Investors Still Love Romania!

Recently, the RoREN community of real estate professionals expanded to include investors beside developers, real estate brokers, and mortgage brokers.

To innaugurate, I am pleased to bring you an excellent analysis of the Romanian real estate market by Mru Patel, Founder, Chairman and CEO of European Property Investments (www.epissrl.com). Below you can find excerpts of Mr. Patel’s report. The full text is published at blog.roren.ro.
––––––––––––––––––––––––––
Romania: Debunking The Myths

Today I want to talk about what I believe puts some people off investing in Romania. And I want to explain why the reasons are rubbish!

When I researched Romania 5 years ago, I did a complex spreadsheet (my IT analytical background kicking in) looking at every major aspect of why invest in the country, ranging from GDP, Foreign direct investments, population, finance, growth in middle class etc through to country related real estate market, supply, demand, growth, who is buying, prices, costs, rentals, disposable income, intrinsic property value etc.

I am convinced the country still holds good grounds for good returns on investment, albeit with the current tide has become slightly longer (but NO way as long as UK, USA, Dubai, India etc). I have not read one report or heard any expert in those countries markets say that the prices will recover or get back to where it was in the peak within 5 years.

The Romanian market summary is as follows:
– Old apts have crashed to approx 30-40% from peak (as new apts become available)
– New apts have kept their prices due to demand but I see some developers offering discounts for multiple purchases or special offers (how ever NOT more than 10% max. The developer friends I have here are willing to do early investment deals with higher returns (as with most parts of the world)
– Offices and commercial buildings are still in demand and have kept their prices
– Office rents are still the same or even increased in some areas due to demand and fallen by 10-20% in areas of over supply, largely in the north area.
– Land prices are very difficult to say as this is where the transactions have fallen so there is NO real view of pricing, however as a whole from the fewer transactions it has fallen in general by some 10-20% from a year ago purely because of desperate sales bringing them down (most sellers are holding!)

Romania is not hit as badly as other countries as it does NOT have much debt, mortgaging and finance is new and the National Bank asks the retail/investment banks to put 40% of the credit loaned to the client as security with the National Bank. I then compared the above with whats happening with UK, USA and Dubai. The picture was a lot worse and the recovery period from most analysts a lot longer !

The deals European Property Investments (EPI) and the Investors companies I manage together in Romania so far have returned annualised growth in excess of 50%. Yes 50% per annum! That was exactly a year ago. YES I agree its stopped last year and now as there are fewer to no transactions and difficult to replicate. Even I, at my most bullish, know that kind of growth was NOT sustainable and not even desirable over the long term.

So what is happening is a cooling period and some distressed sales (I think a lot more will follow) which is exactly the situation right now. That is why it’s great news for the property investor with cash. I feel that the times I had just 2-3 years ago are back again and we have another opportunity to see those gains due to the demand and market drivers explained above. I will be raising another fund and if additional funds are received again over the next 3 months, I could still target key distressed deals from my network of sources.

Where do you invest now?

So the limited number of the new deals that I would call „worth an investment in”, are mainly in the city with rentals or potential for rentals to feed the demand. The good deals that I see and get on a daily basis are from:

– Quick sales due to cashflow needs for bank debts
– Repossession sales from banks and liquidators (due to my contacts and network here early access to sell off from these are vital before auctions)
– Early heads up from my surveyors and assessors/valuers
– Friends in businesses that I meet in my social and Real Estate groups that I belong to (3 monthly meetings types of groups)
– Social networks on Romanian groups for Private Equity, real estate and Investors
– others

You want to piggyback on huge amounts of research, the like of which an individual investor can only dream about and you want to reap the benefits of increasing affluence created by the seriously big investors? Then follow the serious money – to Romania. Yes, times are somewhat uncertain right now – probably all over the world. When we look carefully, nowhere is immune.

Those who would like to know more please drop me an email and your interests and potential amounts you would like to invest be it directly, via my structure or into a fund.
–––––––––––

Read the full analysis from European Property Investment:
Part I: http://blog.roren.ro/2009/03/01/investors-still-love-romania-part-i/
Part II: http://blog.roren.ro/2009/03/01/investors-still-love-romania-part-ii/
Part III: http://blog.roren.ro/2009/03/01/investors-still-love-romania-part-iii/