by Mihai Dumitrescu, managing partner, Crosspoint Investment Banking & Real Estate
Real estate has been an interesting topic lately.
There are differing points of view on where real estate is headed, at the end of 2014, even by advocates of the free market. Some think we are in another bubble that will pop again, while others think that real estate prices will continue to go up and maybe even enter a new bubble at some point, while maintaining that it is not a bubble yet.
Despite the volatility of an up today and down tomorrow economy, real estate has historically been considered the safest investment one can make.
According to a Gallup survey, Americans, who triggered the economic crisis, are also the ones launching the recovery signal: they now think of real estate as the “best” long-term investment, followed by gold, stocks and mutual funds, savings accounts/CDs, and bonds. Also, U.S. millionaires see real estate as the top alternative-asset class to own this year, according to Morgan Stanley. About 77 percent of investors with at least $1 million in assets own real estate, according to a survey released by the New York-based investment bank’s wealth-management unit. Direct ownership of residential and commercial properties was the No. 1 alternative-investment pick for 2014, with a third of millionaires surveyed saying they plan to buy this year. Twenty-three percent said they expect to invest in real estate investment trusts, the second-most popular choice.
Wealthy investors see stocks getting expensive and interest rates staying stable or even declining over the next couple of years. This is the reason why they are looking more closely at alternatives including real estate for returns and income.
In Romania, investors` appetite came back for certain categories of investments. On the one hand, new residential projects, very well located (near metro stations, parks or shopping malls), with quality finishings and reasonable surfaces were on top of the list in 2014. On the other hand, investors started scouting various properties to lease, as these generate a certain type of turnover – office buildings, commercial spaces, logistic parks leased to solid companies for a period of 5-10 years.
Land opportunities have been highly scanned in 2014, especially by developers of residential projects. In general, they scouted for lands with surfaces of 1.000 – 3.000 sq. m., very well positioned, where the impact of the land in the price for built square meter didn`t go beyond 150 – 300 EUR / sq. m.
Still, investors maintain themselves cautious – whether we will experience a new real estate bubble or not, this is a larger debate that is very much depending on the forecoming political future.
