to the volume of the credits which reached at the end of September RON 67.9 bn (EUR 18.2 bn), of which over two thirds are loans in foreign currency.

Source: www.seeurope.net

DC plans coming of age in emerging markets

2008-12-08T22:35:00.000-08:00

Report says assets in plans in Asia, Central and Eastern Europe could jump fivefold by 2015

Emerging pension markets in Asia, and Central and Eastern Europe are blossoming, growing at a pace that could see defined contribution assets under management increase nearly fivefold by 2015, according to a new report published by Allianz Global Investors AG.

“The trend toward capital-funded pension systems is a very strong one,” said Brigitte Miksa, head of international pensions at Munich-based AGI, in a telephone interview. "We hope that despite current market conditions, the governments (of these emerging economies) will have the courage to continue to develop their pension systems."

In Asia, DC pension assets are primed to increase to €1.05 trillion ($1.36 trillion) by 2015 from €215 billion at the year-end 2006, the latest date for which data were available, while similar assets in the CEE region could rise to €245 billion from about €51 billion in 2006 over that same time period. The annual growth rate for DC assets is projected to be about 17% for emerging Asian markets and 19% for the CEE region, according to the report.

Alexander Boersch, senior pensions analyst at AGI and author of the report, added that the growth estimates linked to pension assets among emerging market economies are based on contributions as well as asset performance. “Even in the current market conditions, there is still a steady flow of contributions (into the pension systems). We’re confident in the level and magnitude of the estimations” Mr. Boersch said in the report.

Inflows have primarily been into defined contribution platforms introduced by government authorities to cope with “significant demographic changes, resulting in an unprecedented speed of aging,” according to “Pension Trends in Emerging Markets – The Rise of DC Plans and Its Consequences.”

For example, China has one of the fastest growing DC industries among emerging market economies. The median age is estimated to climb to 48 years in 2050 from 32.5 years in 2005, according to data from the Washington-based International Monetary Fund.

In response, Chinese government officials introduced a voluntary individual pension savings plan in the late 1990s. Aggregate assets in the individual accounts totaled €53.4 billion at the end of 2006, and are expected to swell annually by between 23.4% and 25.6% until 2015, according to data from AGI.

A separate occupational pension system, dubbed the Enterprise Annuity system, was introduced in 2004. Assets under management under this system totaled €8.9 billion at the end of 2006 and are estimated to rise annually by about 21.2% until 2015.

“There’s no general pattern that these (pension) markets follow,” Ms. Miksa said. The pension systems of various nations “emerge from very different backgrounds, which make it difficult to identify common patterns. It’s astonishing how very different these systems are.”
10-year-old Hungary model copied but details differ

In Hungary, where more than one in five people will be older than 65 by 2025, government officials introduced a mandatory DC-based pension savings platform in 1998 in addition to an existing state pay-as-you-go system. The initiative became a model for neighboring CEE countries, including Poland, Slovakia and Romania.

Even while the pension structure is similar among those nations, significant differences are apparent in the details, Ms. Miksa said. For example, in Hungary, a broad range of investment rules are imposed, including a including a 30% ceiling on foreign investments, a 10% maximum exposure to real estate investment funds and 5% total limit for hedge funds, private equity and direct real estate strategies, according to separate data provided by AGI.

Nearby in Poland, a completely different set of maximum limits are in order. For example, no more than 40% of the investment portfolio can be exposed to the stock market. The maximum for mortgage bonds, municipal and corporate bonds is 40% for each asset category.

“Over the years, pension systems have generally developed from a very restrictive (investment platform) to a more risk-oriented approach allowing for more individual choices that, for example, includes lifecycle (strategies),” Ms. Miksa explained. She added that as pension markets evolve, investment strategies have tended to focus more on certain factors including “individual retirement horizons and different risk conditions.”
Regulators need to strike a balance for DC plans to succeed

Four main issues need to be addressed “to ensure the sustainable success of DC plans and adequate living standards after retirement,” according the report. They include improvement in financial education, better-designed investment portfolios, increased transparency and more appropriate levels of regulation.

“What’s needed are government regulations that strike a balance between risk management and generating returns to meet future needs of pensioners,” Ms. Miksa said.

She pointed out, however, that one potential threat to emerging market pension systems is the fallout of the current economic crisis. For example, as individual investors witness sharp falls in their investment portfolios, they may shy away from further investments. Government officials also may be tempted to impose further restrictions on investments in response to the recent volatility — a move that could hurt returns in the long term.

“The financial crisis has had an impact on the growth of pension assets in emerging markets,” Ms. Miksa added. “However, from a general structural point of view, this shift into capital-funded pension systems will continue.”

In addition to China, Hungary, Poland, Slovakia and Romania, other emerging markets analyzed in the report were Hong Kong, India, Singapore, South Korea, Taiwan, Thailand, Bulgaria, Croatia, Czech Republic, Estonia, Latvia, Lithuania and Slovenia. The structure of DC pension systems vary widely among these markets, ranging from platforms that are similar to the U.S. 401(k) plans to organizational structures that combine pension assets with the broader social security fund.

Source: www.pionline.com

Land of Opportunity for Backup Power Manufacturers

2008-12-08T22:34:00.000-08:00

Romania and Bulgaria are currently the fastest growing countries within the Central and Eastern European (CEE) market for uninterruptible power supplies (UPS), as stated in a recent Frost & Sullivan study. The process of joining the European Union in 2007 gave Romania the euro 3078 million in aid it needed to develop its industry, transportation, rural and environmental infrastructure and to boost its agricultural sector.

Backup power manufacturers have now a huge opportunity in Romania, due to recent developments in the power generation, telecommunication and automotive sectors. With domestic consumption increasing, and the construction, automotive, industrial, mining and retail sectors performing well, Romanian demand for backup power equipment such as uninterruptible power supplies (UPS), gensets, and DC power systems is growing.
"The collapse of Communism in 1990 resulted in the severe downturn of the Romanian economy. However, the past few years have seen the economy improving and production and consumption levels rising," notes Frost & Sullivan analyst Malavika Tohani. "Inclusion in the EU has accelerated improvements in infrastructure and efforts are underway to weed out corruption and red-tapism. The global economic slowdown, affecting the US and Western European economies significantly, is expected to have a lesser impact in Romania. Short-term growth (next 1-2 years) might slow down due to fall in foreign direct investment (FDI), industrial output, investment in real estate, available financing, purchasing power of consumers, etc. However, the medium to long term scenario looks bright for this emerging economy, thereby providing immense opportunities for backup power manufacturers."
A quickly expanding sector in Romania is the automotive industry and companies like Renault, Mercedes-Benz, Audi and Ford are starting to manufacture cars there, creating more jobs. Mercedes-Benz and Audi are viewing Romania as a strategic location to set up production facilities designed to benefit close markets like Russia, China and India. These factories are highly automated and require power continually, making investment in backup power equipment essential.
The telecommunications market is also soaring due to its large target market. Compared to Western European markets, Romania boasts of a fairly low installed base, and therefore has room to grow. Since implementing the EU Data Retention Directive in 2006, information like the identity of the caller, time and means of communication must be stored for a minimum of 6 months. This has added the need for datacenters, which require power and power backup around the clock.
The power generation sector is growing, as Romania draws foreign investors. Inclusion in the EU as well as privatisation of the state monopoly RENEL has attracted many foreign companies such as E.ON, CEZ and Enel. Although Romania generates energy from a variety of different fuel sources, nuclear energy is an important source of power generation. Czech power company CEZ is constructing two additional reactors at the nuclear power plant located in Cernavoda, scheduled to finish construction by 2015. Nuclear power plants, where safe shut downs are essential, depend on backup power systems.
Given the positive growth of the power generation sector along with opportunities emerging in both the telecommunication and automotive sectors, backup power manufacturers have much to look forward to in Romania.
If you are interested in knowing more about the Uninterruptible Power Supplies (UPS) Market in Europe, please send Chiara Carella - Head of Corporate Communications an email at chiara.carella@frost.com with your full contact details. An overview will be sent to you by e-mail.
Frost & Sullivan, the Growth Partnership Company, partners with clients to accelerate their growth. The company's TEAM Research, Growth Consulting and Growth Team Membership(TM) empower clients to create a growth-focused culture that generates, evaluates and implements effective growth strategies. Frost & Sullivan employs over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 30 offices on six continents.

