“80% of the residential projects are described as ‘luxury designs’, yet you are actually afraid to walk in.”
An interview with Georgian Marcu, director of Green Angels real estate company, Bucharest.
Residential market in Romania is just about to come of age, says Georgian Marcu, director of Green Angels Real Estate Company. And during this period there were three years of building boom, when they built by breaching every rule, and six or seven years in the aftermath of the crisis. Today, the real estate sector is catching its breath, yet the quality of average housing is still poor.
They build badly also because very few Romanians are well-educated in matters of quality housing, says Marcu; in towns the parents of this young generation lived in the apartments generally allotted by the enterprise where they worked, and the village dwellers built at random and, obviously, by breaching every rule. “And now we expect that consumer’s choice be well-informed, when he or she has no education in this field?” Marcu wonders.
Vlad Odobescu: What did people learn during all these years after the Revolution? Did their vision on dwelling evolve in one way or another?
Georgian Marcu: Unfortunately, very little. We are talking here about the general public. Fine, there are competitions, wonderful buildings for the market are designed, yet they narrowly stand for 0.0001% of the total amount of the building stock. The consumer hasn’t evolved much. You can spot a difference within the middle class. The latter could travel and see what’s on foreign markets, how a building should look like. In my opinion, people don’t follow healthy criteria when they choose to buy a house.
Neither do I think that the same purchase criteria should function in Bucharest and Iasi. Bucharest is an extremely particular case. Don’t forget that this is the most crowded city in Europe and on the 4th place in the world. Two years ago things went 6-7% worse than three years ago, and last year, 6-7% worse than the previous year. It means that the traffic is heavier and we spend more time in traffic. What does it mean? Besides its impact on productivity, it takes from children’s time, from the time you spend at home. In the end, the quality of life declines.
What should people demand from a dwelling?
The first criterion in Bucharest should be the zone: the smaller amount of time you spend in traffic from home to work, to school, park, the better it is. For me, this criterion comes first. Next comes the budget you fit in and see if you can afford an apartment in a new or an old block. As to the new blocks, before you look at the layout, you should check on the developer and visit other blocks the person might have built. You may be shocked to see blocks that were completed four or five years ago but look far worse than those built in the 1980s, although new modern building technologies, new materials have appeared. 80% of the residential projects are described as ‘luxury designs’, yet you are actually afraid of walking in.
What are the biggest problems posed by the new housing estates, the mass housing, I mean?
In most cases, their location and lack of infrastructure. Just think about the apartments from Popești Leordeni: the planning office is staffed with two-three people, and they developed tens of thousands of apartments. I don’t think they can physically check on all those blocks.
There are many issues at stake, but everything starts from bad planning, from the city masterplan. Let’s look into the edge zones like Popești Leordeni or Roșu. Here comes the developer and says: “I’ve bought some land in the middle of the field, there is no street, but until the building is over, you’ll have also a street”. Certainly, I haven’t stipulated it in the contract, why should I? And in the end you find yourself living on a street which you cannot walk unless you have rubber boots.
Recently I’ve been somewhere near Mihai Bravu tube station, where they’ve built extensively. I was looking at the streets in-between 8-10 storey blocks: they are three meters wide and crooked somehow, because some have pushed their fences slightly onward … While driving I wondered if I had to fold my rear-view mirror or not when driving past. No fire engine can drive in there. [Authorities] allowed them to build without having access roads. It has been a chaotic development, specific to Eastern Europe.
In an article you mentioned the need for city development strategies. I know they exist, but they are sketchily outlined.
That would be the first step to be taken. Hypothetically, there are strategies devoted strictly to housing. Just think there is a land use plan which, hypothetically speaking, has been under elaboration for 7-8 years. Nobody has taken the responsibility of stating that things will change, that this city has to be developed. How shall we do it: vertically or horizontally? Let’s make myself clear: none of these solutions is the ideal, irrefutable one.
