Higher construction costs, higher apartment prices

Developers are facing a 10% spike in construction costs this year, as compared to last year. Mauricio Gomez, General Manager Cordia - Futureal Group told the audience at CEDER 2019 that besides the increase in construction costs, everyone is concerned about the lack of manpower and access to finance.

"Banks are more selective when financing residential projects, as the former crisis is still in the memory," he said. However, the good sign is there demand is not coming from big investors, but from individuals, "which is good for the fundamentals of the market."

Bogdan Oslobeanu, CEO of Impact, believes the increase in costs will ultimately result in higher prices for end consumers. He pointed out that the group recently concluded negotiations for the next phase of its Luxuria project and noticed "a cost increase of over 10% year to year". Oslobeanu sees this is a symptom of good economic development."There is pressure on salaries,so purchasing power will follow and we shall see a bigger, sustainable demand. Our main volume project Greenfield saw a capital appreciation of 40% for the buyers in the last four years," he concluded.

As salaries more than doubled in Romania over the last ten years, Doron Klein, CEO of AFI Europe, considers this to have made a significant change in the comfort of potential buyers. He agrees that contractors are facing difficulties related to manpower and the hourly fee which is more expensive, but "it'll get better."

"The margins are being affected, so we just have to be more efficient in designing the project and preparing it for tenders," Klein concluded.