Source: www.marketwatch.com

kika aims to become furniture market leader in Romania

2008-12-08T22:33:00.000-08:00

Austrian kika furniture retailer opened its first store on the Romanian market, following a €31 million investment, the largest on the local furniture market. kika’s entrance into Romania comes one year and a half after another major international retailer, IKEA, opened a store in Bucharest, in which it invested €25 million.

The largest local retailer, Mobexpert, invested some €8 million to expand its network with three hyperstores.

kika officials hope that their significant investment in Romania will help them secure market leadership as soon as possible. They target a 10-15 unit network in the coming 5-10 years. Given that the investment for one kika store amounts to €8-10 million, the company’s investments on the local market could amount to €110-180 million on the long run.

kika began expansion to Eastern Europe in 2000, first in Hungary, where it currently has seven stores. In 2005, it moved into the Czech Republic (four stores currently) and Slovakia (two stores). It also has two units in Croatia, where it entered in 2007.

The company’s General Manager, Paul Koch, said three stores could cover the demand in Bucharest. kika is introducing several services already operational on the Austrian market, including free transportation for distances greater than 40 kilometers for total purchases exceeding RON 1,000 (€260).

Company officials decline to provide details regarding turnover for the first year of operations. Stores abroad, similar to the one in Bucharest, generate average annual turnover worth €30 million.

Praktiker forges ahead with expansion as it awaits crisis effects

2008-12-08T22:31:00.002-08:00

Praktiker, local do-it-yourself retail market leader, is maintaining initial plans to expand its network by 4-5 stores in 2009, in spite of the fact that the effects of the global economic evolution will also affect this field of activity, Guenter Vosskaemper, General Manager of Praktiker Romania, told Business Standard. The company budgeted €40-50 million worth of investments in 2009 and is offering 400 jobs.
Expanding our store network countrywide remains our number one priority. The downward global trend is adjusting the perspectives that all large companies were considering early this year. We are certainly also taking this into account, but it does not affect our current expansion plan,” said Vosskaemper.

Praktiker has 24 stores in Romania and posted a rise in sales of more than 60 percent in 2007, up to €251.4 mln. The company’s main competitor is Bricostore, with eight stores which generated €180 mln in business in 2007. Other players on this market include bauMax, Hornbach, OBI, Mr. Bricolage, and Tekzen. The value of the do-it-yourself retail market is estimated by its players at €2 billion.

Source: www.standard.ro

Rental fees for luxury homes up 15 percent

2008-12-08T22:31:00.001-08:00

The average rental fees on the luxury residential segment, especially in northern Bucharest, rose 15 percent in the past six months, according to the residential department of DTZ Echinox real estate consulting company. “This is a directly related to the fact that, on the one hand clients for the medium and luxury segment are not being granted mortgages due to new regulations enforced by BNR [National Bank of Romania] and, on the other, because those who have liquidities are reluctant to block these in such acquisitions,” according to DTZ Echinox Consultant Oana Lungu.
BNR enforced new lending rules for individuals, in an attempt to curb consumption and lower risks for both lenders and clients. This led to a significant slowdown of sales, driving those who were planning to sell their properties to change their plans. Consequently, they would rather rent their properties, instead of lowering sale prices to make their products become accessible. “Owners saw the opportunity (...) and raised rental prices,” Lungu added. The most sought after areas on the luxury segment are Primaverii, Dorobanti, Aviatorilor, Kiseleff, Herastrau, Floreasca, Cotroceni, Baneasa, and Otopeni. Northern Bucharest remains the hottest area for new residential projects on the medium and luxury segments. Clients prefer to rent apartments here because they are close to shopping centers and office buildings in which major companies are operating. On the other hand, rental prices for old apartments declined due to the increasing supply of new apartments in semi-central areas of Bucharest, such as Colentina, Drumul Taberei, Grozavesti, Titan, Vitan, and Vacaresti. Clients would rather rent newly-built apartments because these are roomier and provide better conditions.

Source: www.standard.ro

Only half of the 1,500 homes planned for Q4 will be delivered

2008-12-08T22:30:00.001-08:00

Only half of the total 1,500 apartments planned to be delivered by year-end will be finalized, because of the global financial crisis, which has forced most developers to put their construction projects on hold due to a lack of financing, said Adrian Nicolescu, Head of Valuation&Advisory of the CB Richard Ellis-Eurisko real estate advisory company.
“The year 2008 was supposed to register the largest number of residential project launches and lead to the start for true competition,” Nicolescu added. He indicated that Real estate developers are due to finalize some 7,000 housing units in 2009, as part of already announced projects.

Last year, 3.4 housing units per 1,000 inhabitants were finalized in Bucharest, while at the national level, that level stood at 2.1 units per 1,000 inhabitants.

The solution proposed by Nicolaescu is for developers to sell housing units which have not been finalized or have smaller surfaces, even at the risk of lowering comfort standards. Thus, projects destined for middle and high classes could be reorganized and sold to a different buyer target.

“Developers must consider the economic situation, the difficult access to financing, the high price for which land was acquired, and the powerful competition on the market. They have to settle for 20-25 percent profit margins, instead of 80-100 percent, as they were used to,” said Ioana Momiceanu, Managing Director of the Atisreal consultancy company.

Housing prices down 14% due to government measure

2008-12-08T22:29:00.002-08:00

Romania’s government approved two ordinances on Tuesday and Wednesday which will directly affect real estate market consumers. The first ordinance lowers value added tax (VAT) to five percent for social housing and homes with a constructed area of up to 120 square meters and worth up to €100,000.

The second law approves the draft proposed by the National Consumer Protection Authority (ANPC), which states that Real estate agents must provide consumers, prior to the signing of the contract, with information related to the building which they are about to acquire. Main elements about which agency clients must be informed are: market prices, the building’s legal status, the estimated level of costs to be paid by the consumer, and of commissions charged by the real estate agency, as well as sources of noise and pollution. Prime Minister Calin Popescu Tariceanu said that persons who will benefit from this drop in VAT will be ones who did not previously own a home, and those who live in neighborhoods such as Pantelimon, Drumul Taberii, Colentina, Berceni who want to move from their crowded one-bedroom apartment to a bigger home. “The construction cost of a housing unit is €1,000 and the developer pays VAT worth €190. A housing unit’s sale price is €1,500, for which the developer should receive €190 to deduct taxes paid on construction, but he will now recover only €75 from the buyer, with the remainder deducted by the state,” said Gabriel Biris, Managing Partner of the Biris Goran law firm. He added that a five percent drop in VAT is actually a 14 percent drop in housing unit prices. Players on the real estate market reacted positively to the new law. However, developers remained skeptical regarding the effect this will have on the construction industry.

Source: www.standard.ro

Romania, placed first in a European listing of construction growth

2008-12-08T22:29:00.001-08:00

Romania's constructions sector grew by 27% in September as compared to the similar month in 2007 and registered the fastest pace of growth in the European Union since the sector dropped by 3.1% in EU countries and by 3.8% in Eurozone countries, the European Eurostat office shows, quoted by Romanian news agency NewsIn. The constructions sector reported growth in eight states within the Union in September and dropped in another five as compared to the same month in 2007.

In September, Slovenia was placed second regarding the annual growth of construction works with 19.4% followed by Bulgaria with 17.7%. However, Spain's construction sector continued to fall, as did Sweden's.

Source: www.hotnews.ro

Local constructions sector still tops growth in EU in spite of crisis

2008-12-08T22:28:00.001-08:00

Romania’s constructions sector registered the highest annual growth in the European Union, according to EU’s statistics office, Eurostat. The country has been EU leader for several months in this field.

In spite of the global crisis, which is impacting on Romania, the constructions sector registered a 27 percent annual growth.

Slovenia ranks second, with a 19.4 percent growth, followed by Bulgaria (17.7 percent) and Slovakia (17.3 percent).

On the other hand, Spain registered the most severe decline, 24.1 percent year-on-year. In Sweden, the constructions market shrunk 19.8 percent.

Of the total 27 European Union members, Eurostat only had data for 13 countries. Eight of them registered growth in constructions, while the sector declined in the remainder five.

Overall, the constructions sector registered a 3.8 percent decline in the EU, the same as in the euro-zone.

However, Romania ranks fifth month-on-month in the EU in terms of construction growth, with a 2.7 percent advance, equal to that of the Netherlands. Slovakia tops this ranking, with a 7.2 percent growth compared to August 2008, followed by Portugal, with 6.8 percent.

