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Costlier building materials push value of residential investment projects up 20 pct

The investment amount real estate developers announce at the launch of residential projects can rise 15 – 20 pct until completion, mainly because of building materials growing more expensive.
However, the price advance can be less when the developers take into account an error margin at the calculation of the investment.
Usually, unforeseen additional costs arisen during the development of a real estate project trigger a price increase for the end product. Workmanship costs increased in 2008 by a significant 20-25 pct and costs with architects, property consultants, marketing and banking interests went up too. Whilst in 2006 additional costs stood at 60 euro/sqm, they now reached some 110 euro/sqm. Some experts say these costs, plus the rising construction and land price take the developers’ profits towards nil.

According to Andei Marian, manager of the local representation of US real estate consultant Coldwell Banker, in 2008 building costs increased 25 pct and house rents – 40 pct from 2006 and the first part of 2007, mainly because of the labour shortage.
Avner Bar, director general of Israel’s Ocif Romania, says the boom in the real estate sector triggered a severe shortage of construction companies, plant and workforce.
Construction costs increased globally too, one of the reasons being the high demand for iron and building materials in countries like China or India.
About 60 pct of the total residences built in Romania are in Bucharest, followed by Cluj-Napoca (center).

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