The general trend is vertical development, but we have to take the seismic risk into account; there is no such a thing in other towns. Well, once we’ve agreed on it, we can say we want to build only houses in town. In this case, what shall we do? We choose to develop horizontally to the periphery. But we should also need infrastructure: public transport, streets, tube, gas mains and electricity; it’s mandatory we create decent lots of land, and then grant building permits.
I was talking with some developers who wished to buy a bankrupted project. “The [housing] structure will cost us 1.5 million,” they said. And I said: “Well, that is quite a bargain considering its size.” “Oh, yes, but how much do you think it’ll cost us to connect it to the powerline, because Bucharest’s network can no longer hold it? If you want me to take it, bring power here.” When I’ve been in London, there was a debate going on about a giant investment of about two-three billion pounds; the investment was to go somewhere in central London, close to the City. The municipality was ready to bring in one billion; they were also willing to build two tube stations. Why should you do them if the development was one kilometer away from another tube station? They said there was nothing wrong about the distance between the development and the tube station except the absorption power of the current station. The municipality said that if the inventor came with such a huge investment, they could join in too. Will they do it here?
So, there is no coordination between the developer and municipality.
I don’t think it is. In residential areas there are small-scale investments and it’s hard to measure them. But let’s consider the office area from Floreasca-Barbu Văcărescu, where investments are tangible, quantifiable as there are precise figures. Now, tell me, where are the infrastructure investments of the municipality? I had a meeting there which ended at 6; it took me an hour until I could drive off the street. Unbelievable, isn’t it? They wouldn’t extend the tube line, God forbid; they could have done so and add one close to Promenada or to Pipera, at Fabrica de Glucoză. That would be but normal! The municipality could have said: “There are 300,000 people per sq. km. What shall we do about them?” Can you realize what would be like if something happened during the rush hours in that area? Not to mention that it’s impossible to drive there. Just give me an example of a parking lot or a new bus route in that area? Null.
Here are the questions they should ask: “How many apartments are there in Popești Leordeni?” “50,000.” “How many more people live there as compared to their number 5 years ago and where do they need to go? Let’s make two bus routes, let’s extend the tube line.” Such things pass unnoticed, but they have an impact of the quality of living.
One of the assumptions of this exhibition is that the user’s voice is unheard, because when he puts the money and gets the house, everything has been already decided on his behalf: the state made the decision, the bank or even the developer did. Do you agree?
Yes, I do, but that occurs everywhere else. For some projects the users may choose their finishing, for example. You cannot change the compartmentalization because the developer was granted a building permit for a certain number of apartments and a precise layout. Developer’s life will become more difficult if he allows the buyer to personalize his space. Hypothetically, the designer should have done whatever the consumer wants and is willing to pay. Some market surveys are carried out to find out whether they wish open or closed kitchens or 14 sq. m or 20 sq. m bedrooms. Hypothetically speaking. Yet, practice is our big weakness, because I don’t believe that more than 15-20% of the projects on the market are based on a market survey.
Today, the two-room apartments represent the bulk of the market because the First Home Program stepped in, and not only that. How sustainable are such apartments from the investment viewpoint? To which extend are they utilized?
Theoretically, they are used as long as you live. Two issues distort the market a lot, and one of them is this program about which they should have made things very clear since 2013 and let people know it’ll only last for two more years. They shouldn’t have stopped it instantly, because that would have also sounded like a big robbery. You should allow developers to carry out their project so that the end of the program would not find you with one hundred apartments under construction. The program has kept that price limit of 60,000 euro, because most people on a lower income will buy since they cannot afford a higher advance than 5%. The second issue is the VAT. For instance, in the heart of Bucharest is hard to find an apartment with a decent area that would fit in the 5% margin, that is, to be cheaper than 100,000 euros. If you consider the development costs, it will take you sky-high. This is why the apartment areas tend to decrease by comparison with the ones before.
