Residential developments are heading to new highs in 2022
The second pandemic year ended with a total of about 50,000 apartments transacted in the Capital, more than 40% above the 2020 level, according to Colliers consultants. Nationally, although the context of the pandemic has slowed the pace of new deliveries as a result of the decrease in authorized areas during the emergency state in the spring of 2020, the residential market has picked up and in the first 10 months of 2021 the total area authorized by developers had already reached 10.1 million square meters, almost the level of the whole year 2020, which means that the residential sector is moving towards new delivery highs this year.
In total, last year, homes with a total area of 8 million square meters were delivered nationwide, a slight decrease from the approximately 8.4 million square meters delivered in 2020. Even though 49,621 homes were built across the country in the first nine months of 2021, 1,131 more than the same period in 2020, this slight increase is rather short-term, according to Colliers consultants, because from the second quarter of 2020 the first restrictive measures came into force following the outbreak of the pandemic, which had the effect of delaying some construction sites.
“Nationally, the number of newly built homes is around 67,000 units in 2021, similar to 2020. However, we notice a change in the dynamics of deliveries in major cities versus the metropolitan area. In the first 9 months of 2021, 459 fewer units were delivered in urban areas (-1.4%), while in rural areas there was an increase in deliveries by 1,590 units (+ 9%). This difference is even greater if we take into account the fact that three of the most dynamic localities in the metropolitan area of Bucharest – Voluntari, Bragadiru and Popesti Leordeni – are included in the urban environment”, explains Gabriel Blăniță, Associate Director of Valuation & Advisory Services at Colliers Romania.
In the top of the largest suburbs in Romania are the localities Voluntari, Bragadiru, Berceni, Popesti Leordeni and Chiajna near the Capital, but also Floresti, Baciu, Apahida, Chinteni and Jucu, near Cluj-Napoca, followed by the localities Rediu, Miroslava, Valea Lupului, Barnova and Ciurea, around Iași. According to the number of homes delivered in 2020, in the top of the Romanian suburbs is the locality Giroc (1,844 units), from Timiș, followed by Floresti (1,626 units) and Bragadiru (1,283 units). According to market data, in 2021 the top of the metropolitan suburbs was dominated by Voluntari, Floresti and Giroc.
“Working from anywhere and social distancing have led to a trend of population migration to quieter areas of suburbs or towns around large cities, with significant effects on the residential market. This trend will accelerate in the coming years, as illustrated by the authorized areas in cities versus metropolitan areas. If at present, for every house delivered in the city, 2 houses are delivered in the metropolitan area, in the next 2 years, for every house in the city, 3 houses in the metropolitan area will be delivered”, predicts Gabriel Blăniță.
Another market trend is the construction of residential complexes for rent only. As the gap between rate and rent narrows as market prices rise and lending conditions tighten, Colliers consultants are seeing a growing demand for rents. This demand has so far been met by small investors who bought packages of apartments and put them on the rental market, but now it is starting to attract the attention of big players.
“We are in talks with several developers and investors regarding the construction of ensembles intended exclusively for rent in several areas of Bucharest and we recently witnessed a land transaction for such a project. Another business reality is that, for the first time since 2015, salary level in Romania has increased at a rate both below that of inflation and below that of rising residential prices. The evolution until 2020 has made Bucharest one of the capitals with the most affordable housing in the EU, along with Sofia, compared to the average salary. If at the beginning of 2021 it took about 7.5 years of average salary to buy the average apartment, now we are talking about a period of at least 8 years. Therefore, we expect that in the next two years, a period characterized by high inflation and an increase in interest rates compared to the historical lows of 2020, this evolution will continue and we will have less affordable housing in terms of price”, concludes Gabriel Blăniță, Associate Director of Valuation & Advisory Services at Colliers Romania.