Severe monthly decline was registered in Britain (8.5 percent) and Spain (7.8 percent).

Mortgages could revive in 2009

2008-12-08T22:27:00.000-08:00

Mortgages, blocked after a five-year boom by the application of new regulations issued by Romania’s National Bank (BNR) to curb lending and lower risks for both lenders and clients, could be re launched as of 2009, according to bankers interviewed by Business Standard, who count on better conditions for mortgages.
The new regulations increases financing costs for clients.
“We will meet with BNR officials next week to present them with our point of view,” said the President of the Romanian Banking Association (ARB), Radu Gratian Ghetea.

BNR’s Governor aide, Adrian Vasilescu, said that BNR has notified lenders that the impact of the new regulation will be analyzed after three months.

The housing loan market, estimated at €5 billion in September, was blocked in November, as clients of banks are on stand-by following a 15-20 percent drop in prices of old apartments and houses. One third of these are no longer eligible for the new stricter lending conditions. Furthermore, many of those who want to buy an apartment and have access to financing are on stand-by and wait for prices to further decline.

Source: www.standard.ro

From real estate to energy

2008-12-08T22:26:00.000-08:00

The financial crisis has led businessman Dragos Bitleanu, a founder of Capital Partners independent investment bank, to shift his funds from the real estate sector to focus on energy, which he considers safer. Nauru Holdings, a company founded by local and foreign investors, and represented by Bitleanu, acquired 73 percent of Romenergo energy company, for some €20 million.

“I plan to liquidate my Real estate business and to focus on Romenergo by investing in electricity distribution, supply and production,” he told Business Standard. “We are reconsidering our business structure because these are crisis times,” Bitleanu said. He added that Nauru Holdings bought stock from 44 Romenergo shareholders. “We made an offer and they accepted because they needed the money,” Bitleanu explained, saying that he is studying other opportunities in the energy production sector.

Romenergo includes several companies involved in electricity distribution, design and consulting services, port operations and parts for water plants, among others. Furthermore, it owns a three-star hotel in the Azuga mountain resort, and two restaurants in Bucharest. Depending on the company’s evolution, Nauru Holdings could increase its participation in Romenergo. One of the main shareholders of the company prior to this deal, Alexandru Marin Parvescu, said the company will maintain its development plans. Parvescu is Chairman of the Board of Directors and General Manager of Romenergo.

Source: www.standard.ro

Developers begin returning down payments

2008-12-08T22:25:00.000-08:00

Investment vehicle RomReal, the local subsidiary of Westhouse Group, a company with Norwegian and British capital, suspended construction work on two of its three Real estate projects planned in the southeastern city of Constanta, due to a lack of financing. The company announced it could return down payments made by 25 clients for apartments in one of the projects, worth a total €625,000 (excluding VAT). Amid the financial crisis, several developers, including major ones such as TriGranit, RED Management Capital, River Invest and Fabian, have decided to freeze projects because they have been unable to secure financing. RomReal announced two weeks ago that it has no funds to build its largest project, Central Apartments.
According to Westhouse Group’s Sales Manager, Andreea Panache, clients who pre-contracted apartments in the Central project may opt instead for Corallia Holiday Apartments or have their down payment returned. So far, RomReal has invested €3 million in the most complex of all three projects, Oasis Residences, with 15 percent of the apartments pre-contracted, a further €1.2 mln in the Central Apartments project, where 25 percent of the apartments were pre-contracted, and €400,000 in the Corallia Holiday Apartments, where 60 percent of the apartments are already sold. This is the first company to return money paid by its clients. However, other developers are likely to do the same shortly. “It is obvious that there are companies that are unable to carry on their projects. It is likely that other such cases will appear, because these developers relied only on lending and funds from apartment sales,” according to real estate consultancy company CB Richard Ellis-Eurisko’s Residential Department Manager, Ionut Bordei, for Business Standard.

Source: www.standard.ro

Sales dropped 5% in September

2008-11-23T23:28:00.001-08:00

In the context of global financial crisis, the furniture production in Romania will be impacted by several factors in 2009, such as reduction of exports, Romanians’ restricted access to consumer credits, weakening of the purchase power, slowdown or stagnation of the real estate sector, said Stefan Nicolae, chairman of Staer board.

“Small players will certainly be affected and a part of them will collapse or will be forced to merge. The ‘survivors” will be those who will find solutions to optimize costs, and to manage resources. It is all up to their business strategies and a long-term vision”, he said.

The reduction of sales in installment system together with the flagging consumer confidence is the first sign of the crisis in case of Staer. “In September, due to the crisis, Staer’s sales declined 5% from last year,” said Staer’s representative.

Staer’s turnover for 2008 will also be affected by the global financial crisis. “Given the delay of the development plans (opening new showrooms – where we depend very much to real estate developers) and the current economic crisis, it is possible that the initial forecasts for this year turnover will not be reached. The last two months of this year will be vital in acquiring our financial targets. In the past years, we would register a peak in sales, but now, in the context of a national and international crisis, it is possible to see a different evolution,” Stefan Niculae explained.

Source: www.wall-street.ro

Ackermans & van Haaren NV: Interim report

2008-11-23T23:27:00.000-08:00

CONTRACTING, DREDGING AND CONCESSIONS Driven by an almost complete fleet utilization in the third quarter, the turnover and profit targets of DEME for the financial year 2008 are maintained. Many new contracts have resulted in an increase of the order book, which amounted to 2,306 million euros at the end of October 2008 (versus 1,946 million euros at 30.06.08).

Interim report on the current state of affairs of the main group companies - Third quarter 2008 (Regulated information within the meaning of the Royal Decree of 14 November 2007)

The main new contracts since June 30, 2008 are the following: * Port Rashid (Dubai): a contract of 390 million euros for the reclamation and expansion of Port Rashid, where residential and recreational facilities will be built for 200,000 people. The contract will be executed in a temporary joint-venture with Boskalis. * London Gateway Port: the development of a large new port area along the Thames in the United Kingdom. The project of a total of approximately 400 million pound will be carried out in a temporary joint-venture with Laing O'Rourke. * Amoras: an important assignment for the design, construction and exploitation of a silt treatment and storage system in the port of Antwerp. Half of this 400 million euros project will be performed by DEME. * South America: dredging in Manzanillo (Mexico) as part of the construction of an LNG terminal and a new contract for the dredging of the access channel to a new container terminal in Panama. Both contracts together represent a value of 40 million euros. * Asia: new dredging contracts in Taiwan and an environmental dredging assignment in the Philippines for a total amount of 100 million euros.

Taking into account this positive evolution of the order book, DEME is investigating further investments in its fleet within the context of the previously announced investment plan.

At ALGEMENE AANNEMINGEN VAN LAERE, all subsidiaries contributed positively to the result. The order book remained stable thanks to new contracts in, i.a., Vilvoorde, Machelen en Zoetermeer (the Netherlands).

REAL ESTATE AND RELATED SERVICES At the real estate investment trust LEASINVEST REAL ESTATE, the fair value of the real estate portfolio remained fairly constant at 487.0 million euros. The total value, including project developments, amounted to 513.3 million euros (versus 502.7 million euros at 30.06.08). The occupancy rate remained at a very high level of 97.30% (versus 97.06% at the end of the second quarter) and the rental yield was 7.20% (versus 7.15% at 30.06.08).

An office project of 1,585 m² was acquired in the city of Luxembourg in the third quarter. Additional investments were also made for the ongoing project Bian in Luxembourg.

The development activities of EXTENSA have clearly suffered from the slowdown in the demand for new housing parcels. Due to the low book value of the land bank and a number of new permits, this land development activity in Belgium has a low risk profile and maintains its recurring profit potential.

The permits for the further development of the Tour & Taxis site are in full preparation, amongst others for a first project of 16,000 m² for the Brussels environment company BIM/IBGE. The shopping centre in Focsani, Romania will be completed in the fourth quarter. The start of the sale of the residential project in Istanbul (Turkey) has been postponed with a couple of months due to the local market circumstances.

FINANCIAL SERVICES Despite the extremely volatile financial markets and the continued turmoil in the financial sector, both Bank Delen and Bank J.Van Breda & C° realised a strong commercial growth in the third quarter.

