Romanian land valuation

Hi

I've been offered a deal for land in Brasov and would like to assess the offer that's been made. The details are as follows:

Florilor area of Brasov which is about 1km from the commercial center of Brasov with planning approval to build a block of residential apartments

Surface - approx 500 sqm
Legal situation - intravillan
Utilities - all next to the plot
Price/sqm - 260 Euro/sqm non negotiable.

It is speculated this would be worth 500 Euro/sq m in a year's time.

Does anyone have any experience with land valuation in Brasov/Romania and would be able to advise?

Ideally, a contact for assessing this would be ideal but any opinions would be more than welcome.

Btw, I'm aware of the issues with ownng land in Romania as a foreigner and this is where the other issues lie!

Any advice as a newcomer to development in Romania would be much appreciated

Thanks

Alex

I think there's 1 or 2 selling property in Romania, or seeking investors there, auto and ancutza are two who have hyped it alot, you could send them a message to see. Sounds steep though. All said Brasov is nice, stnge folks but nice.

260 euro per sq m would set a new record for this area for sure. 100 to 150 euro would be more like the price, depending on where exactly in Brasov it is located -- I have only been in Brasov about four times and don't know the area you mention by name. The price seems too high though. You would need to check the prices of local land and buildings to get a better idea of the value. Also check the cost of putting an apartment block on it, and work out the selling price of your apartments and see how it tallies up.

Whatever about the current price, the chances of it making 500 euro in a year are slim.

The seller may not be out to dupe you, but may genuinely believe that the land will double in a year. There is a belief in many quarters in Romania that land can only go up in price year on year, and this has created a situation in some areas (notably Bucharest) where land prices have risen to unsustainable levels, i.e. where nothing you build on the land can be sold at a price that will recoup your costs.

No issues around owning land in Romania as long as you have a Romanian company, which can be a bit of a pain regarding accounting etc, but any good accountant will be able to do it for you there.

The price may or may not be a good one. You say that it has planning for a block of apartments. You need to check that out throughly and see the documentation.

There are 3 steps in the planning process in Romania. The first of which is to obtain whats called a 'Certificat de Urbanism'. This is little more than a stamped declaration issued by the town hall as to what might be built on the site. It's NOT a permission to build and is in no way binding upon the local authority.

The second document is what's called a 'Plan de urbanism si dezvoltare' or PUD. This is issued when the architectural plans have been submitted to, and approved by, the local council and chief architect. It's what we might refer to as an outline planning approval. If you have this then you probably will get full planning permission assuming you don't significantly change the plans for your final submission.

The final document, and the most important, is the 'Autorizatie de constructie' or building permit, i.e you've achieved full planning permission.

If you only have the first document then be careful! You MUST check the 'Regim de inaltime' for the zone you are building in. This is the maximum allowable height for the building under the local zoning laws.

At the price you are quoting then I'd say that you would have to be looking at being allowed to build P+6 (ground floor plus 6 additional floors) to be able to profit from it. Ideally you'd want to go more, say P+8-10.

Have you seen the site? If it's standing in the middle of a low rise residential development then I'd say you haven't much chance of better than P+4. No profit in that at the quoted price. This years construction costs are likely to be in the region of 380 - 420 Euros per square metre + VAT and you will most likely only be able to develop around 60% of the surface area of the site. You sholud also build in about 20% into the built surface area of the development to allow for common areas (stairwells, halls, lobby etc) when making your calculations.

If it's only 1km from the central business district and standing beside a high rise block of say 10 floors then it's probably a good deal assuming you don't get objections from the neighbours at the PUD stage (you'll need a minimum of 2 neighbours to agree to the development to be granted you PUD).

You may say, 'Ah well! Sure I'M not going to develop the site!' ,but people coming after you and wishing to purchase it from you in a couple of years time will be VERY concerned about these issues so tread carefully.

I'm currently in the final stages of a grant of full planning for a 15 room Hotel on a 650 sqr metre site so I know the issues as I've come across them. My original intention was to build apartments on this site too but I was only allowed P+4. I'm waiting for the grant of full planning now and then I'll sell it to build apartments on another site (yet to be purchased) with a friend of mine.

As a final thought I'd guess that your site has only got the 'Certificat de urbanism' or it is only destined for a relatively low rise development, otherwise the price, at that distance from a major city business district in Romania, seems a bit cheap if anything.

Also remember to check title, title, title, title, title..............

Thanks guys for some detailed and informative responses. I have only just joined this forum and specifically joined up as I saw some informed responses for those considering investing in Romania (and your names came up several times!).

My conclusion, unsurprisingly, is that I have to do some more detailed research and should, possibly, consider a formal valuation.
However, you've addressed my main concern which was to determine whether this deal was crazy or worthy of further investigation and, particularly, the indiviudals promoting it.

I live in London and plan to visit Brasov in March/April (probably for other deals as I imagine this one would have passed by then). Could you recommend any estate agents/valuers or how I should go about locating any reliable ones?

Btw, I've bought off plan in Krakow and Bucharest and am interested in land/development in Romania to increase my returns.

its very difficult to accurately value romaniam land and any one that
says it will be worth x amount higher than you paid for it in a year may or may not be corrrect. If it does go up its a bonus, but don't assume it will simply go up. Sellers who forecast prices going up usually haven't a clue what they're talking about there only interest in selling thenland and they will say anything to sell. Most sellers have little or no real property expertise.

The only way to value this plot would for you to spend enough time in the area so that you can discover the price plots are changing hands with locals

I'd totally agree with the previous posters sentiments. Nothing will ever be a substitute for careful analysis and on the ground research.

A visit to Romania is a MUST to ascertain the reality of what is on offer.

Agree with the two previous posters about current value of the land.

While it is impossible to predict future values (although as someone said, sellers seem well able to do it!), you can make an estimate of the added value that can result fom developing the plot. If you can calculate the cost of putting (say) ten apartments on it, and you know the price that can be achieved for them, you can decide whether or not the land is worth the money.

Time on the ground, on your own, will give you a lot of answers.

Ok, no substitute for a bit of leg work then!

Thanks gents - will be booking my flight out soon.

Lexa