Romanian “First Home” Program Sparked Old Flat Price Hikes – Agency

"The supply of good old apartments is very low, which is why owners have increased prices, and in the near future we will not see a decrease in prices," said Thursday Ion Catutoiu, managing partner at real estate agency Real Time, while he was presenting a market study in the opening of national real estate fair tIMOn.

The study revealed that one family with two average wages, namely some 1,800 lei (EUR1=RON4.2132) each, could obtain some EUR57,000 from the bank for the "First Home" program, a sum with which they could buy a studio or a two-room apartment in one of the new housing projects in Bucharest neighborhoods like Titan, Prelungirea Ghencea or Colentina.

"With this money, there is not much you can buy on the old apartments market," Catutoiu said.

He added banks evaluate old properties at very low levels, close to half of the value, because they do not want toxic assets in their portfolios and they target the clients with the highest credit worthiness.

"Clients sign initial contracts for certain prices, then they go to banks and the banks evaluate the property at only half the price for which the contract was signed," the Real Time representative explained.

In his opinion, the "First Home" program, through which the state guarantees real estate loans, is simply an electoral instrument frowned upon by banks, deceitful for developers and an illusion for buyers.

"The only certainty in this program is the increase of prices for old apartments. Increases of up to 25-30% in some areas for studios and two-room apartments are explained through the effervescent reaction of buyers when buying apartments costing up to EUR80,000," Catutoiu said.

He added three and four-room apartments have not been in too high demand, therefore they have not seen increases in price.

Regarding the new apartments market, there are some developers, according to the real estate consultant, who sell the apartments at prices below the construction cost.

"Developers need to understand they have to buy within the boundaries of a certain purchase power," Catutoiu added.

Real estate fair tIMOn is held between September 24 and 27 in Bucharest's Constitution Square. The fair is attended by 70 companies with 120 real estate projects, offering prices between EUR33,000 and EUR600,000.

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