The assets under management of BANK DELEN amounted to 10,889 million euros at 30.09.08 (against 11,293 million euros at 30.06.08 and 12,126 million euros at the end of 2007). Taking into account the negative stock market impact over the first 9 months of 2008, this implies an important net increase of new assets under management.

The net equity of Bank Delen increased over the first 9 months of 2008 from 246 million euros to 271 million euros.

Bank Delen invests its own assets almost entirely in short term government bonds.

BANK J.VAN BREDA & C° has also shown a strong commercial performance with its target group clientele of entrepreneurs and liberal professions. The total assets deposited by clients increased to 4,940 million euros at 30.09.08 (compared to 4,827 million euros at 30.06.08 and 4,701 million euros at 31.12.07). The total volume of deposits increased in the third quarter with 5% to 2,063 million euro (or an increase of 9% over the first 9 months of 2008), and with respect to the off-balance sheet investments, the inflow compensated for the negative stock market effect.

The net equity of Bank J.Van Breda & C° increased over the first 9 months of 2008 from 207 million euros to 224 million euros.

Also Bank J.Van Breda & C° has a tradition to invest its portfolio very conservatively and almost entirely in government paper. Bank J.Van Breda & C° only grants loans to its target clients with whom it has a sustainable and global relationship. Furthermore, all loans are very diversified as to amounts and debtors. As a consequence, the write offs due to loan losses were very limited in the third quarter.

The niche approach of both banks and the traditionally extremely cautious investment strategy ensured that neither Bank Delen nor Bank J.Van Breda & C° have any 'subprime' securities or other 'toxic' products in their portfolio.

PRIVATE EQUITY Overall, the private equity participations continue to make an important, although lower, contribution to the group result. The impact of the financial crisis on the consumer confidence and the economic slowdown which is clearly evolving towards a profound recession have resulted in a decrease of the turnover and operational profit of some of the industrial participations in the third quarter.

AvH & Subholdings The net cash position of AvH amounted to 171.7 million euros at 30.09.2008 (against 207.6 million at 30.06.2008). This evolution is mainly driven by the decrease of the market value of the investments in KBC and Fortis with 31.6 million euros. Based on the current evolution of the stock price of Fortis, AvH expects a total negative impact on the results of the financial year 2008 of approximately 44 million euros (or 1.3 euro per share AvH).

Prospects 2008 Ackermans & van Haaren still expects to be able to realise a decent operational group result over the entire financial year 2008 thanks to the strong cycle in the dredging sector and the good commercial performance of its banks. In the mean time, the consequences of the weakening of the economic climate start to impact most group participations.

Calendar 2009

6 March 2009 annual results 2008 18 May 2009 interim report Q1 2009 25 May 2009 annual shareholders' meeting 27 August 2009 half year results 2009 16 November 2009 interim report Q3 2009

Ackermans & van Haaren is a diversified group active in 4 key sectors: contracting, dredging and concessions (DEME, one of the largest dredging companies in the world - Algemene Aannemingen Van Laere, a leading contractor in Belgium), Real Estate and related services (Leasinvest Real Estate, a listed real-estate investment trust with real estate assets of approximately 480 million euros - Extensa, an important land and real estate developer focused on Belgium, Luxemburg and Central Europe), private banking (Bank Delen, one of the largest independent private asset managers in Belgium - Bank J.Van Breda & C°, niche bank for entrepreneurs and liberal professions) and private equity (Sofinim, one of the largest private equity providers in Belgium, and GIB). The group concentrates on a limited number of strategic participations with an important potential for growth. The AvH share has been included in the reference index BEL20, the Private Equity NXT index of Euronext Brussels and as of 23 June in the European DJ Stoxx index 600.

Website All press releases issued by AvH and its most important group companies as well as the 'Investor Presentation' can also be consulted on the AvH website: www.avh.be. Anyone who is interested to receive the press releases via email has to register to this website, under the 'News' section.

Source: www.ad-hoc-news.de

Charles de Gaulle Plaza owners preparing a new acquisition

2008-11-15T00:06:00.002-08:00

The German GLL Real Estate Partners investment fund, which owns the Charles de Gaulle Plaza (CGP) office building in Bucharest, has announced it plans to expand its local real estate portfolio with a new acquisition in the coming months.

Company officials said they have extended the lease contract for the 6th floor in the CGP building, which was formerly occupied by the Vodafone mobile phone operator.

“The company is planning to expand its portfolio in the near future,” according to a GLL statement. The Germans acquired the CGP office building in the summer of 2006 for €80 million from the Avrig 35 and CA Immo companies, the largest transaction at the time.

The company’s portfolio also includes the multifunctional Metropolis Center building, a €50 mln investment, which will be finalized in spring 2009. Metropolis Center is being developed by the Austrian Soravia company, and includes11,300 square meters of office space, 2,300 sqm of commercial space, and a 6,400 sqm hotel.

GLL’s third property in Romania’s capital is the Pallazo Italia office building, acquired a few months after the CGP deal was finalized. The investment made in the development of the building sold by Conta Investment amounted to $10 mln (some €7.98 mln).

Source: www.standard.ro

The luxury real estate sector is stagnating

2008-11-15T00:06:00.001-08:00

New luxury segment real estate projects will be affected by the way in which the market will register demand for these, considering the financial crisis is cutting into the spending budgets of companies and into prices on the real estate market.

Cosmin Viespescu, Sales Manager of the Tiriac Imobiliare Real estate company for the Stejarii residential club said: “Prices are tailor made. However we cannot be very lenient as the complex will be delivered shortly and will be paid for in cash. We are trying to be flexible as we are talking about large sums of money and clients have varying special circumstances.”

“The supply of products remains small, while demand for such products will remain constant,” said Mihaela Pana, Head of DTZ Echinox residential department.

The price of a Stejarii residential packet starts at €340,000 (VAT not included) for a 108 square meter one-bedroom apartment, with parking space and related terraces, while a six-bedroom suite could amount to €1.8 million (VAT not included), according to Tiriac Imobiliare officials.

“We are also registering stagnation on the luxury segment, in terms of the value of transactions. Buyers are holding off to see how prices evolve, and speculative acquisitions in this market sector have been almost non-existent,” said the DTZ Echinox representative.

Viespescu said the market value of the Stejarii project amounts to €230 mln, with the construction taking place in two stages. The first stage includes 286 apartments to be delivered as of the first quarter of 2009, while the second stage comprises the remaining 249 apartments.

Baneasa Investments, Willbrook Management, and GEA Prasa are also operating on the luxury residential segment.

Source: www.standard.ro

Real estate agencies: Real estate prices dropped 15-20% on all segments

2008-11-15T00:05:00.001-08:00

After the buyers on the market delayed their acquisition decision for quite a long time, blocking the market, the owners pressed to sell and the developers lacking cash decided that lowering the prices should be the best way to unblock the transactions. Real estate consultants from EuroMetropola declared on Thursday that the prices were lowered between 15 and 20% on all market segments, including villas and new apartments.

Agency representatives said that they had a central office building at sale for 1.7 million Euros for one year. Te owner decided recently to lower the price to 1.5 millions and got an offer for 1.3 million. "It is most likely for the transaction to take place for this price", EuroMetropola representatives said.

Rents are also free falling. An office building in a business area was opened for rent for 17,000 Euros per month, but the owner would now accept even 13,000 Euros.

In transactions, the fastest falling prices are in the coveted Northern area of Bucharest, where prices decreased up to 50%, from 900 to 450 and even 400 Euros per square meter.

The least affected areas are the central ones, where prices decreased 5-10%.

Source: www.hotnews.ro

Fondul Proprietatea earnings twice as high as expected

2008-11-15T00:04:00.002-08:00

Fondul Proprietatea, a fund established to compensate those whose assets were confiscated by the communist regime, posted €28.8 million in net earnings for the third quarter of 2008, double the initial estimates made by company officials.

For the first nine months of 2008, earnings amounted to €112.2 million, 41 percent higher year-on-year. The fund posted €121.2 million worth of business. Most of the turnover was made from dividends and interest rates. Expenses amounted to €6.9 million, of which 60 percent were due to losses from exchange rate fluctuations.

The fund has a portfolio of 88 Romanian companies and cash, totaling some €4 billion. Its main shareholder is the state, through the Ministry of Economy and Finance, with 85 percent of the stock, while the remaining 15 percent is owned by individuals.

