Romanian Property News

This is probably one of the most appealing headings that I’ve seen for a while – getting a house for a fiver. You can’t avoid a sceptical chuckle “yeah, right…”, but cannot refuse your curiosity, so you may as well have a look and humour yourself. You’re guaranteed to have a laugh at some point in the process, so why not?

What is the story? As expected, there’s no free lunch. The Own A House for Five Pounds website (catchy name) is running a lottery-like competition: the tickets cost up to £5 pounds and the prizes are actual houses. There isn’t a lot going on at the moment, as the site only includes three houses, one of them…somewhere in a sunny place, judging by the pictures (there is not further information regarding the location), and two of them in Bulgaria.

One thing you do need is patience. The website, in spite of the fact that is designed by a company called TidyEcommerce, takes (literally) minutes to load each page, so you might want to open several pages (in new windows) to begin with, make a cup of tea, then come back and get ready. Once the pages load, don’t expect loads of information; in fact, don’t expect any information, beyond a blurry picture for one of the Bulgarian houses, some more detailed pictures confirming what the text says (i.e. derelict), and…nothing on the sunny location dream property which is apparently worth £250k. But there’s more…

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Although a low price is an incentive for any buyer, people come on the estate market for two reasons: either to find their dream home or to make a profitable investment. Human taste is probably the hardest concept to measure, so for now it’s worth concentrating on the second alternative: how profitable is the investment. As we are now approaching the end of the explosive growth of Romanian real estate prices and moving slowly towards a more linear increase, potential investors should check whether they will be able to get their money back or, hopefully, make a profit out of it (yes, somebody’s been watching Dragons’ Den recently :) )

To keep the story short, the Global Property Guide website did the maths for a large number of countries and came up with a very positive conclusion: “Yields are generally high in Bucharest”. Based on the current market (getting slightly outdated, as the figures are from December 2006) Romania occupies the fifth place in terms of rental yield for a flat in a prime location amongst the European countries.

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When it comes to signing on the dotted line, we all look for one thing when buying a property, whether it’s in Romania or anywhere else: the price. As highlighted by earlier posts, some of the developers prefer to provide the information on a “need-to-know” basis (which sounds a bit ludicrous, but it’s not far from the assistants in the shops arranging the price tags so that you can’t see the price until you’ve already decided it’s something you want to buy).

In a recent article, the Romanian Financial Week website highlighted some of the dangers posed by the pitfalls that may appear when considering/purchasing flats or villas in the ongoing real estate projects. While the list is not complete, it does raise awareness on the “need-to-know” is often far less than the common sense would dictate it and it provides a first level of advice for interpreting the small print when purchasing a property on the Romanian market.

To begin with, it’s the price itself. In an ideal/normal situation, you would be told the actual price and the area of the unit. However, most developers start by removing the VAT; the resulting figure is meaningless, as there are very few buyers that will be able to recover the VAT, so there is no point highlighting the difference. Then you have the heavily publicised price per square meter. For flats, it is a bit more difficult to juggle with the figures, but even there you might end up with a calculated price that also includes the balcony. When it comes to houses, it’s far worse – annexes, terraces, garages might end up bundled in the calculation of the sale price, so that the resulting figure is considerably reduced. What is the alternative? Very simple: ask for the price, ask for the plans (if you want to know the actual surface) and make the calculation yourself.

The second area that can cause headaches is the delivery date of the apartment or villa. There are no significant delays so far (or at least none that the media picked up on) for the finished projects, but with such a large number of ongoing developments it is likely that we will see at least a few of them taking longer than expected, particularly due to the seasonal workforce migrating to western Europe. Although more appealing to an outsider, finishing the work earlier is just as bad for the buyer due to the financial commitments associated with it.

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The Condominium fair slowly becomes an established landmark on the Romanian real estate market. While earlier year it was at its first edition, the fair now is gathering momentum, with more participating companies, wider reach for the market, all unsurprisingly due to the increasing pace of real estate projects.

In spite of less media coverage (you can have a look here for an outline by one of the participants), Condominium gathered a total of 75 companies for this round, presenting a total of 83 projects for potential customers. From €750 million in February, the total value of the investments presented in the October edition of the fair increased more than four-fold to €3.3 billion, as well as €100 million from overseas investments. Bear in mind once again that Condominium focuses exclusively on flats. While the market for houses and villas is not to be ignored, it is easier to attract more interest and a larger number of offers by focusing on flats.
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It appears that country-themed neighbourhoods are the latest trend for the Bucharest real-estate and development market. After the emerging English Village project, another large-scale development follows along the same lines: Austrian Village.

Although there is plenty to talk about the project, I’ll start with the above image, which the developers have proudly put on the website. Yes, the project looks rather popular, at least judging by the number of houses already sold (in case you can’t see them, the baloons next to the buildings all say “SOLD”). Out of the 57 villas of the project, 32 have been already sold; the snapshot dates from the 1st of November 2007, but you can see the updated picture here. The remaining houses for sale in Austrian Village are a mixture of semi-detached and detached houses, with prices between €250k and €350k, with some of the more expensive ones having access to Lake Zmeu.

