Upmarket properties in Romania
The number of the rich had an atypical evolution during the recession. This number has increased despite the odds. Specialty charts show that there are more millionaires today than before 2008. And more millionaires mean that there are more properties for millionaires. The experts are providing some tips on luxury real estate investment including the Romanian market which, although has not the size of a developed market, follows the same principles.
Luxury real estate market is less affected by reduced capital flows or political crises, given that these two components do not significantly influence the purchase of land by individuals with exceptional incomes. Billionaires have thrived and multiplied in the last five years, and experts of Christie’s International Real Estate Division say the number of millionaires worldwide grew with 55% compared to 2000. According to experts, the cities where the rich feel comfortable to invest in luxury properties are often those where the luxury real estate market is flourishing, despite the economic crisis.
In other words, luxury attracts more luxury. “The prices of the luxury market are not fueled entirely by the external influences but also by the consumption habits of local entrepreneurs. Then, the value of the luxury residential properties will likely follow the evolution of luxury goods and not the overall residential property prices” said Bonnie Stone Sellers, CEO of International Real Estate Division of Christie’s .
If we reduce the area of reference to Romania, the link between the prosperity of the local rich and the evolution of the price of the luxury residential market is directly proportional. According to the latest reports the fortunes of the Romanian billionaires, there was a decline of an average of 30%. The same happens with the prices of their buildings” Since March 2008, when the real estate crisis was at the beginning, the housing prices dropped by 50% and the luxury market had discounts of 30-35 %. The explanation is that this market has other players than the rest of the market, they were not so much affected by the crisis” said economics professor Radu Zilișteanu.
The luxury real estate market in Romania has several features that differentiate it by what happens in developed markets but fits it into the regional picture. Investment threshold begins lower and acquisitions are still dictated by snobbery. “It is difficult to define the luxury market in Romania, the perceptions are different. I define it as the market accessible to upper middle class.
There are investment opportunities in this market. Most of them prefer to place their money in unique historic properties or properties with special architecture” says Professor Zilișteanu. Bucharest has enough historical buildings completely refurbished on sale . And their number and the dynamic of acquisitions already define a niche of the luxury real estate in Romania. It is a type of investment that does not necessarily yield immediate seeking for rent; they buy an asset that can be converted into cash later.”
Currently, the buildings of this type available on the market, have selling prices between 4.5 and 7 million euros, and renting prices between 11,000 euros (an area of 835 square meters) and 20,000 euros per month (up to 1,900 square meters). We are talking about buildings build at the end of the nineteenth century, beginning of the twentieth century which can be used as office buildings and residences. Are there customers for these architectural “pearls”? According to Professor Zilișteanu, many real estate decisions are dictated by snobbery and as a result there are buyers in the area. “I buy a villa in the X area because others have bought there or because it is trendy to have a home there. But the crisis has changed attitudes and the premium market. Customers are more cautious. It is interesting that in this luxury niche Romania has recently registered purchases made by citizens from the former Soviet space”, says the economist. How did they get here?
Most of them have businesses in Romania and prefer to stay in a residence rather than in a hotel. Until a few years ago, this category of customers made luxury real estate purchases in expensive markets: Great Britain, France or Switzerland. And, like global trends in the market of luxury apartments show, the areas of migration of the rich will trigger investment opportunities with a short term return of investments through rent.
“The globalization of business opportunities, industrialized production and cultural attractions have created a set of major cities that function as a network. The global urban centers have distinct attractions and an easiness of doing business. These attributes act like a magnet for mobile professionals and entrepreneurs, whose number is increasing constantly. Few in number, these global cities tend to relate more with each other than perhaps with any other city in the country of origin” says Lynne Sagely , professor of real estate at Columbia Business School in New York. Specialists from Christie’s consider that London remains one of the most interesting cities in the luxury residential market investment, followed by Los Angeles, a city virtually overrun by Chinese investors and Hong Kong.