The worse the market gets…The more unserious many people become…

Monday, August 10th, 2009

“Prima Casa” faces problems in Timisoara

Part 1

I was telling you few days ago that Timisoara and Cluj are very important cities for someone who wants to study the impact of “Prima Casa” project. Well, the first indications I can provide you are not very good. Ofcourse it is still August and nothing is sure, as most of the people are not into “business mode”, but the signs are significant…

Hello and have a nice week! I am back from a daily trip in Timisoara on Friday, where I was in meetings non stop from the moment I arrived (10.30) until the moment I was driven to the airport (18.15). Many new important deals are “on the way”, but they always need many meetings and serious thoughts before they will be finalized. (Yes, this is for my case, of the not intelligent, slow person who thinks a lot. I know that there are many guys out there who are asking the investors to solve all issues and pay money in few days…)

Plenty of owners rose their prices 20 – 100% for ridiculous reasons…

It could be funny, if it would not be that sad. I spoke with several agents in the city and it looks like after the first days, when indeed there were plenty of interested buyers and I heard of some transactions too, things have ceased now. The main reason is the new trend of many owners of apartments, especially the ones with 2 rooms close or in the center of the city. Before the programme to be launched, these properties had prices around 30.000 – 50.000 euro (This was the real price someone was obtaining, when he really wanted to sell). Today, there are plenty of owners reported having raised their price to 60.000 euro! Why is that? Because they heard that the State will guarantee loans up to this amount and they understood that this is the amount someone can pay.

Bingo! Again some people started the same like in the past (if they ever stopped)! So, it doesn’t matter what is the financial capacity of a potential buyer. If the bank can lend him 60.000 euro, he should pay this amount, either his income allows this or not. People look only in the ability someone has to obtain a loan, not at the ability someone has to pay it back. Or if it makes sense for him to buy the apartment in a high price, even if the loan will be approved.

“From 95.000 to 70.000 euro”, or maybe 55.000 in reality?

On Friday I was reading in Ziarul Financiar that an apartment which was bought in Bucharest in May 2008 for 95.000 euro values now 70.000 euro. From the description I read, I don’t think I would find someone willing to pay for this more than 50.000 – 55.000 euro (2 rooms apartment, 49 sq.m. in a… third class area). The owner will have to pay a loan for the following 30 years, paying a price which is almost double than the reality today. Obviously, he declared in the short interview he gave to the journalist Cristi Moga that he was not so happy.

So, now let us go back to Timisoara. After this crisis, the problems, the difficulties and everything else, what do we see?

(tomorrow the second part)

Dragos

Hello mr. Ilias. I just wanted to tell you that i really enjoy reading your book. I found out many interesting thins, and i want to make a compliment to the way your book is edited. i agree with plenty of things that you published in this book, but with some other things i don`t. At the end of the day your book made me extract some conclusions, and if a book can do that, then it mean`s it`s well written

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