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After Japanese villas, an American school, a German neighbourhood, the outskirts of Bucharest are about to get a corner of English countryside, complete with housing, architecture, and the all-important village pub! The English Village project is due to build an entire…English village near Clinceni, one of the Bucharest satellite villages. Due to its characteristics, the designers of the project didn’t have to be very innnovative with the name: English Village…would do :).
Position-wise, English Village is quite advantaged. It is located south-west of Bucharest, nearby the Bucharest-Alexandria road (far less congested than the North routes), only 10 miles from the Bucharest city centre and one mile away from the Vlasia Forest (one of the oldest forests surrounding Bucharest and, more important, one of the very few still left in place) and the Mihailesti Lake. The project stretches over 24000sqm, but will include only 710 units. This is because the developer, Helios Development SRL, wanted to follow the English village model not only in the style, but also in the size of the new houses (traditional mansion-style english, rather than crammy, terraced cubicles). The smallest houses are the two-bedroom semi-detached Ascot model (pictured on the top of the left hand side computer generated image), are built on a 300sqm plot and include a usable area of 127sqm. Windsor style follows, with three bedrooms, 216 sqm and a plot of 500sqm, then Buckingham, with four bedrooms, 246sqm and a similarly sized plot of 500sqm. For those happy to settle with less, you can get the 1- and 2-bedroom Richmond Apartments, or, why not, the 3-bedroom apartments in the same 2-story buildings. And yes, to complete the picture, the village will have its own Tudor-style pub, The Old Mill, together with a 1360 sqm retail and service area. All good, but what about the prices?
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The city of Ploiesti is historically known due to its oil industry. Although very far from the glamour of Texas oil companies, most of the extraction and refining used to take place in this area. Nowadays, things have slightly changed – the oil companies took a back seat (although business is still blooming for them) and a new wave of international companies settled at the outskirts of Ploiesti, from Coca Cola to British American Tobacco; recently InBev opened a production facility in Ploiesti (you might have not heard of the name, but surely had the pleasure of one of their products - Stella Artois). Why the interest? Because Ploiesti is well located – slightly cheaper prices than Bucharest, easier access for cargo trucks, and you can get to both the capital (55 km) and the mountain resorts (Sinaia is about 65 km away) within one hour. And, although the Otopeni/Henry Coanda airport is 45 kilometres away, due to the traffic, you might get there quicker than somebody leaving the capital. To summarise, Ploiesti is likely to become for Bucharest what Reading became for London over the past couple of decades.

After the increased interest for large commercial companies, the developers now follow suit with residential projects. One of these is Evocasa Orizont (as you might have guessed, ‘orizont’ is Romanian for ‘horizon’), currently being built on the outskirts of Ploiesti; don’t be put off by ‘outskirts’ – the city is rather small (22 square miles, with a population of 230 thousands. The project is relatively large, at least when compared to the size of the city: 120000 sqm and 1000 apartments and villas, priced at 120 million euros.

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With so many undergoing projects at the moment taking shape in all areas of Bucharest, it is not hard to miss even some of the larger developments. A good example is Emerald Residences, currently approaching its delivery date.

Emerald Residences is located in the area of Floreasca, by the Lake Tei - both central Bucharest (you will be about 3 miles from the city centre) and with a (possible) view of the lake. Although the 12 blocks that comprise the development might seem slightly crowded, the entire project seems to be a bit more airy when you consider the fact that it includes only 279 units and it occupies 15000sqm. Bear in mind that the developer was rather courageous and, while you do get the smallest (studio) flats at 52sqm in 12story blocks, the project also includes a number of townhouses. The details are slightly contradictory there, as the media indicates that the largest houses include a built area of 537sqm, but looking at the plans on the Emerald Residences website the houses seem to be “only” 282sqm (still incredibly generous, as some of them are two- and three-bedroom houses!). The Floreasca area is seen as a relatively green one; adding the lake on top of this you are guaranteed to get some freshness in the air. However, don’t expect crystal water and idyllic shore, as the lake could do with a bit of cleaning, but this is guaranteed to happen in the following years. In any case, you would get your peace and quiet also in the amenities of the development, from gym and fitness centre to an internal garden. But you do have to pay a bit for all these…
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…but you might be a bit short for cash when it comes to the bill. The latest land transaction in Bucharest managed to hit a new record for the amount paid for the acquisition: 53 million euros.

So, what does 53 million euros gets you these days in Bucharest? According to the online version of the Atac Online newspaper, an Irish company paid this record sum for an 83000 sqm plot in the Titan area in Bucharest. Compared to other projects, although not negligible in size, we can’t even talk about a mammoth one: the company plans to build a total of 1000 flats, as well as a 20000 sqm shopping mall. Further, if you do the maths, it comes to 638€/sqm, which is not too bad; however, we’re also talking about a large plot, rather than a single-house, 500sqm footprint.

The land is no longer just a mere part of an investment in Bucharest. The total development costs for the entire project due to be built, including both the residential and the commercial buildings, will cost 120 million euros according to the plans. That makes the land worth just over 44% of the development costs; even if you put the two costs together, to evaluate the overall price, the land will still cost 30% of the total amount.
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Anybody can have a flat or a house (well, anybody who can afford it…); beyond styles, shapes, and sizes, what more can you want from a house? According to Opus Land Development and the Turkish Buyukhanli Group, the companies behind the project, we are all after the magic proportion of 60% ‘green area’ and 40% ‘city area’. And this is how they started their quest to build what they call the first satellite city north of Bucharest – Cosmopolis.

The project is ambitious on all counts. To give you some figures, the size of the plot is one square kilometre and includes, only on the residential side, a number of 4600 residential units in flats and villas. On top of this, Cosmopolis has plenty of amenities, including a bit of everything from cafes and restaurants to kindergarten, a pony club, and, for the more religious ones out there, even its own church! There is a mention of a river beach, but don’t get too excited about sunbathing, you’re more likely to do a bit of fishing or water skiing in there. However, based on the various computer generated graphics, there are plenty of pools throughout the city.
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