Amid a good feeling given by the positive economic growth figures for Romania, the demand for residential properties in Romanian cities and bigger towns has been on an upward trend. But Romanians have also started to be more quality-oriented when it comes to buying a house. And this may be bad news for residential developments that do not create good investments, better living spaces, incorporate technology and invest in infrastructure, Maggie Kitshoff, director of residential projects at Prime Kapital, believes.
Prime Kapital, an integrated real estate developer, investor, and operator that mainly focuses on central and Eastern Europe is currently developing two residential projects in northern Bucharest. The company also has plans for expansion outside the capital and started with a mixed project in Iasi.
The developer’s director of residential projects Maggie Kitshoff talked to Romania-insider.com about the trends on the Bucharest real estate market, the Romanians’ growing appetite for home ownership and their behavior when making a property investment, and about Prime Kapital’s developments and future plans in Romania.
Recent data shows that the supply of new apartments in Romania is getting near the 2008 high. What has been driving this new development frenzy?
Romania is experiencing positive economic growth. This growth created the means to buy houses in a quest to have ownership. This is especially true for cities and lathe towns. We also see a growing need not only for a place to sleep, but for quality and innovative projects, projects that tick all the boxes, and the supply of such projects remains low. We estimate that the residential real estate market in Romania will continue to offer positive prospects over the long term. Residential developments that do not create good investments, better living spaces, incorporate technology and invest in infrastructure will suffer, nonetheless.
What are currently the main trends in the residential real estate market in Bucharest?
I think for too long ‘trends’ were artificially driven by cost efficiency and high profit margins, instead of sustainability of projects, quality, and honesty. People are informed and are starting to demand projects that offer quality, security and creative and ‘out the box solutions’ for all steps associated with acquiring a property, such as finance, central management, and maintenance. Value is placed and premiums are paid for better communal services that can actually transform into small communities in hubs, instead of projects of empty promises. This means that people started to see the value of investing in parking spaces in basements, to unlock the potential of better green areas.
Another worldwide trend is to mix office, retail and residential neighborhoods, again in a quest to rebuild neighborhoods. This is our vision with our project in Marmura, to redevelop a derelict site that poses several security risks and is really an eyesore to the community of Bucurestii Noi; this will provide apartments and services for the offices that will be delivered in the area, and promote a better work-life balance and most importantly prevent urban sprawl.
The trend all over the world is to redevelop these old factories and brownfield sites, as they are underutilized, have good connections and infrastructure, usually strategically placed closed to the traditional city centre. This means that the already existing residential areas will increase in value.
We launched the residential division in 2018, committing ourselves to improve market standards in terms of project quality for prospective owners. For too many times and for too long, many homeowners received poor quality for their money. We want to change that and to show that it is possible to build quality projects for competitive prices. We have already announced the first two projects in Bucharest: Avalon Estate in Pipera area - the largest integrated residential complex in Bucharest, comprising 733 units (villas, townhouses, and apartments) - and Marmura Residence, located in Bucureștii Noi, which offers 458 of modern units, to the highest standards.
Which are the hottest areas for residential development in Bucharest and why?
In our view, the Northern areas remain interesting, and more specifically, Bucuresti Noi is unique, as mentioned before, it offers great connectivity and is perfect for developing an urban hub of apartments and offices and all related services.
How do you expect the prices of new apartments in Bucharest to evolve in the next 3-4 years? Do you see the potential for increases?
If we get the primary drivers such as location and access, the most obvious evolution that I see in prices is that buyers will start to compare the quality of projects instead of the net usable areas. This will continue to be the case, as more and more quality projects come onto the market and will drive bad developments into a corner.
What about the costs? Besides higher wages for construction workers, what other costs have increased?
It is true that an optimistic market drives prices up, from wages to materials. But there are also the intrinsic drivers, not related to materials, but rather quality of the project.
We see that better-quality projects sell for what is regarded as a ‘premium’, where I believe that all projects should inherently deliver quality irrespective of the segment. Buyers will have to educate themselves, that quality projects possess certain elements that could drive costs up slightly, such as better green areas, basement parking, but it is a small price to pay for better living conditions. We continue to find solutions where our projects can sell at competitive rates through good planning, cost optimization, and scale.
Another aspect is that many developers will pay too much for land in an optimistic market, and this will artificially drive up prices and in this case, buyers may find that they overpaid as a result. Therefore, it's important to take charge and ask the right questions.
Given current conditions, is the development activity still profitable?
As stated above, we are competitive through better management and planning.
In the near future, do you see any risk of a new crisis like the one in 2008-2009, which has put many developers out of business?
I cannot say. Irrespective of whether this may be the case, as a business, we are not planning for the best-case scenario and we always consider that there will be changes in the outlook. Therefore, we manage our business in such a way that we can weather these downturns and continue to execute our long-term strategy.
How much does Prime Kapital plan to invest in the two ongoing projects in Bucharest?
Considering that we will be built two large projects with a combined GBA of approximately 173,000 sqm & large green areas and facilities it is a significant investment. However, we do not want to talk ‘big’ when it comes to money, our objective is to build quality and invest well, the amount is therefore not relevant.
Do you plan to expand outside Bucharest as well?
Yes. We have a long-term vision and will continue to add projects to our pipeline.
Maggie Kitshoff has been the director of residential projects of Prime Kapital since 2016. She brings more than 16 years’ experience in turnkey construction projects with an emphasis on niche residential development projects. She co-founded and managed a Johannesburg based business from 2002 – 2016 shortly after she obtained a B. Com LLB from the University of the North West in South Africa.
(Photo source: the company)
(Photo source: the company)
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