Romania Real Estate Report Q4 2009

Romania Real Estate Report Q4 2009

The global recession hit home in Central and Eastern European property markets in the first quarter of
this year. Market turnover, according to CB Richard Ellis (CBRE) data, fell 57% between the last
quarter of 2008 and the first this year, from EUR616mn to EUR268mn.
One notable event in the market, indeed an event cited as the only one of its kind in Central and Eastern
Europe over the first quarter of 2009, was the closure of a transaction in Bulgaria’s industrial segment
during the quarter.
Other than this anomaly, the Romanian real estate market is under the same pressures as others in the
region, which are generally not attractive to investors. It is important to note that foreigners cannot buy
land in Romania. Under EU law foreigners can buy land for residences or headquarters five years after a
country joins the union, and are entitled to purchase farmland and forest seven years after accession.
Romania joined the European Union in 2007, so foreign investors will have to wait until 2012 before
considering the market.
As far as international conditions are concerned, the declining real estate market may bottom out as yields
stabilise, but there is no sign of this happening any time soon as the recession has yet to play out.
The key issues in Romania remain largely the same as in our last report:
- The major challenge is the relationship between the growth in lending and the growth in nominal
GDP, which is currently exceedingly high
- The continuing caution on the part of Romania’s banks
- There is good room for growth in the construction sector, given the still substantially rural
population
- Any clear sign in improvement in bureaucracy and the legal system
- A market increase in the quality of transport networks and other infrastructure, which has been
supported by European Union funding
These conclusions are based largely on our proprietary Real Estate/Construction Business Environment
Rating (RECBER), the component factors of which we discuss in detail. The conclusions are also set
against recent conditions in the commercial office market – for which we have used office rents in major
cities as a proxy and in the residential real estate market – for which we have used housing prices as a
proxy.

Executive Summary ....5
Key Features of This Report ..........7
SWOT Analysis............8
Romania Real Estate/ Construction SWOT......... 8
Romania Economic SWOT. 9
Romania Business Environment SWOT 9
Real Estate Market Overview .......10
Key Projects.12
Construction Overview .... 12
New And Ongoing Projects............ 12
Residential Construction.. 12
Commercial Construction 13
Hotels And Resort Construction..... 13
Major Projects Table....... 14
Table: Major Projects – Construction 14
Real Estate Investment Trusts In Q309.....18
Table: FTSE EPRA/NREIT Global Real Estate Index, Total Returns (US dollar terms) ..... 19
Table: US REITs, Total Returns (US Dollar Terms)....... 20
Pointers ........ 24
Industry Finance Outlook............25
International Financing... 25
Table: Client Loans, 2007-2013 (% Change y-o-y) ........ 26
Table: Loan-Deposit Ratio, 2007-2013............. 28
Domestic Financing......... 29
Monetary Policy. 29
Table: Romania – Monetary Policy .... 31
Industry Forecast Scenario ..........32
Table: Housing Prices At A Glance – Central And Eastern Europe Etc........... 32
Table: Office Rents – Central And Eastern Europe – CBRE 34
Construction . 34
Risks ............. 35
Commodities . 35
Macroeconomic Outlook.. 36
Table: Romania - Economic Activity .. 38
Real Estate/Construction Business Environment Rating ........39
Table: European Real Estate/Construction Business Environment Ratings...... 39
Real Estate/Construction Business Environment Rating. 39
Romania’s RECBER........ 40
Project Finance Ratings: Outlook for Central and Eastern Europe ... 42
Table: Design And Construction Rating ........... 44
Table: Commissioning And Operating Rating .. 45
Table: Overall Project Finance Rating............. 47
Romania’s Business Environment.. 48
Table: Business And Operational Risk Ratings. 49
Latest/Recent Developments .......... 50
Institutions .... 51
Table: Legal Framework Ratings .. 53
Infrastructure 54
Table: Labour Force Quality......... 55
Market Orientation .......... 56
Table: Europe, FDI Annual Inflows, 2006 And 2007...... 57
Table: Trade Ratings ....... 59
Table: Top Export Destinations..... 60
Operational Risk 61
Company Monitor......62
Holcim Romania 62
Alstom........... 64
Strabag ......... 65
Bouygues Romania .......... 66
Mivan............ 69
TriGranit....... 71
Country Snapshot: Romania Demographic Data........72
Section 1: Population....... 72
Section 2: Education And Healthcare. 73
Table: Vital Statistics, 2005-2030.. 73
Section 3: Labour Market And Spending Power ............. 74
Table: Employment Indicators, 2001-2006....... 74
Table: Consumer Expenditure, 2005-2010 (US$) ........... 75
Table: Average Annual Wages, 2006-2010....... 75
BMI Forecast Modelling.76
How We Generate Our Industry Forecasts ....... 76
Construction Industry ...... 76
Bank Lending 77
Real Estate/Construction Business Environment Rating. 77
Table: Weighting Of Indicators ..... 78
Project Finance Ratings Indicators .... 80
Table: Design And Construction Phase ............ 80
Table: Commissioning And Operating Phase – Commercial Construction ...... 82
Table: Commissioning And Operating Phase – Energy And Utilities . 83
Table: Commissioning And Operating Phase – Transport... 84
Sources ......... 85