At the end of September, Fondul Proprietatea’s liquidity amounted to €245.9 million, of which some €35.3 mln were invested in treasury bonds last month. The fund is to increase the ratio of state share placements, given they are safer during the global crisis, according to General Manager Daniela Lulache. The remaining funds are placed in bank deposits.

Flavus has €150 mln for the first stage of its Coresi project

2008-11-15T00:04:00.001-08:00

The Flavus Investitii investment fund, administered by Centerra Capital Partners, will begin construction work on the first stage of the Coresi project, developed on the former Tractorul Brasov industrial platform in the second half of 2009.

This first stage requires investments worth €150 million of a total €1.5 billion needed for the entire project, according to company officials, and represents one quarter of the total surface of 120 hectares.

Coresi will start in the first part of 2009 with a 25,000 square meter expositional center. As of the second half of 2009, Flavus will begin building a retail park, followed by a mall with 100,000 sqm rentable space, to include 200 shops, and the first stage of the residential area, with 200-300 apartments, of a total scheduled 6,000 homes.

Silviu Savin, Flavus Investitii’s Manager, said that, because of the financial crisis, the project’s construction rate will depend on demand registered on the market. For the development of the commercial center, the fund established a joint venture with a specialized company, whose name will be made public in a few weeks.

Source: www.standard.ro

Romania's Open House: maximum budget and minimalist style

2008-11-15T00:03:00.000-08:00

Romania's House in Italy, a three day project aimed to improve Romania's image abroad was opened in downtown Rome. The goal of the project is to create a space where they can reproduce the atmosphere of a modern Romanian house with traditional dances, Romanian books and traditional food. HotNews.ro correspondent to Italy, Miruna Cajvaneanu talks about the house and the impressions of foreign visitors.

The house is modern and equipped with modern technologies: hi tech LCDs, elegant cooks dressed in black uniforms and virtual images projected on the walls. The overall impression is quite modern, irrespective of the aim of the project to emphasize Romania's traditions.

The Romanian pavilion does not attract as many tourists as one would expect. The main visitors are tourists carrying luggage, youngsters or Romanians who are curious to see the project. Nonetheless, the few visitors to enter the house take some pictures with the pavilion's most interesting images.

As expected, the Romania's traditional food is the most visited place where tourists anxiously wait their turn in the line to taste the Romanian specialties. The two cooks prepare Romanian "sarmalute" (stuffed cabbage rolls) and other recipes.

Source: www.hotnews.ro

Flats at new minimum prices

2008-11-15T00:02:00.000-08:00

The crisis of the real estate market brought the prices of buildings to the level of last year and this process is expected to continue to drop, according to a report of the real estate monitoring company anunturiparticulari.ro.

Since the beginning of the year, the prices of dwellings decreased proportionally with the hikes of 2006 – 2007. The decrease of prices is seen as a direct outcome of the economic crisis, their unbalance being determined by the reduction of the solvable market demand, especially following the tightening of the crediting conditions.

Source: www.evenimentul.ro

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2008-11-14T01:09:00.000-08:00

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Prices of old apartments were returned in 2006. In Bucharest, a studio in a decent area, is to cost 60,000 euros

2008-11-11T22:56:00.001-08:00

The crisis on the real estate market has brought housing prices in the last year and expects the decline to continue. Thus, those who invested in an old apartment in 2006 will have no profit if they sell the apartment now. If you sell later, they likely never recover the total investment.

"From the beginning of the year, property prices have dropped directly proportional to the increases of 2006-2007," informs the site anunturiparticulari.ro. Dropping prices is seen as a direct consequence of economic crisis, instability caused by their being in demand solvency of the market, especially after înaspririi credit conditions.

Dominant criterion of price variation remains the position but the building, followed by facilities and related improvements.

Thus, it comes as a studio was costing 60,000 euros in areas deemed acceptable in Bucharest (Rahova, Petre Ispirescu, Militari, Dristor). Significant price falls are registered and where apartments with two, three and four bedrooms.
According anunturiparticulari.ro monitoring, with 80,000 euros can buy an apartment of two rooms in areas such as Bucur Obor, Baba Novac, Grivitei, Rahova market, and with 90,000 euros one of three rooms in areas such as Vitan, Drumul Taberei.

Four-room apartments are traded at 110,000 euros in neighborhoods such as Berceni and Rahova. In October of this year, the volume of properties offered for sale by owners continue to trend upward. "The number of tenders property remains high as compared to January 2008, as compared to the same period last year," May anunturiparticulari.ro study shows. In October 2007 have been removed from sale less than 1,000 apartments with two rooms, while in October this year were registered over 1,200 offers.

In October 2008, the average price sought by sellers for a studio was approximately 68,000 euros. Those who want to sell apartments of two rooms have requested a price average of almost 106,000 euros, while for apartments of three and four bedrooms, the average price was 146,000, and 200,000 euros.

Romanian strategic territorial development policy made official

2008-11-11T22:55:00.000-08:00

The preliminary document on the long-term integrated territorial development of Romania was publicly introduced on Tuesday by the Environment Minister, Laszlo Borbely. The minister also announced recently a financing line for urban development, addressing cities over 10,000 inhabitants, not including development poles.

The strategy introduced today establishes the guiding lines for Romania's national, regional and inter-regional development, tying the concepts of cohesion and competitiveness.

The concept launched today is critical for ensuring a territorial dimension of the European structural funds spending and allocation.

Within the urban development financing line, eligible projects include urban infrastructure and urban services development, business environment development and social infrastructure rehabilitation.

Source: www.hotnews.ro

Thermal insulation reduces energy consumption by 50%

2008-11-11T00:55:00.000-08:00

Isolation of adequate housing reduced by approximately 40 - 50% energy consumption per heat throughout the building, shows a study conducted by Knauf Insulation. According to company representatives, the construction which consumes a significant percentage of heat required heating blocks naked in Romania are exterior walls, roof and floor over the basement.

They accumulate up to 50% of the total consumption of heat. Following a study on building a residential structure with a P +10 E, it was found that the exterior walls is lost almost 33% of the total heat consumed, while 11% is lost through the roof and floor over the basement. The remaining energy is lost from windows and doors. At present, Romania is one of European countries which are most residential buildings that have not been isolated heat.

Goodman entered the Romanian market

2008-11-11T00:51:00.000-08:00

Goodman, real estate group that owns, develops and operates industrial spaces and offices, entered the Romanian market and in a first phase will focus on the niche of storage spaces in the area of capital, company representatives announced.

The group, now at this time in Europe through the 24 subsidiaries, owns and manages over 240,000 square meters of storage spaces in different markets of Central and Eastern Europe-Poland, Hungary, the Czech Republic and Slovakia.
"The offer of storage spaces modern and high quality in the area of Bucharest is limited and demand exceeds supply," said Valerie Vanbiervliet, regional director of the Goodman in Central and Eastern Europe.

Goodman has opened office in Romania, naming him director general Muler Onofrei.

Muler Onofrei worked, before joining the group Goodman for Aleph Properties, where he held the position of director general. Previously, Onofrei was country manager Prologis in Romania and director of the Industrial Department in the CBRE-Eurisko.

With total assets managed by 11.4 billion euros and 371 properties in the portfolio, Goodman is one of the largest listed property groups, worldwide. The group has over 1,200 employees working in those 39 offices in 19 countries. In Europe, has offices in Great Britain, Germany, Holland, Belgium, Luxembourg, France, Spain, Italy, Poland, Czech Republic, Hungary, Slovakia and Turkey.

Prices of old apartments in Bucharest continue to fall

2008-11-10T13:43:00.001-08:00

Prices of old flats in Bucharest continued to go down in October, by 6% compared with the previous month and by 16% compared with the beginning of the year, reveals the Bucharest Real Estate Index (BREI), put together by real estate consultancy Colliers International.

The average price of old flats in Bucharest has therefore reached 1,576 euros/square metre, with the most important depreciation occurring in sector six, which comprises districts such as Militari and Crangasi, where prices reached 1,310 euros/square metre, as a result of an almost 13% decline.
On the other hand, according to the ZF real estate index which takes into account the asking prices on the www.anuntul.ro website, three-room flats in Bucharest have dropped by 12% since the beginning of the year, while in some areas the decline was as steep as 20% (Iancului, Mihai Bravu, Oltenitei).

