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News from Members Meta Estate Trust - This year-end could bring a rebound in the number of property transactions

Meta Estate Trust - This year-end could bring a rebound in the number of property transactions

by Meta Estate Trust July 28, 2023

Bucharest, 27 July 2023: During the first six months of the year the Romanian real estate market was characterized by buyer caution, registering minor adjustments in trading prices, according to Meta Estate Trust, a holding company operating in the real estate sector, listed on the SMT - AeRO market of the Bucharest Stock Exchange under the stock symbol MET. However, the end of 2023 could register a slight recovery in the number of purchases, especially as we are already seeing a fall in inflation.

"The housing market is in a period of stabilization, with no significant change in prices of old or new housing compared to the previous year. However, potential buyers show a more cautious attitude, influenced by stressors such as inflation, which is reducing disposable incomes, and difficulties in accessing loans. However, this caution period is coming to an end and the return of buyers to the market will bring price increases, given future supply constraints in the big cities," says Oriol Casellas Deig, CEO of Meta Estate Trust.

"The National Agency for Cadastre and Land Registration shows that in the first half of the year, the number of transactions decreased by 22% compared to last year, which once again shows the reluctance of buyers. However, we note that residential projects in the middle and low categories have suffered the most, given the profile of clients in these categories with lower incomes and still high interest rates," added Oriol Casellas Deig.

Falling inflation will boost the local real estate market by lowering mortgage interest rates and a strong rebound of real estate transactions. Easier access to credit will restore confidence and boost demand for housing acquisitions, as there is still a strong home-ownership culture and a real need for new housing in the local market.

The decrease in the number of transactions during the first part of the year has so far not led to a fall in housing prices, according to the company representative. Given that the building materials have had high costs in the previous years, lowering prices for developers proves to be difficult and there is a possibility we could see this in some projects, especially those with bank financing that need to be repaid in the coming period.

Another stress factor for the real estate market is related to the VAT rate applicable to dwellings smaller than 120 sqm - initially by lowering the threshold for which a 5% VAT could be applied (from RON 700,000 to RON 600,000, from the beginning of this year) and then by the discussions about increasing the rate from 5% to 9% for the same conditions. This change will increase the pressure on those looking for housing and will cause, in the medium run, a decrease in the built floor space on the part of developers in order to be able to create products that suit buyers' budgets.

Despite these challenges, the need for housing will persist and with falling interest rates, demand for purchases will increase again. In this market context, the Meta Estate Trust business model stands out for its agility and ability to adapt to challenges and identify opportunities.

"In less favorable times, a business model such as that of Meta Estate Trust attracts in particular investors who choose to invest counter-cyclically, aware of the benefits they can obtain, benefits that translate into above-average returns," says Oriol Casellas Deig.

The drop in transactions and the volume of pre-agreements in recent months has had another impact on the real estate market, namely an increasing pressure on the cash-flow of projects at the construction stage. In this context, collaboration between developers and entities such as Meta Estate Trust can bring significant benefits, providing not only quick access to financing but also comprehensive project validation. This translates into greater market visibility and improved access to potential clients.

The Meta Estate Trust representative believes that the real estate market will see more and more changes in the long run. Improving the housing stock is an urgent necessity in Romania, given the current nature of the housing stock, which is dominated by small, old, unmaintained, and overcrowded dwellings. This presents a tremendous opportunity for the housing market in the future, especially as Romania is among the countries with the lowest levels of financial effort required to purchase a home in the European Union.

"On top of this, we will witness a sharp increase in the rental market, which currently only accounts for a small proportion of all households. In the future, the impact of short-term rentals, especially in popular tourist areas, will be significant. Platforms such as AirBnB and Booking offer a simple means for owners of tourist accommodation to get attractive returns. Energy efficiency and housing quality will become increasingly important issues for buyers, who are becoming more informed and selective in the home-buying process," says Meta Estate Trust.

In conclusion, the Romanian real estate market is stabilizing in terms of house prices and buyers are becoming more cautious, leading to a decrease in the number of transactions. However, there is every reason for future development. With the reduction in inflation and interest rates for mortgage loans, as well as the development and improvement of the housing stock in Romania, favorable opportunities are emerging, especially for investors with an agile spirit, on the watch for the key moments in the development of this segment.

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About Meta Estate Trust

Meta Estate Trust, a company founded by a group of Romanian entrepreneurs with extensive experience in the capital market and real estate, started its activity more than 2 years ago.

The business model involves investments in the real estate segment, with a short capital turnover cycle, with a focus on the large urban residential segment. The company has carried out two private placements and a public offering of shares, as a result of which the share capital of the company reached the amount of RON 87 million.

As of 29 August 2022, Meta Estate Trust is listed on the AeRO market of the Bucharest Stock Exchange, with the stock symbol MET. More information about Meta Estate Trust shares is available here.

Since its establishment and to date, Meta Estate Trust has invested more than EUR 24 million in 25 real estate projects, having so far made a total exit from 8 of them.

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