Tuesday, March 27, 2007

Romania: Real state market lacks adequate financial support

26 March 2007

The Romanian real estate market still lacks adequate financial support, reads a study by Willbrook Management International Image. 'In the real estate sector, Romania can lose important ground to Bulgaria, because the financial market is not yet sufficiently developed to support real estate projects,' says Daiana Voicu, Willbrook Management International managing director, ACT Media news agency reports.

According to Voicu, the Romanian real estate market has several shortcomings in comparison with the Bulgarian counterpart sector, because the legislative framework does not stimulate real estate investment trusts - REITs.

“Therefore, investments on the real estate market are slowed down or delayed in terms of invested or re-invested capital and although steadily expanding, the Romanian real estate sector is not capitalized on according to its real potential,” underscores Daiana Voicu.

Bulgaria is the only country in Central and Eastern Europe to finance the real estate sector through the Stock Exchange. Unlike the other regional real estate markets, Sofia offers public access to the yields of real estate property and projects through bourse-listed REITs. At first, the REITs were implemented in Bulgaria as an alternative, more accessible method to invest in real estate. Subsequently Bulgaria used it to encourage and boost foreign investments. Taking advantage of the “zero” tax on the reinvested profit offered in Bulgaria, the investors can re-invest their profit in other real estate projects developed in the same country, generating unremitting growth in global investments. Although the absence of REITs can have unfavorable consequences on the long term, the Romanian real estate market is still high in the preferences of foreign investors due to the strong urban population interested in acquiring or renting a house. Real estate experts consider that land for future residential projects is the most profitable investment in the two fresh EU entrants, pointing to the seaside and the capital cities as top-potential areas.
Although the residences on the Bulgarian littoral are priced lower than those on the Romanian littoral, both in Sofia and Bucharest the price per. sq.m. in new residences reaches some 1,000 euros. Of all the countries where Willbrook Management International has on-going real estate projects - Romania, the Czech Republic, Poland, Latvia, Bulgaria and Turkey - Romania holds a leading position with investments worth over 1.2 bn euros of a total of almost six bn euros. “It would be a pity for the financial market and the relevant legislation not to adequately support the real estate sector in the future by financing it also from public sources,” concludes Daiana Voicu.
Willbrook Management International is a corporation specializing in the management of luxury real estate development projects, active in Romania, the Czech Republic, Poland, Latvia, Bulgaria and Turkey.

Source: ACT Media News Agency

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