The price of new flats remained at the same level in September and October, according to BREI, although a series of smaller companies announced price cuts or various incentives to help facilitate buying a home.
"Although the asking price remains constant, developers continue with the promotional offers of the summer or launch new ones to boost sales," Colliers officials note. The price drops were caused by the low volume of sales in the last few months, due to both the financial situation that led to higher interests rates and harsher lending terms and to the expectations of the potential buyers that prices would fall, influenced by the situation on the foreign markets.

In addition, a large part of the demand would come from speculative investors until recently, who have, however, reduced their operations significantly.
However, not all the prices of old flats fell, as there are still some owners who keep asking for the same prices, without closing a deal.
"The supply is no longer uniform but divided into two segments; those who keep the prices close to the values of the previous month and those who cut some of the price in the hope they would close a deal. We are therefore seeing a dispute on the market related to the minimal threshold that prices could reach," Colliers officials add.

Although the number of sale-purchase deals went down, real estate consultants have noticed a rise in the number of lease contracts, of some 15% compared with the summer of 2007.
"This autumn, many of the clients looking to buy a home, either no longer had access to loans, or were confused by the situation of the market and decided to rent at least for a while," says Adrian Ghimpau, head of the residential department of the Coldwell Banker Affiliates of Romania.

Source: www.zf.ro

Most employees with facultative private pensions work in finance, industry and real estate sector

2008-11-10T13:42:00.000-08:00

Most customers of the funds of facultative pensions in Romania (pillar III) work in the finance sector, industry and in the real state field, show the latest figures of the Commission for the Surveillance of the Private Pension System (CSSPP).

Therefore, 20.21% of the people who have facultative pension are employed in the financial sector, 13.7% in industry and 5.88 in real estate transactions and other services.
The share of employees in the financial sector decreased slightly compared to June, when it was of 23%. The share of those working in industry also shrank, considering at the end of July it stood at 16%.

Holding the next places in the ranking according to fields of activity are trade (5.31%), health and social assistance (3.45%), transport, warehousing and communications (3.38%), constructions (2.93%), education (2.2%), public administration and defence (1.92%), agriculture, hunting and forestry (0.44%), hotels and restaurants (0.3%).
The other fields of activity have very low shares.

According to the Commission for the Surveillance of the Private Pension System, at the end of September the funds of facultative pensions had over 125,500 customers and managed net assets of some 16 million euros. More than half of those who chose these funds (50.57%) are between 30 and 44 years of age, 33.61% have over 45 years old and the remainder of 15.82% have between 16 and 29 years old.

Most customers are working in the area Bucharest-Ilfov (20%), north-western area (16%) and center country (14%). Some 82% are from the urban environment and the remainder from the rural environment. Facultative pensions were launched in Romania last summer.

The estimates of the Commission for the Surveillance of the Private Pension System show that in 2009 the market will have 400,000 customers, considering fiscal deductibility of contributions will increase to 800 euros a year cumulated for employer and employee, double as against at present.

On the market of facultative pensions there are nine funds, managed by companies ING Life Insurance, Allianz-Tiriac Private Pensions, BCR Life Insurance, Aviva Insurance Raiffeisen Asset Management, OTP Garancia Insurance and Asirom Concordia.

Source: www.financiarul.ro

Chicago's homes are state's priciest

2008-11-10T13:40:00.000-08:00

A 2,200-square-foot house, with 4 bedrooms, 2 baths and a 2-car garage, might cost you about $300,000 in south suburban Flossmoor. The price tag for that same home in a popular Chicago neighborhood would be $860,000.

Coldwell Banker's annual Home Price Comparison Index looks at the prices of similar homes in 315 U.S. markets and 100 international cities.

Here are average sales prices for other area municipalities: Deerfield ($581,000), Barrington ($546,000), Naperville ($352,000), Orland Park ($360,000), Carol Stream ($336,000) and Schaumburg ($321,000).

"The survey serves as a valuable tool for consumers who are relocating, considering relocating or simply curious to compare the value of their home against nearby cities, and the rest of the world," said Fran Broude, president of Coldwell Banker Residential Brokerage.

Eight out of 10 of the country's most expensive housing markets are in California. The list is topped by La Jolla, Calif., with a 2008 average sales price of $1.8 million, followed by Greenwich, Conn. ($1.78 million) and Beverly Hills, Calif. ($1.77 million).

"This year's study comes at an interesting time in our nation's history with the impact of the housing correction and mortgage financing serving as critical economic issues in the presidential election," says Jim Gillespie, president and chief executive officer of Coldwell Banker Real Estate. "While Americans move for lifestyle reasons, a home is usually a family's most valuable investment asset."

The survey also charts each state's most expensive and most affordable cities. In Illinois, the range is Chicago ($860,000) and Rockford ($199,000 average sales price). The range in Indiana is Munster ($342,000) and Muncie ($144,000), and in Wisconsin it's Milwaukee ($374,000) and Eau Claire ($147,000). Muncie and Eau Claire are among the top 10 affordable municipalities in the nation.

The cumulative average sales price of the 4-bedroom homes surveyed was $403,738, a 4.4 percent decline from 2007. Thirteen U.S. markets exceed a $1 million average price.

Dubai is the most expensive market studied outside of North America, where homes averaged $2.45 million. Coldwell Banker charts a total of 15 markets outside of the U.S. averaging more than $1 million, including Bucuresti, Romania ($1.9 million); and Madrid, Spain ($1.7 million). Quito, Ecuador, ($96,750) is the most affordable foreign market in the survey. Nine markets average less than $200,000, including Guayaquil in Ecuador.
Waiting game

Resale homes in the Chicago area that sold during the third quarter of this year were on the market for an average of 153 days, according to an industry report. That's about how many days there are until opening day of the 2009 baseball season.

"When homeowners must move out of a home, whether the reason is a job transfer, a financial problem or something else, a growing number are choosing to rent [their home for sale] rather than continue reducing the price of the property until it sells," said Jim Merrion, regional director of the RE/MAX network in northern Illinois.

"It is not a risk-free strategy. But if a seller thinks it is likely that home prices will rebound in the next year or two, it can be an effective way to deal with a difficult situation even if the monthly costs of continued ownership [mortgage, taxes and insurance] are more than the rent received." Approval from the condo association may be needed in order to rent a condo.

For example, assume a home purchased three years ago for $460,000 has a current market value of $410,000, and the homeowner's monthly cost is $3,300. If the home can command just $2,200 a month in rent, the owner would have to pay $26,400 out of his or her own pocket over a 24-month rental period. However, if the homeowner believes the market will rebound so that the home will be worth at least $440,000 in two years, the out-of-pocket costs of renting can be recaptured when the home is sold.

Moreover, because the mortgage principal will continue to be paid down while the house is rented, the balance due to the mortgage lender will decrease over the rental period, allowing the seller to keep more of the sale proceeds.

Another good reason to consider renting, according to Carol Ficarra-Harczak of RE/MAX All Stars in Niles, is that leaving a home unoccupied, especially in winter, can be expensive and risky.

"Energy costs are up substantially this year, and even a vacant home must be heated in winter," she said. "However, if you rent the home, the tenant pays the heat. Plus, there is the security of knowing someone is in the home looking after things. Unoccupied homes are a risk in cold weather. If the furnace fails and the pipes freeze, it can be extremely costly. It happened to one of my neighbors, and repairs were $50,000."

Source: www.searchchicago.suntimes.com

Developers are looking new sales strategies for 2009

2008-11-10T13:39:00.000-08:00

While in the past two years apartment surfaces were reduced in order to cut costs for housing units, this method is no longer working for investors, as most are already building close to the legal limit.

Players on the market, affected by the international financial crisis, have to come up with new ways to increase the appetite of buyers.

“Our apartments already have small surfaces and we cannot make any more changes. Our strategy for 2009 targets building homes, considering the pace of such sales. If sales go up, we will build more,” said Shimon Galon, Chief Executive Officer of Globe Trade Centre Romania, a major player on the local residential market. Galon added that lowering the construction standard to cut prices will lead to units similar to those built 15 years ago.

“Homes destined for the middle class have surfaces close to the minimum allowed by law and these cannot be cut any further. This method was used in the past two years but cannot be applied now,” said Ilinca Paun, Manager of the Residential Division of Colliers International Real estate consultancy company.

However, the Spanish Hercesa announced its intention to cut the space of apartments included in the Estellas project, in the Grozavesti area of Bucharest. The average useful Hercesa apartment space will reach 45 square meters.

