Prices of new apartments to plunge

“The main decline will be registered for homes built by small developers. Due to pressures from lenders, they will be forced to sell homes in various stages of construction at liquidation prices,” Popp said. The financial crisis, which has had a significant impact on the real estate market, led to lower housing prices and financing difficulties for both developers and clients. According to Popp, the number of projects started in 2008 on the residential segment is likely to be some 20 percent lower than initially announced.

Furthermore, “the market was expecting some 50,000 new units in 2008, but due to the crisis and the government decision to lower value added tax [VAT] for new homes to 5 percent, the number of units actually delivered will be 10-15 percent lower,” Popp added. The outgoing government decided to lower VAT for new homes with less than 120 square meters and cheaper than €100,000 to 5 percent from the current 19 percent level. Because of expectations based on government promises, apartment buyers are likely to postpone to January 2009 the signing of some 100 contracts with Impact, with a negative impact on the developer’s revenues in the fourth quarter and, possibly, revenue estimates for 2008. “I cannot yet tell how such a delay will mean, but we estimate that over 100 contracts scheduled for year-end will be signed in 2009. In financial terms, this could mean millions of euro,” Impact’s President said.

Due to the crisis, the construction of some 40,000 new homes is to start in 2009 and most of these will be built by owners rather than developers, Popp added. (M.B.)