Although the emergency period blocked real estate transactions, including in the residential market, the residential segment recovered rapidly from May, the total number of transactions in the first nine months of 2020 decreased by only 8% compared to the same period of the previous year.
Similar to previous years, the average price of new residential units increased by 4% in the first nine months of the year.
The impact of the COVID-19 pandemic became visible in the second half of the year, when prices fell, with the average price / sq m reaching 1,400 EUR / sq m for new apartments in September. In recent months, however, there has been an appreciation of the prices of old apartments in Bucharest, with an average difference of 60 EUR / sqm between old and new apartments. In comparison, last year this difference was over 110 EUR / sqm. This could be attributed to the fact that, given the experience that customers went through during the 2008 financial crisis, they are cautiously approaching projects under construction.
In addition, the supply of old apartments on the market is currently higher due to the declining profitability of the rental market. “Our report shows that diminished customer confidence in the new residential market, although based on real experience, is no longer justifiable in 2020. The residential market is completely different, there are a significant number of institutionalized, experienced developers with funded projects largely from own resources, which no longer rely on loans to complete projects. In turn, customers have much greater access to information related to all aspects of the market and can make informed decisions”, explains Ilinca Timofte, Research Analyst, Crosspoint Real Estate.
Another reason why customers prefer homes in old blocks of flats is the 19% VAT rate for new homes more expensive than 450,000 lei. "For products intended for middle-income customers who want, for example, a new two-room apartment, its purchase is restricted exclusively by the high VAT rate, provided that the average price of such a product is more than EUR 100,000. A single 5% VAT rate for new homes would have a positive effect on the residential market, both in terms of development and customer satisfaction ”, adds Oana Popescu, Associate Director, Residential Capital Markets, Crosspoint Real Estate.
The areas with the highest prices remain those in the center-north (Floreasca, Aviatorilor, Primaverii), while the western and southern peripheral areas are still the cheapest. Although some customers expect sharp price declines, they will remain at the same level or decrease slightly, at least until the end of the year. (source: Crosspoint)
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