According to the draft law of the Ministry of Development, Public Works and Housing a studio apartment will have a minimum surface of 37 sqm, of which the room will be 18 sqm, the kitchen 5 sqm, and the bathroom 4.5 sqm. In the case of a one-bedroom apartment, the minimum surface will be 57 sqm, while a two bedroom apartment will require 74 sqm.

Source: www.standard.ro

Cold wind of recession blows into east Europe

2008-11-09T00:22:00.001-08:00

Romania and Hungary are now feeling the squeeze as the downturn spreads.

Ask Romanian pensioner George Iedan to list the benefits of western-style liberal market economics and he would do no more than show you round his communist-era flat.

Iedan and his Hungarian-born wife, Barbara, share a modest two-room flat with a kitchen and bathroom. They live in Timisoara, a city that has profited from an inflow of western money and industry and counts itself well off.

By Romanian standards the flat has made them unbelievably rich. Since they bought it six years ago its value has appreciated by 700%.

Old age and infirmity are forcing them to move and they expected to get a comfortable sum for their twilight years. But the global financial crisis now sweeping through eastern Europe has claimed Romania as its latest victim, leaving them high and dry.

An overblown economy built on a credit boom and run by a barely functioning government is on the point of collapse – much like its neighbour Hungary, which last week was forced to go cap in hand to the International Monetary Fund. Romanians stand next in line for the bankers’ version of a Red Cross parcel, as do the Baltic states.

The Iedans, in their eighties, spent most of their lives suffering under the perverse version of socialism practised by the dictator Nicolae Ceausescu.

Now they face a new form of misery, that imposed by the free market.

“We are no longer mobile and need a ground-floor flat. I’m kicking myself for not selling last year,” said Iedan. “Instead, I did what other people were doing and hung on, hoping that the value would go up. But nobody wants to buy at the moment. The banks won’t lend the money. New flats and houses stand empty everywhere now.”

The couple bought the flat for the equivalent of €10,000 (£8,000). It was built in the days of the Ceausescu regime when the authorities reckoned that lifts were too good for the country’s workers so none was installed. But for the old couple the stairs have noq become a climb too far.

Last year the flat was valued at €80,000. “We have brought the price down to €60,000 and still nobody has the money or is willing to risk ownership in a falling market. I don’t know how low we will go,” said Iedan.

A Romanian estate agent said that the crisis had left him “completely exhausted” and lacking the will to carry on.

The Romanian housing boom reached ludicrous levels in a relatively poor country. Housing costs per square metre in the capital, Bucharest, are between €4,000 and €5,000, making Romania more expensive than Austria and twice as expensive as Germany.

Leading economist Nicu Taran said: “Public debt in Romania is €14 billion but dwarfed by private debt of €50 billion.

“The government faces a serious recession, rising unemployment and inflation. We have elections within a month, which will leave the government further weakened and the prospect of the crisis getting worse.”

Taran describes the government as dysfunctional.

“We have no reason here for optimism. The price of goods is going up, with inflation reaching 8%, and our competitive-ness is going down. We have a demographic problem in our country with an ageing population and large numbers of young, talented people who are emigrating to western Europe and America,” he said.

In neighbouring Hungary the government briefly stared into the pit of bankruptcy. The country’s public debt amounts to a mind-boggling 93% of gross domestic product with an ever-widening current-account deficit.

Since 2006, when Prime Minister Ferenc Gyurcsany was caught on tape candidly admitting that he had lied about the economy in order to get himself reelected, the country has been in political stalemate.

Gyurcsany presented himself as a national saviour and pleaded that the crisis was too serious to call elections to end the impasse of running a minority government.

Instead he called a national summit that descended into bickering even though there was a run on the forint and insolvency looming.

Within 10 days the Hungarian national bank raised interest rates by three percentage points. The subsequent prospect of bankruptcies, unemployment and loan defaults led one analyst to claim “the economy is toast”.

At that moment Matthias Sandfort, a real-estate executive with Helaba Landesbank, was guest speaker at a Budapest economic forum along with the IMF’s Christoph Rosenberg, responsible for central Europe.

“Back in June when the invitations went out, the conference title of Tropical Storm seemed a bit playfully ironic. It’s not a storm but a tsunami. The mood of the delegates was a feeling of despair,” he said.

Rosenberg told the conference: “This [global crisis] may be the catalyst we have been looking for.”

Shortly afterwards the IMF announced a €20 billion loan with the claim that the Hungarians had put “appropriate measures” in place to ensure stability and growth. In short, this cancelled the 2009 budget.

The prime minister’s ability to push through economic reforms remains to be seen.

At least Gyurcsany has progressed from telling economic fairy stories to committing himself to what he called “recession reality”, having announced a freeze on salaries and bonuses for people employed in the public sector, and cancelling proposed tax cuts.

It seems a characteristic of the financial crisis that governments deny difficulties or claim to be well placed to weather the storm.

The IMF warned the Baltic states 18 months ago to end the pervasive “buy now, pay later” mentality. There was, said the IMF, “an urgent need for decisive action” to curtail domestic demand. Latvia, Lithuania and Estonia have barely scratched the surface of the problem of what one analyst described asa “loan festival”.

An EU-wide recession will reduce domestic demand but inflation, current-account deficits and currency imbalances have not been tackled.

“The same recipe is good for the Baltic states as it is for Hungary - spending cuts, wage curbs and preventing wild currency speculation, said Krisztian Szabados, director of the research group Political Capital. “Whether they will call for help from the IMF I would not care to say.”

Source: www.business.timesonline.co.uk

Financial crisis’ fatalities in the economic environment

2008-11-09T00:21:00.000-08:00

Global financial crisis has already spawned major fatalities worldwide and affected thousands investors who watched their portfolios shrinking drastically. In Romania, the first manifestation was in the capital markets, but its effects start to spread on several levels of economy.

The consumer - the dictator of the economic growth in the past years – is still living moments of glory in Romania. “Seen from distance, in a weekend day, in any hypermarket in Bucharest, it seems shocking that the shopping spree continues, almost the same as before” said Alex Stoian, partner with Prognosis.ro project.

He gave the example offered by the political figureheads in our days, “the attempt of slashing budget for 2009 by burdening it with salary growths which it is impossible to bear in the actual context. It takes time for the impendency and its subsequent materialization of the crisis to be felt”, he said.

Marius Pandele, Head of Research with Vanguard, says the consumers are likely to feel the effects of the dramatic declines at the stock market if the companies floated at BSE would manifest a higher level of dependence upon the funding via capital market.

“In a situation of this kind, companies will face major funding problems, which would affect consumers as well, sooner or later, especially if they serve companies in difficulty,” Pandele added.

Meanwhile, the outlook on national currency is not positive. Thus, Ovidiu Fer, analyst at Wood & Company says this will trigger repercussions on consumptions, especially on imported goods.

“Moreover, I think the expansion of consumer credit will temper down. Therefore, I think the consumers will be affected. Yet, this has nothing to do with the problems in Romanian economy and not necessarily with the slumps at the stock market,” said Ovidiu Fer.

Impact of declines at stock market will be low for those who are not involved

Even if the declines of the stock market have backed down market to 2003-2004 levels, and the prices slumped to all-time lows, specialists polled by Wall-Street say there will not be any forceful negative impact, generally speaking, because the stock exchange is not a major financing source for companies or economy.

“I see no major direct influences on consumers. In Romania, the capital market is not an important financing source for economy, and number of investors in the stock market is low. Certainly, the deepening declines of stock market stir up uncertainties on the financial and general economic climate of the country. However, certain companies that used capital market for financing may be affected”, said Razvan Pasol (photo), manager of Intercapital Invest.

In the actual status of Romania, there is an impact of the major slumps, but a low one and rather indirect.

“The factor that influence both the Bucharest trading and the consumers is the international economic crisis that will soon become local as well. Actually, it already is. It is at its infancy”, said the representative of Vanguard.

Specialists see a major downslide of the real estate industry

If the stock market was the first “fatality” of the global crisis, the other fields will not be avoided, even if the effects are starting to take shape barely now.

Wood’s analyst, Ovidiu Fer thinks that the most affected fields will be banking, real estate and retail.

Real estate sector is expected to face a major decline led by international turmoil.

