Rising construction costs represent the biggest challenge of 2022 for 90% of real estate companies in Romania and other countries in this region of Europe, according to the Deloitte survey on confidence in real estate for the Central Europe 2022, carried out in the second quarter of this year in Romania, Poland, the Czech Republic and Hungary. At the same time, more than 50% of respondents assume that debt financing will become less available in the region in the coming months.
Study participants believe that the war in Ukraine has caused disruptions in supply chains, accelerating rising costs for building materials and energy. This concern, along with that of widespread inflation, shortage of land for developments and market uncertainty is reflected in the sentiment surrounding developer profit margins, with 90% reporting negative expectations regarding this indicator.
The residential and industrial sectors remain the most competitive according to the perception of developers (33% each), with an emphasis on the private residential rental sector, which is becoming increasingly attractive. Investors also favor the same sectors (more than 40% residential and 36% industrial). At the same time, the number of developers and investors interested in the retail sector has increased for the first time since the outbreak of the pandemic, exceeding even pre-pandemic expectations for this sector. This could suggest that investors and retail chains have regained confidence and that the market is now ready to absorb new trading space. On the other hand, the study shows that there is no appetite for real estate investment in tourism (hotels, other accommodation units or leisure facilities) in the near future, and interest in the sector office space is still well below pre-pandemic levels.
“The region’s real estate market has shown great ability to recover from unexpected events, such as the COVID-19 pandemic. However, the increase in construction costs is worrying and it remains to be seen who will absorb it, and by how much. On the other hand, it is encouraging that, in a period dominated by so much uncertainty, developers and investors continue to have plans for expansion (for example in the retail sector) or are looking for new markets. . Romania follows the regional trend, with developments in the residential and industrial sectors, which can also represent a form of protection against inflation – real estate assets can retain or even increase their value over time, unlike other investments. that are being eroded by inflation,” said Alexandra Smedoiu, Partner, Deloitte Romania, and Real Estate Industry Leader.