Mauricio Mesa Gomez, Country Manager of Cordia Romania and Spain and member of Cordia’s Board of Directors discussed the company’s development plans and the prospects of Romania’s residential market with Property Forum.
This interview was first published in Property Forum’s first annual “The 50 most influential people on Romania’s real estate market” publication.
How is the development of your first Bucharest project, Parcului20 progressing?
We have uninterruptedly continued construction works on Parcului20 throughout the pandemic and the first residents moved in starting March 2021. We started construction works on phase two of Parcului20 in November 2020 and we have recently poured the slab across the 9th floor. We are also moving forward with the project’s infrastructure and landscaping and we are currently arranging the 3,000 sqm private garden, destined for the residents, and the space in front of the project, a green buffer of grass and trees between the project’s first building and Parcului street.
Many say that working from home is expected to remain a regular practice even after the pandemic is over and this might create additional demand for larger living spaces. Do you agree with this prediction?
People rediscovered their homes, which are now more than just the place where you are going to sleep after a day’s work in the office. In many cases, the home is now also the workplace and even the place where your kids are going to school. The preference for larger residential spaces existed even before the pandemic, and the context generated in 2020 emphasized it. The demand for larger residential spaces is growing, but not all clients can afford to buy those apartments. One solution would be to stimulate the acquisition of larger apartments through tax facilities, such as a 5% VAT rate for apartments with a maximum price of €140,000. The moment this law enters into force, more people will be able to afford to upgrade and buy a larger apartment.
Have you noticed any changes in what clients are looking for since the start of the pandemic?
The lockdown in March-May 2020 was a turning point for the residential market in Bucharest. We kept in touch with each other in the online environment and, when the quarantine ended, we met again and tried to resume the plans we had made at the beginning of the year. We have succeeded and we are proud that, during 2020, we have managed to meet the objectives we set for the year, namely the completion of construction works on Parcului20 phase one and the start of construction works on the second phase of the project.
The pandemic brought changes to the residential market and some of them are permanent. The need for safety and comfort is continuously growing and is manifested not only in the interior of the apartments, but also in the facilities offered by the project and the urban environment in which it is located, and all this influences how the projects look on the outside and their location as well. People are now searching not only for an extra room, as compared to their requirements before the pandemic, but also for spaces where they are able to relax, like terraces, balconies and gardens.
To be close to parks and sports facilities is also important for the buyers, as well as modern technology, which is present in both the project itself and in the sales office in the form of a 3D application through which the positioning and orientation of the apartments can be easily visualized. Parcului20, comprised of 485 apartments – 265 in the first phase and 220 in the second phase – is perfectly adapted to the new reality. Having over 30 apartment configurations available, a private garden of over 3,000 square meters, integrated smart home systems, charging stations for electric cars and parking spaces for both cars and bicycles, a yoga garden and being only a few minutes away, by bike, from Herăstrău Park, the residential project located in the Expoziției area in North Bucharest is designed for liveability and energy efficiency. These types of facilities are a standard for Cordia’s residential projects on the markets where the company is present and will be integrated in our future projects as well.
Do you plan more developments in Romania? What are your current expansion plans?
Cordia Romania has a land portfolio in Central-North and North Bucharest that provides a 2,000-apartment pipeline in the medium term. We are currently assessing which particular land plots we will develop next, depending on the market conditions and other factors. We intend to launch a new residential project this year, on a land plot located in North Bucharest.
Are you interested in entering regional markets?
The regional markets in Romania are growing at a fast pace, but Cordia Romania is focusing at the moment on the residential market in Bucharest. Cordia is one of the largest residential real estate development and investment corporate groups in the Central and Eastern European region with a strong and well-known brand and presence in the mid- and mid-to-high segments of the for-sale market in Hungary, in Poland, Romania, while also undertaking a pilot project in Spain. Cordia is also active on the UK market, through Blackswan Property.
Apartment prices in Romania have been growing steadily for quite some time. What are your expectations for the next 12 months?
Despite the two-month lockdown in March-May 2020, the residential market in Bucharest continued to grow throughout the year, both in terms of apartment sales and prices. The year 2020 started on the same growing trend registered in 2019, but the lockdown caused by the COVID-19 pandemic drastically reduced the sales in March-May. The sales strongly recovered in H2 2020, and by the end of the year the number of sold apartments, old and new, reached 37,097, compared to 34,478 in 2019, according to official data.
The average annual price increase in 2020 was approximately 3.5%, following the ascending trend that started in 2015. Residential prices registered a 1.9% increase in Q4 2020 compared to the previous quarter, reaching an average of €1,465 per sqm. This increase came after small price decreases of below 1% were registered for two consecutive quarters. The increase in the last quarter is a clear sign that the residential market was not seriously affected by the COVID-19 pandemic. Moreover, the Q4 2020 price increase seems to compensate for the previous quarters’ decreases, proving the relative stability of the residential market. For 2021, we are estimating, based on the increasing sales level in Q1 2021, that apartment prices will continue to grow at a steady and healthy rate.
In Q1 2021, apartment sales in Bucharest increased year over year, according to official data. 10,791 units, old and new, were sold in Bucharest in the first three months of 2021, compared to 7,746 apartments in Q1 2020.
What are the biggest challenges you have to face as a developer?
The most important aspect for a developer is to have predictability regarding fiscal and regulatory matters, in order for the company to be able to create and implement sound business plans in the medium- and long-term. We have saluted the Romanian Government’s decision in 2020 to raise the upper limit for the price of dwellings subject to a preferential 5% VAT rate from €93,000 to €140,000 because this extension would have granted access to larger apartments to more people and thus the quality of living would have risen.
As we were starting to make plans and develop new residential products to fit this new demand, the measure was postponed to January 1, 2022, instead of being implemented on January 1, 2021, as initially announced. This postponement may have a negative impact on the market, as some buyers might postpone acquiring an apartment until next year when hopefully the new law will come into force.
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