While the costs of construction materials in Romania rose during 2022, impacting the ability of developers to self-finance their projects, the current outlook is not pointing towards an improvement of this situation this year, according to an analysis by the Eastern European Construction Forecasting Association (EECFA).
With global logistics and energy markets upended by the pandemic and the war in Ukraine, a decline in construction costs remains unlikely, wrote Dr. Sebastian Sipos-Gug, EECFA’s researcher on Romania.
”Developers are pushed into either eating some of the increased expenses or passing them along in the form of increased prices,” according to the researcher. Furthermore, investors could become more risk averse due to the increase in construction costs, more difficult financing conditions and an overall uncertain economic outlook.
Sipos-Gog adds that once the inflation rate falls into single-digit territory, the central bank might reduce the key interest rate which currently stands at 7%. This would cheapen bank loans and have a positive impact on demand for residential units that are purchased by end-users or investors.
Moreover, a significant portion of mortgage loans in the past years were issued in the domestic currency with fixed interest terms of 5 years or more, which makes them quite resilient to short term shocks.
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