COVID-19 will impact each Romanian residential market segment differently

The impact of the pandemic on the Romanian residential market will be different for each category of buyers, correlated with the sale price of the properties, the most affected being the segment that addresses buyers interested in properties with prices below 1,300 euro / sqm.

This category represents the largest part of the offer of new homes in Bucharest, respectively 64% of the total.

Under these conditions, government measures such as the Noua Casa program or the reduced VAT rate will continue to support market dynamics in these times of uncertainty.

The middle-upper segment which represents approximately 30% of the total number of units in the market and have selling prices between euro 1,300 euro/sqm and 2.000 euro /mp will be moderately affected as the buyers from this category presumably have more stable incomes and are more resilient to market downturns.

Nevertheless, the small investors looking for buy-to-rent opportunities suitable for short term accommodation will step-back from this market on the middle term.

Moreover, the presence of the opportunistic buyers will increase as they will be looking more actively for distressed acquisitions.

The high-end segment which represents approximately 6% of the total number of units in the market and have selling prices above 2,000 euro /mp will be the least affected, as it proved to be the most resilient segment in distressed periods over the time.

JLL don’t foresee a change in the potential buyers’ appetite for luxury residential properties, the demand is expected to remain stable.

The level of new units transactions in H1 2020 was situated somewhere at 8,000 units for Bucharest and 3,000 units for Ilfov, assuming that 60% of the Bucharest transactions officially registered by the National Agency for Cadastre and Land Registration were with new units, while for Ilfov new sales represent 90% of total transactions. ​

This represents a 7% decrease when compared to H1 2019.

About 4,000 new homes were delivered in Bucharest and Ilfov in the first 5 months of this year

Overall, the new supply in 2020 will be less than 10% smaller than the 2019 level, reaching approximately 12,900 units with potential delays in construction completions.

However, the number of newly supplied apartments could fell by up to 50% in 2021 reaching approximately 6,500 units and might continue the downward trend in the next 2 years.

Therefore, the effects of the current crisis will be clearer on the longer term, when we will be able to evaluate its impact on the projects currently in the planning phase.

In the mid-term, JLL expects developers to be more cautious and opt for the breakdown of the projects into a larger number of phases in order to limit the exposure to market fluctuations and to keep the flexibility of adjusting their product to potential changes in demand.

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