www.business-review.eu Business Review | April 2022
18 REAL ESTATE
Inflation and Ukraine crisis driving real estate prices up by double digits in 2022 The Romanian residential sector saw a 16 percent increase in the average price per square metre in 2021, and the trend appears to have continued since the beginning of 2022. Last year, price hikes were supported by the high demand for apartments and houses, but now they seem to be a consequence of the rising cost of construction materials. Prices of construction materials had been growing since 2020, and they peaked at the beginning of this year
P
By Aurel Constantin
rices for construction materials rose by
a few months ago. For example, going back
significant. We build hundreds of units each
about 50 percent last year, leading to a
to steel products, we saw their prices grow
year so customers are guaranteed to move in
20-25 percent increase in construction
by about 30 percent within just a few days
immediately, homes are completed on time,
costs. The outbreak of the conflict in Ukraine
at the beginning of March,” explains Razvan
and part of the cost of materials can be offset
has added to the unpredictability of this in-
Parvulescu, Business Development Coordina-
by carefully planning the development pro-
dustry, and today it is unclear how prices will
tor at BTD Construct & Ambient.
cess,” said Ozan Tuncer, CEO of Cosmopolis.
evolve in the face of rising bank interest rates
A major issue right now is the lack of
But prices for new buildings will be higher
predictability in the prices of both construc-
this year. “The new prices must also take
“Unfortunately, although earlier this year
tion materials and energy. “At the moment,
into account the cost of land and labour, so
we were estimating a rise of up to 10 percent
it is difficult to predict future pricing levels
our estimate is that prices will rise by about
in the prices of construction materials, this
for these resources, given the global context
15 percent this year. But here at Cosmopolis,
threshold is very likely to be exceeded due to
that involves a continuous rise in inflation
we’ve managed our construction materials
the very complicated geo-political context.
coupled with an energy crisis and the un-
very well, and we're looking at only increas-
While there is still a fairly high demand on
availability of some regional manufacturers
ing prices by one digit,” Tuncer notes.
the market, people prefer to wait and avoid
or raw material suppliers due to the recent
making decisions at the moment, which is
events in Ukraine. Another aspect to consider
follow those of materials, because the entire
understandable,” says Tinu Sebesanu, CEO
are the stock shortages that might occur,
economic context is pointing us in that direc-
at Impact Developer & Contractor. “So, there
which would eventually lead to even higher
tion. However, we are not expecting increases
will be an exponential increase in construc-
prices,” Parvulescu adds.
to be that sharp. The resulting chain reaction
that push up the cost of credit.
“Construction prices will undoubtedly
will probably push the overall prices of new
tion costs, which will lead to a rise in selling
properties up by about 10-12 percent,” says
units. The challenge is finding the balance
CAREFUL PLANNING FOR FUTURE BUILDINGS
between our need to raise prices immediate-
Big developers are affected by the rising cost
is still under the influence of the initial shock
ly—because we’re buying the goods now—and
of materials too, albeit not to the same extent.
generated by the state of affairs and that the
customers’ pace of absorption, which can be
“Though we are one of the biggest players in
entire construction industry needs more time
much slower.”
the industry, we are also affected by this price
to readjust.
prices, including for completed residential
Prices of construction materials had been
increase. I would say that prices have risen by
Razvan Parvulescu, adding that the market
The situation is not much different on the
growing since 2020, and they peaked at the
20 percent on average, but I want to point out
office segment. While demand is still high,
beginning of this year. Although we had start-
an important difference. Compared to small
rising costs are driving up the prices of new
ed to notice a price moderation at the end of
developers or those with boutique projects,
buildings, while the global turmoil is putting
last year, especially for steel-based products,
contracts for the development of Cosmopo-
transactions on hold. “Normally, there would
this year we are facing a different scenario
lis are signed in advance, and we buy large
still be a very high demand on the market,
that would have been impossible to foresee
quantities, so the financial impact is not so
which could not be covered by the develop-
