Nowadays it is 5 times more difficult to buy an appartment than it was 20 years ago

Bucharest, November 5^th, 2009 - "Before 1989 most of us had a dwelling and in the years 1990s there was possible to perpetuate the mentality of the type <<I deserve a dwelling as well>> by the restorative prices that were practised", says the businessman Dan Ioan Popp, involved for over 16 years in the real estate field. "Thus, we have reached, after 20 years of capitalism, to have almost 8 million of owners of old dwellings and one million of potential buyers. Annually only 4-6% of the first category conclude effective transactions and only 30-40% of the second category succeed in buying. In all of this picture, the percentage of the developers (of new dwellings) is much under 10% of the total of the real estate transactions of these 20 years".

Unlike communism, now we afford less bread, but more TV sets

The president of Impact D&C S.A., in the recently performed study, proposes a concrete comparison: 20 years ago, during communism, the salary of the middle class composed of engineers, economists or physicians was of about 3,000 lei, that is approximately 100 US dollars at that exchange rate. With an average salary, they could buy 703 kg of loaves of 3.2 lei. An Elcrom color TV costed 12,500 lei, the equivalent of 4.16 average salaries. A Dacia 1300 car with improvements costed 89,000 lei and could be paid for with 29.66 salaries. A communist apartment with two rooms could be bought with 140,000 lei, that is with 46.66 average salaries. Provided that you waited 1-2 hours in row for bread, 6 months for a TV set, 1-2 years for a car and 2-4 years for an apartment.

The study shows that it is difficult to accomplish a perfect comparison to nowadays, but an attempt could look like that: the net salary of the same professional category is nowadays of about 2,000 lei and the US dollar is of about 3 lei, that is the average salary is of about 666 US dollars. One loaf (nowadays smaller) costs 1 leu, so, with a salary you can buy today 560 kg of bread. One color TV of 45 cm costs now 1,500 lei, so, you must pay 0.75 salaries. A popular Dacia Logan car of today costs about 30,000 lei, that is 15 salaries. And THE SAME ceausist apartment with two rooms costs about 250,000 lei, that is 125 salaries. "Of course, you can find bread anywhere, you may choose TV sets of the tens of types, you may opt for 3-4 types of cars of similar classes, and apartments you may select of at least one hundred offers. So, the Romanian earns today, 20 years later, more US dollars but can buy less bread and far less apartments", is the opinion of the one who has seen the real estate market evolving and involving during the 20 years of capitalism. "The construction standards have evolved towards the European ones, the products become better and better, there were even state attempts to propel the field. And though, today the Romanian buys five times more difficult an apartment than he could do 20 years ago. The question is: why?"

The "apportionment of property" of 1990 perpetuated and amplified the communist mentality among sellers

First of all, because the prices before 1989 were not fixed by the market, but were artificially administrated by the communist government, generating the perception of the "right" to have a dwelling even if you had to wait for some time until you got it. After the 1990s, following the "apportionment of property" among almost 4 million families by the sale for symbolic prices of 1,000-2,000 US dollars of the apartments they were living in, approximately 97% of the urban population acquired the statute of owner. That led to the amplification of the communist idea that everyone is entitled to an apartment. There was created a fantastic mass of owners, the rest of the population "left out" or the new generations having the same characteristics and expectancies as before 1989: "there should be as easy as then for me to buy a dwelling now as well". With this mentality we entered capitalism that, obviously, is a game with other rules.

From the position of the one who crossed different stages of the market evolution and that introduced in Romania new concepts, such as the idea of residential assembly or the flexibly-configurable surfaces according to the needs of each beneficiary, Dan Ioan Popp finds that the first who applied the new rules of the market capitalism were precisely those who were "gifted" with apartments received for symbolic prices. "That is how we had all at once 8 million owners that started to play by the capitalist rules - demand and offer - fixing practically the price of dwellings. That is, they have assumed the role of market-makers. Today, on this basis, 90% of the present dwelling fund are the old, communist ones, about 85% of these being transacted by the owners - natural persons, that means the shaper of the average price is in fact the great mass of population and not an entity or a group of commercial entities that are practically dispersed and in fact insignificant. În reality, the real estate developers had an an unexistant influence during the first 10 years and recently they cumulate under 10% of the annual total dwelling transactions".

Optimism of cash or pessimism of the old dwelling you cannot turn to profit?

At what extent are though the prices of today correct? In the residential market there are three forces that compose the public opinion: the 4-6% of the total of the 8 million owners that make effective transactions within one year, the 30-40% of one million of interested persons that effectively succeed in buying within one year and the rest of the participants in the economy as suppliers of associated products or services. Any price established by a free market is correct. "But you may be pessimistic as you have some properties that you cannot turn to profit. Or you may have a feeling of optimism given by the fact that you have some available liquidities - especially under the form of credit - and so you may take into account the conclusion of a transaction. The two psychic social perceptions should meet frequently (somewhere halfway) so as the real estate market would defrost" explains Dan Ioan Popp one of the mechanisms that led to the present state of things in the real estate market. The buyer obviously desires smaller prices and especially thinks he deserves a more cheaper apartment. But in fact 90% of the offers he receives are from the sellers - natural persons as he himself that gave in the 1990s about 2,000 UD dollars for the apartment they try to sell now for 70-90,000 US dollars. "In fact we have an almost communist mentality of the buyer that, on the back of that, is young, face to face with an almost capitalist mentality - of the seller who, imagine that, is older!" a situation that makes it difficult for the demand to meet the offer.

So the Romanian capitalism of 20 years made the majority of us to have the feeling we live much better as the majority of the Romanians are theoretically 5-6 times richer, even if some of them cannot buy a dwelling very fast, but at least they can purchase much easier a TV set.

Better real estate products and incentives offered by the state may defrost the present situation

The businessman is convinced that there is however a solution for the stopping of this situation, that engages other two players: the developers and the state. "The developers cannot change mentalities, moreover when under 10% of the total real estate transactions are carried on with new apartments. But if the developers have better dwellings, then the buyers as well will understand in time the superiority of a new apartment, with high seismic class and with A-type thermal insulation class, and green areas and enough parching places. The second player in the equation is the state, that, by the opinion of Dan Ioan Popp must play a more active part and to stimulate private initiative for the building of new dwellings by competitional market mechanisms by at least 15 already classic means in advanced economies.

ABOUT IMPACT DEVELOPER & CONTRACTOR SA:

Impact Developer & Contractor SA, established in 1991 by public subscription, is quoted at the Bucharest Stock Exchange. The company, that introduced the concept of "residential assembly" in Romania, has developed until now in 5 cities 16 residential areas for more than 2,000 familes that live in houses and apartments. Its portfolio is completed with 25,000 square meters of offices and shopping premises, and with complex administration services. The purchase solutions proposed to clients, 10 in number, include concepts used for the first time in Romania: CallBuy® - the rent paid for a dwelling may be turned into advance in order to purchase, A 2a Casă® - the old dwelling may be sold without commission by means of the company and its value is considered as an advance for a new apartment; Habitest - testing under real conditions of the future dwelling and of the chosen assembly; configurable dwellings of Kaleidoscop® type.

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Additional information: Florian Fugaşin, PR Manager. 0729/100 111, florian.fugasin@impactsa.ro