Source: www.wall-street.ro

Romania's pace of growth will probably slow down

2008-11-09T00:20:00.002-08:00

Romania will not face a real estate crisis as long as the real estate market is made up by rural area constructions and those in private management, Romania's National Prognosis chief Ion Ghizdeanu declared. He added that some prices for residential houses decreased but not because their activity stopped but because of market perception pressures.

In Romania, the residential market only amounts to 15% of the total value of constructions works. Ghizdeanu declared that in 2009, the constructions sector will grow by 13% if the economic grow will stabilize at 6%. This year alone, constructions will witness a 29% increase.

Ghizdeanu declared that the construction authorizations offered by city halls increased in August, which, in his opinion, is the best indicator that the market is not witnessing any failings. According to him, in the first quarter of 2009, some 70,000 constructions will be finished.

Romania has two big advantages, both from the market's under-development stage: almost 65% of consumption is concentrated in the food and other goods sector and the other element is self-consumption. Romania, has a natural economy that is less flexible to the crisis, unlike Bulgaria.

Source: www.hotnews.ro

Financial crisis shock to affect DIY market in Q1 2009

2008-11-09T00:20:00.001-08:00

Even if the real estate market in Romania started to feel the global economic woes, the status is not yet well-shaped in DIY retailers’ sales, said Isabelle Plecka, managing director with Bricostore Romania in an interview for Wall-Street.

She said that the most difficult period for this field would be the first quarter of 2009. “People who contracted mortgage loans before the financial crisis had started, are bound to continue their home improvement, and this is why the do-it-yourself market has not yet been affected by the fallout of the real estate sector”, said the representative of French-based retailer.

Even if the sales volume has not been affected by the global economic context, the year 2009 will not have a promising start for one of the biggest players in the domestic do-it-yourself market.

“The effects of the crisis will be more visible in first quarter, 2009 especially because the winter holidays period is not a profitable one for local DIY business. However, I think that starting April, the market will regain its dynamics”, she added.

The fact that Bricostore’s sales have not been hit by global crisis so far is reiterated by the year-to-date 30% growth in sales, up to 600 million lei, from first nine months last year.

Although she thinks there will be no recession in 2009, Pleska says the most affected fields will be car industry, real estate, home appliances market, and luxury industry.

In 2008, Bricostore Romania will open five units. “In May we opened a store in Arad, and in September in Braila, and we plan on opening three more units in the fourth quarter, to reaching 13 units”, she stated. Bricostore will officially open a new store in Suceava, in Iulius Mall, on November 26 in Focsani and on December 3 in Oradea. “The average investment in a new store hovers around 10 million euros, except for the branch in Baneasa, where we invested 14 million euros, as it stretches on 14,000 sqm , while the others are at 10.000 sqm”, Pleska explained.

Two of the stores that Bricostore will launch by yearend are in Moldova region, which seems to have high potential. “Many retailers heaped in Ardeal area and for several times, the outcomes were below the expectations, and this is why we focused on Moldova, where people are more orientated towards consumption”, stated Pleska, adding that the stores in Braila and Arad had a more difficult start-up.

Source: www.wall-street.ro

Real estate market to revive in 2009

2008-11-09T00:19:00.000-08:00

The local real estate market will revive in 2009, with a boost in demand, following several months of stand-by, according to real estate developer Gea Prasa's General Manager, Rafael Ordás Diéguez.

Gea Prasa is developing the Laguna Residence project in northeastern Bucharest. "The local residential market is almost in a deadlock. Potential buyers are scared, but the fear is not caused by the Real estate market, but by the storm of information from abroad. Too many bad news come upon us every day and the financial crisis has an impact on Bucharest," Ordás Diéguez said.
However, he added, there is no real reason for market deadlock, "it's only lack of trust and panic."

The company plans to launch a new residential project in Bucharest next year. It will include 2,000 apartments for the middle class, worth a total €300 million.

Source: www.standard.ro

No real estate deal before H2 2009

2008-11-09T00:18:00.002-08:00

Mergers and acquisitions on the real estate market are frozen for some three months and no significant deal is expected until the second half of 2009. Last year’s real estate deals amounted to a record €2 billion. This year, however, the figure has dropped to half, and could have been zero if it had not been for deals finalized in 2008, which started in 2007, according to a Partner of Capital Partners investment company, Andrei Diaconescu, for Business Standard.

Lower lender liquidity is forcing potential buyers to stand by, while owners are not willing to sell at the current 8-9 percent yields, Diaconescu added. “When the buyers’ problem of liquidity is solved, prices will amount to an acceptable level for sellers, although these will not be as high as last year,” he said. The only segment of the market with a positive evolution this year was rentals, as owners opted to rent their properties instead of selling them at low prices. As far as the transaction segment is concerned, the market is back to 2004 levels, at which time financing was also in short supply, according to Diaconescu. Major developers, including TriGranit, RED Management Capital and River Invest, announced they would postpone projects that lack financing and have cancelled plans to sell properties in their portfolio. The Immoeast and Charlemagne investment funds have also given up acquisition plans and are focusing on strategic partnerships with developers. Meanwhile, the General Manager of Gea Prasa Real estate developer, Rafael Ordas Dieguez, said the local real estate market will revive in 2009, with a boost in demand, following several months of stand-by. “The local residential market is virtually at a deadlock. Potential buyers are scared. This fear is not due to the real estate market, but rather to the storm of information from abroad,” Dieguez added.

Source: www.standard.ro

Bucharest’s Magheru Boulevard rental fees up 13% year-on-year

2008-11-09T00:18:00.001-08:00

Magheru Boulevard in central Bucharest ranks fourth in a list of most expensive locations in Central and Eastern Europe (CEE) in terms of rental fees for commercial space, according to Jones Lang LaSalle (JLL) real estate advisory company. In a survey of the top 25 most expensive streets in Europe, Magheru Boulevard ranks 19th.

At the end of the first half of 2008, rental fees on this main artery amounted to some €1,500 per sqm annually, more than rents on Stockholm’s most expensive street, Biblioteksgatan (€1,419 per sqm per year) or Lisbon’s Chiado (€1,200 per sqm per year). Rent for commercial space on Magheru Boulevard rose 13.6 percent compared to H1 2007. Most areas included in the JLL survey registered higher rental fees year-on-year. “In the 12 months since the financial crisis began, almost 70 percent of markets taken into account registered increases in rental fees,” the survey shows. Paris ranks first in the JLL study, with rental fees amounting to an average €7,360 per sqm per year on the Champs Elysees. Moscow’s Stoleshnikov Lane ranks second, at €7,035 per sqm per year, followed by London’s New Bond Street, with annual rental fees of €6,762 per sqm. Regionally, rents on Bucharest’s Magheru Boulevard are exceeded only by Kiev’s Kreshchatik Street, Na Prikope street in Prague, and Vaci Street in Budapest. The study also considered rental fees in other major cities in Romania. Outside Bucharest, the most expensive streets, located in the city of Cluj-Napoca, are Eroilor Boulevard and Ferdinand Street, with annual rental fees of up to €960 per sqm. Rental fees on Brasov’s Republicii Street and Constanta’s Tomis Boulevard average €720 per sqm per year. JLL surveyed 100 streets in major European cities, in terms of annual rental fees.

Source: www.standard.ro

Spectacular housing loan growth in September

2008-11-09T00:17:00.000-08:00

Romanians took banks by storm in September, leading the loan balance to its highest level in 2008, to €400 million, double month-on-month.

September was the last month when individuals could obtain loans based on former, more relaxed lending rules. New regulations will go into effect as of October, drafted by the National Bank of Romania (BNR) to curb lending and lower risks for both banks and clients.

Bucharest inhabitants applied for more than 40 percent of total housing loans - worth €5.13 billion, followed by inhabitants of the northwestern city of Cluj-Napoca. “Fear of the new regulations led clients to apply for more loans in September. October growth is not going to be so spectacular,” according to a statement for Business Standard by Radu Gratian Ghetea, President of the Romanian Bank Association (ARB).

The month-on-month growth rate for housing loans was 8 percent in September, double August’s monthly growth. The increase was 64 percent compared to September 2007. This comes amid a deadlock on the Real estate market, due to high housing prices and the decision of potential buyers to stand by and wait for prices to drop. For the first time in several years, housing loans declined by 2 percent in July.

The final month for more relaxed lending also registered a significant increase in consumer loans, worth a total €994 million in September alone.

Source: www.standard.ro