To be revived, the real estate market must first to be organized

Bucharest, 28^th of September 2009 - "The real estate market needs a rating system which structuring, ordering and driving it", is the opinion of Dan Ioan Popp, chairman of Impact Developer & Contractor S.A., a company that's been present for 16 years in the top of real estate developers.

The statement was made following a study which sets forth the mechanism of quick and transparent real estate rating that take into account 3 criteria - property location, endowments and services within the area and the dwelling itself - in order to establish a fair price, easily calculated by the beneficiary and developer. The system, called eVIR, allows an easy establishment of the price margin both for the demand and for the supply, which leads to the increase of thrust and facilitation of dialogue with the financial institutions. The method evaluates the cost distributed by square meter of land or construction that should be invested in order to have a certain life standing provided by summing the socio-economic environment in the area, the public and private services structure, as well as the quality of attributes of the dwelling itself.

"The fall of the real estate market, the overall resettlement of goods and services prices, the lack of cash and decrease in the number of transactions led to the difficulty and alteration of the correct evaluation of the property. This process is more difficult, as the tendency to excessively simplifying the evaluation criteria by ignoring the quality and synergic aspects that give the real value of real estate is amplified. That means that the price index per square meter is neither sufficient, nor real!", explains Dan Ioan Popp, from the position of someone who introduced the concept of residential complex in Romania and who built homes for 11,000 people, meaning the level at which an establishment in Romania may be granted with the status of city.

The three categories of information based on which the rating system should be applied are:

1. Welfare of the area / city where the property is located in: there is generally-accepted the fact that the income per inhabitant is proportional to the gross domestic product per capita, which determines the level of investments in education, culture, health, administration, protection, environment etc.
2. Endowments and services in the neighborhood / area where it is located: the existence of public services structure necessary within an area depends on the number of the existing population, the size of the area and of the average available incomes. The latter ones give the dimension of the initial investment value, but also sustain the current operation of services. The construction of a hospital means, for example, an investment of approx. 20 million of euro, a school needs 1 million of euro, a small purification plant means 2 millions of euro, a sports field or a swimming pool is translated by approx. 0.3 millions of euro, one kilometer of urban asphalted road is rated at 0.9 millions of euro, one kilometer of water network, sewage, electric power or gas each costs between 0.2 and 1 million of euro per kilometer, a promenade park needs minimum 1 million of euro for every 2 hectares. Therefore, the higher the services concentration is, the more the life standing is increased. Practically, within an area of 100 hectares (1 million of square meters) there can be prepared investments of 10 million or 100 or one billion of euro. It means that the gross investment per square meter of land within the area is 10, 100, 1,000 of euro respectively per square meter of land, initial investment, beneficiated and sustained by the community within that area.
3. the dwelling itself: which is evaluated depending on the location, the area, the energetic level it frames into, the materials used, as well as the other criteria already recognized by the beneficiaries.

Example of calculation

Each level associated to the category of Region / Neighborhood / Dwelling induces a share in the establishment of the estimated value in euro per square meter built of the building, as follows:

• I. Region / locality may be of level:
  • E. region without traffic and GDP under 499 euro / inhabitant
  • D. GDP between 500 and 1,499 euro / inhabitant
  • C. GDP between 1,500 and 2,999 euro / inhabitant
  • B. GDP between 3,000 and 6,999 euro / inhabitant
  • A. GDP between 7,000 and 16,000 euro / inhabitant

  Each level has a contribution in the value of dwelling in quantum of:

  • E. 20-49 euro/sqm
  • D. 50-99 euro/ sqm
  • C. 100-249 euro/ sqm
  • B. 250-499 euro/mp
  • A. 500-1,000 euro/ sqm
• II. Neighborhood / area may be of level:
  • e. area without city endowments, public services, but with access road
  • d. area with city endowments and road
  • c. area with public services
  • b. area with commercial services
  • a. area with elite / culture, sports, entertainment, tourism services

  Each level has a contribution in the value of dwelling in quantum of:

  • e. 5-39 euro/ sqm
  • d. 40-249 euro/ sqm
  • c. 250-599 euro/ sqm
  • b. 600-1,099 euro/ sqm
  • a. 1.100-2,000 euro/ sqm
• III. Dwelling may be of level:
  1. 5. dwellings made of loam brick, timber work, rolls
  2. 4. dwellings made of wood, unburned bricks and prefabricated blocks
  3. 3. dwellings on calculates structures with sketchy endowment
  4. 2. dwellings made according to modern normative, regulations and endowments
  5. 1. super equipped dwellings with special finishing and superior utilities

  Each level has a contribution in the value of dwelling in quantum of:

  • 5. 50-149 euro/ sqm
  • 4. 150-349 euro/ sqm
  • 3. 350-699 euro/ sqm
  • 2. 700-1,499 euro/ sqm
  • 1. 1,500-3,500 euro/ sqm

When a dwelling has the level rating of Bc3 it means that the real value is between 850 and 1,799 euro/sqm (250/499 + 250/599 + 350/699), while for a dwelling having Cb2 rating, the market value is between 1,400 and 2,849 euro/sqm (100/249 + 600/1,099 + 700/1,499).

The rating system, offered as free of charge for 6 months by Impact D&C S.A., proposes an example of evaluation for three examples from the current market:

• I. Valea Doftanei Area, Prahova County, near the cultural house, old-fashioned house

  The locality has a GDP between 500-1,499 euro/inhabitant (meaning a contribution of "D" ype between 50-99 euro/sqm), the area with city endowment and road determines a "d" type contribution between 40-249 euro/sqm, and for the loam brick house the contribution is of "5" type between 50-149 euro/sqm). Therefore the evaluation frames into the Dd5 category, resulting a real price per square meter between 75 and 497 euro

• II. Bârlad City, Vaslui County, near the hydraulic components plant, apartment in G+ 3 blocks

  The locality has a GDP between 1,500-2,999 euro/ inhabitant (meaning a contribution of "C" type between 100-149 euro/sqm), the area is near the industrial platform (it has city endowment, public services that determines a coefficient of "b" type, meaning 250-599 euro/sqm), and the fact that the apartment is in an old block, means a coefficient of "3" with contribution between 350-699 euro/sqm. Therefore the evaluation is between 700-1,298 euro/sqm, with a Cb3. type rating.

• III. Bucharest City, near the American Embassy, modern renovated apartment in villa

  The locality has a GDP between 7,000 and 16,000 euro/ inhabitant (a contribution of "A" type between 500-1,000 euro/sqm), located ultra-central (area with city endowment, public services, commercial services and elite/culture, entertainment, tourism, which determines a coefficient of "a" type with contribution between 1,100-2,000 euro/sqm), and for the fact that the apartment is located in a renovated villa it obtains the coefficient "1" (1,500-3,500 euro/sqm). Therefore the final evaluation is between 3,100-6,500 euro/sqm, level Aa1.

The reasoning may also be furthered with real, known examples:

• The memorial house of Theodor Aman located in Bucharest has a rating of Ab2
• The memorial house of Ioan Raţiu in Turda, Cluj County receives the Cb3 rating
• The memorial house of George Enescu in Liveni, Botoşani County is framed into Dd4 class

Impact D&C S.A. sustains that a regular or online advertising of the values associated to the rating levels by regions or localities, by neighborhoods respectively, may relaunch the real estate market on national scale.