17th april
2007
Telecom enters most competitive period ever
Romania’s telecom market is reaching saturation point in the numbers of
its users, especially in mobile telecom, and the competition between operators
is strengthening.
At the end of 2006, the number of mobile telephone services users, based on subscriptions
and prepaid cards, amounted to 17.4 million, 30 per cent more than the previous
year, and the penetration rate of this type of services was 81 per cent. “I
think simcard penetration will go to 90 per cent this year,” predicts Orange’s
Richard Moat. Nikolaos Tsolas, CEO of Cosmote Romania, estimates penetration will
reach 100 per cent in two years’ time.
But this is not 81 per cent of the Romanian people. And in the most highly penetrated
markets there is often a 120 per cent simcard penetration. This is due to users
keeping more than one, and up to four or even more, simcards in action at once.“There
is a consensus about that there are 1.2 simcards for everyone who has a phone,”
says Moat.
Orange estimates that effective penetration in the market is 65 per cent.“You
will never get 100 per cent penetration,” he adds. “But there are
probably still 25 per cent of people who do not have a mobile phone.”
Meanwhile, the number of Internet access connections amounted to 3.3 million,
with an 80 per cent increase compared to December 2005, say officials from the
National Regulatory Authority for Communication and Information Technology (ANRCTI).
Among them, almost 1.8 million are broadband connections that registered an increase
of 135 per cent over the end of 2005, while the broadband penetration rate has
reached 8.8 per cent.
“This is a sector with a fantastic development and foreign investors are
obviously interested in it,” says ANRCTI president, Dan Georgescu.
In 2006, in Romania, the telecom sector has followed the European trend regarding
the development of telephone and Internet access services, with big players from
Europe and USA already present on the Romanian market, with major investments.
Preliminary results of a report by ANRCTI shows that the alternative providers’
market share is 20 per cent of the landline market. The number of alternative
providers of landline telephony networks on the retail market rose to 105, compared
to 64 registered by mid-2006.
In its growth rate, Georgescu says the Romanian communications market easily overcomes
markets such as the Hungary or Poland. “Although they rank among the first
places in the European Union in terms of market value, the rhythm of growth has
been slower,” he argues.
Lifting of house-buying rules could see new rise
in prices
Romanian families will find it easier to buy a house following a central bank
(BNR) decision to cut the minimum down-payments for home purchasers.
This move would empower many new buyers on the real estate market and could push
apartment prices up by 15 per cent. But there are fears the mass liberalisation
of the home market could lead families to assume too much on credit and cause
a wave of debts.
BNR is no longer compelling the banks to request a minimum 25 per cent down payment
on the value of a house, paving the way for 100 per cent mortgages. The central
bank is also dropping the rule that a bank can only limit the monthly payment
of mortgage loans to 35 per cent of a consumer’s income.
Following this initiative, BRD – Groupe Societe Generale launched two types
of mortgages for the self-employed and businesses. The former is a 100 per cent
mortgage for a maximum of 20 years, at a value of 300,000 Euro.
Real estate experts predict this will increase the demand for old and new apartments
that could result in a price increase of up to 15 per cent. “This increase
in demand can be justified by developers and Romania’s accession to the
EU, which has lead to a lower level of risks,” says Victoria Linca, senior
consultant, residential at DTZ Echinox.
Meanwhile, Alex Van Breemen, general manager of real estate developer Cascade,
believes this will create much speculations and investors are likely to buy properties
off-plan and sell them for profit before the project is finished.
For the consumer market, Sorin Lacusta, director of residential projects at Regatta,
sees banks lowering the down-payment percentage gradually until extinction. “Consumers
have started to realise the costs of a mortgage and they are very careful before
they choose,” adds Lacusta.
General manager of ING Bank Romania, Misu Negritoiu, believes the BNR regulation
is good as it creates a flexible system where banks set their own rules. But he
is sceptical about the 100 per cent mortgage. “It will be lower than 25
per cent and probably will get lower in time, but will not be eliminated,”
he says.
Consumer lending is likely to see a healthy growth with the recent BNR decision,
argues Peter Weiss, country executive of ABN Amro in Romania.
“I am not very afraid that families will become overly indebted with this
liberalisation,” says Weiss. “So far the biggest safeguard has been
BNR itself, due to it being cautious, and I’ll assume it will continue to
be careful from now on as well.”
How does the Bulgarian property market compare to
Romania?
While Bulgaria’s residential market could soon become saturated, Romania’s
remains the more expensive option.Tahi Ali, managing director at Bulgaria Revealed
and Romania Revealed property agencies, believes some areas south of the Danube
are overdeveloped.
“Sunny Beach on the Bulgarian Black Sea coast has proven to be catastrophic
for some investors who bought recently,” he says. “They are struggling
to achieve decent rental yields as there is an oversupply.”
According to real estate developers Willbrook Management, the areas with the best
investment opportunities in the two countries are the coast and the capital, but
in Romania costs are higher. “You can buy a 75 sqm, two room apartment in
Varna for 45,000 Euro, where in Constanta the same type of apartment will cost
58,000 Euro,” says managing director Daiana Voicu.
“For buying, the real estate market in Bulgaria is more attractive, but
profits in Romania are superior compared to other central and eastern European
countries.”
Like in Romania, the Bulgarian office market is expanding. The biggest office
transaction in Bulgaria was the purchase of Sofia Business Park for 180 million
Euro from German company Lindner.
This is similar to Romania, where Austrian investment fund Immoeast purchased
shopping complex Polus Center in Cluj-Napoca for 210 million Euro from Trigranit.
Unlike Romanian companies which decide to rent office space, Bulgarians prefer
to buy.
“The offer for office spaces for sale in Romania is still low and is easily
and rapidly absorbed,” says Silviana Badea, broker at Colliers Romania.
Retail is on an upswing in Bulgaria, with four shopping malls opened in 2006,
three of which were in Sofia.
Names present in Romania such as Marks & Spencer, Carrefour, Ikea and Zara
are looking to Bulgaria, according to Landmark Property Bulgaria.
A new master plan was approved for Sofia that came into force at the end of January
to set clear rules in the height, types and density and zoning of buildings.
“In the past, there have been some loopholes in the legislation that have
provided opportunities for witty developers to build higher buildings than the
standard or even building in the parks and green areas,” says Tanya Kosseva-Boshova,
executive director at Landmark Property Bulgaria. “The master plan is not
perfect, but the administration is willing to listen to the business to make improvements.”
Unlike Bucharest, which is moving towards the north, developers are looking for
land all around Sofia.
The proximity of Vitosha mountain resorts, only 30 minutes away by car, made developers
build residential projects on the outskirts of the capital.
The average price per sqm for a property in Sofia starts from 1,200 Euro to 1,800
Euro at the higher end and between 650 and 850 Euro at the lower end. 70 per cent
are bought off-plan by foreigners from UK, Ireland and Scandinavia looking for
speculations, ski and spa resorts. In Bucharest luxury prices are similar, with
middle class residences trading at between 1,000 and 1,500 Euro and the top end
at 1,850 Euro per sqm plus VAT, according to the residential department of Colliers
Romania.
Current legislation allows foreigners to buy freely in Bulgaria and take out mortgages,
but land purchase is conditioned by establishing a company in the country. While,
according to Radu Rafirou, tax adviser at Norr Stiefenhofer Lutz, Romanian resident
EU citizens are entitled to acquire land in Romania starting with the date of
Romania’s accession to the EU. Romanian residents are deemed to be those
citizens who “have the right to reside in Romania.”
EU citizens who do not qualify as Romanian residents are entitled to acquire land
in Romania only after 2012.
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