Romanian real estate market unlikely to recover at 2008 level

At a moment, you have said that the real estate market must be put in order and reinvigorated? What do you mean?

Markets are natural forms, where demand tries to meet offer, a fact largely based upon the freedom of circulation (and expression) of individuals, capital, products and services. Mature markets are characterized by the democracy of information: producers are known, technologies are known, beneficiaries understand and use the products on daily basis - in other words, a mature market does not offer many surprises, meaning it is predictable. Markets can be regulated either by the state, through laws, norms and standards imposed and mandatory, or by self-regulation at the initiative of a group of interests (professional association, employers' association, consumer group, trade unions etc.)

Let me give you some examples: the market of legal services is regulated by the Bar; the market of notary services is regulated by the Union of Notaries Public; the stock exchange market is regulated by the brokers' association; the market of professional medical services is regulated by the Chamber of Medics. The construction market, on the other hand, is regulated through laws and norms resulting from the concern of state authorities; similarly, the markets of energy or fuels are regulated through the care of the state.

The residential market must be put in order, because during the last nearly 20 years it did not evolve toward transparency and maturity, a fact also proven by the chaotic evolution of prices, the dispersion of product quality, the frequency of frauds, and the frequent non-correlation of declared need with the real volume of transactions. As the residential market is put in order, we also may say that recovery is taking place, because the immediate effect will be that of informing the market and increasing the transparency of correct market relations.

Real-estate's experts were saying that 'the real estate market lacks many things, but most of all correct strategies and auditing.' What is your opinion on that?

I don't have sufficient data to be able to analyze what they said. On the other hand, it is certain that the residential market is a sensitive economy measurement instrument which should be considered in budgeting and macroeconomic forecasts, because any family plans most of the monthly and annual investment and spending on their home and on the maintenance of their home. Most certainly, when information is confusing or even contradictory, a correct understanding of reality and a thorough prediction take a careful assessment of market data which need certifying and correlating to other indicators and with relevant data from other regions and from other countries. The residential subject is a highly complex one and it carries implications on many generations. Building a home entails over 2,000 items, the participation of 11 different industries with goods and services, about 50 different trades and specialties. The minimum life span of a home is 50 years. In reality, however, about 75 per cent of homes influence the quality of life of three generations of tenants, a home being the product with the most notable remanence, justly determining the public image of ages long gone - the classical Greek style, the classical Roman style, the medieval gothic style, the Florence renaissance, the baroque, the rococo, the neoclassicism, the art nouveau, the constructivism, the skyscrapers, the futurism, so on and so forth.

The same experts were saying that the property market needed big and reliable developers rather than rating people. What do you think?

I think that was more a figure of speech which makes me think of gymnastics, where top performance takes devoted and hard-working gymnasts more than judges who mark their routines in competitions. The Romanian residential sector needs large-scale new home projects in major localities, the upgrading of over 50 per cent of the housing stock and the conversion of a minimum of 20 per cent of the existing homes into lettable portfolios. Such programmers normally span 40 to 80 years, need over EUR 200 M and can only be implemented by reliable and accountable people of persuasive substance.

An article from the daily 'Capital' was saying that the real estate segment still has to bear two years of crisis. Is it so?

We should specify that the real estate market has several sub-markets: residential, offices, retail, logistic, lands for construction and agricultural lands. Each of them is affected differently by the crisis but also by the locality to which we refer. A separate commentary should be made about the market of residential buildings for hire. The crisis to which you refer has two components: one is chronic and the other acute. The real estate market from Romania will return neither in two years nor in seven years to the levels from 2008, because the economy cannot recover so fast.

Is this market segment in fact in a real collapse?

Actually the whole market is in a downturn but the crisis brought to the surface the immaturity and poor capacity for organization and regrouping in the new macroeconomic and behavioral context.

Considering your experience, what do you think the real-estate's trend would be in the following period, before and after the Presidential elections?

The real-estate market won't be tied to the economy's evolution in the aforementioned electoral period any more than the other markets are. It would certainly not receive a positive impulse irrespective of the result. Rather the economic performances of Germany and the US could influence the Romanian market 3-4 months later.

And how are the current political decisions influencing the real-estate sector?

In the current international context Romania has a significant deadweight and almost no government would be able to change that perception for 6-8 months into 2010. I believe that the only option that could create chances for Romania would be for high-performing private sector leaders that have proven their managerial and leadership capabilities within their sectors to get involved in the act of governing. Not to mention the effects of the corruption on Romania's well-being. The path towards performance and efficiency in government is determined only by proven managerial competencies.