I was studying a luxurious project for the north of Bucharest where a three-room apartment is 56 sq. m. Or, that should be the limit of a two-room apartment. You can have a decent 60 sq. m apartment; I mean 60 sq. m living area. If you add a 10 sq. m terrace, you reach 70 sq. m, which means 85 sq. m of floor area. If the average price for one square meter is between 1,500-1,600 euros, then you go well beyond 100,000 euros. It follows that the only variant to remain in the 50% margin is to build two room-apartments of 45 sq. m of living area, that would reach perhaps 60 sq. m of floor area. That is a legislative constraint. This is why there are not three-room apartments available on the market. Being a developer, you want to sell and make profit, you’re not an NGO. So, your choice is either to build three-room apartments and still make efforts to sell them during one year and a half after their completion, or build two-room apartments that you can sell from the project phase.
You mentioned somewhere that we are in great want of financial culture. Do we, as future buyers, take big risks?
I don’t think we really perceive the risks we take today as future buyers. Let’s pick up again the First Home Program: most people would rather own a house today, even if they borrowed the advance money. It doesn’t even cross their minds that the market might collapse or that they could be thrown out or could get ill and unable to work for six months. If I couldn’t put together the advance money, how would I pay the installments and also nourish myself? People think that if you rent a place, that place is not your home. Perhaps that money would have paid an apartment and a half. They will always reason in this way. And, if I work in this branch, I’ll do it. If I don’t get paid tomorrow, if my business fails? If I live in a rented apartment and I can no longer afford it, I’ll move to something cheaper. No, definitely, we are not financially educated. We return to our initial conversation: we, in this branch, are 18 years old. Hypothetically, I should celebrate my coming of age. What if it turns out really ugly?
I would like to talk about architects’ role in this equation. I’ve read your interview with Ștefan Ghenciulescu in “Zeppelin”. There you said architects should imagine themselves in the shoes of the end-user, of the investor and that of the builder’s. How many of these ‘shoes’ do they usually wear?
I really hate to generalize because I don’t know every architect, so I can’t tell you how many will try to be in somebody else’s shoes. In my opinion, every architect should ask himself or herself about it. Let him or her think what will make the person who buys my design happy, how will he and his family enjoy living in it. Generally, does the architect know what a consumer desires or appreciates? Or does he or she judges him or her according to his choices? Obviously, the developer will dictate some constraints. He gives the design theme, the X number of apartments that should fit a cost framework. I don’t know how many shoes he wears, I’ve only said how many he should wear, if he or she wants things to turn out fine.
In many cases the design process is a one-way street, there is no dialog among the involved parties, as it should be. I’ve referred earlier to market surveys. If you happen to interview an architect, ask him or her where they started from when they designed their last three projects. Did they have any feedback for their design theme from a potential consumer? Did they proceed because the developer’s previous design had similar requisites? Or, they simply followed the developer’s instructions. You can make the answers anonymous and in the end you’ll have the whole picture.
With detached houses things are easier: you talk with the beneficiary directly and design the project in his image. And according to his budget, of course. It’s far trickier with collective housing. Again, we are not educated in this respect. I think many architecture graduates are defective: in school you are taught that you have to design something, that there are certain norms to follow; yet, no one will urge you to go and ask 50 inhabitants what they really want.
There is no empathy, is it.
I don’t know if it’s about empathy or business. The big American developers throw parties at the end of the year, which are preceded by larger format debates among real estate agents, architects, builders, etc. There are many architects who attend them and propose a certain path to be taken by the future projects. There is nothing like that with us, and nor will it be soon. This process implies openness; it means you want to understand where things stand.
There is a gap between smaller and bigger cities. Will it yawn or will it dwindle?
I’m not very familiar with what’s going on outside Bucharest. I read now and then the market figures for purely informative reasons, but I can’t say I’m a constant observer of it. In my opinion, the gap is yawning. Two months ago some persons from the World Bank came with a study on migration inside the country. There you can read the gap is yawning between star-cities like Cluj, Timișoara, București, and also Iași, recently on the list, and the other cities. The big cities literally dry up other cities of their human resources. On the other hand, it’s good, because we all want to have a theater, a cinema and other stuff you can’t find in smaller towns. Cluj, Timișoara și București have always been extremely attractive destinations after all; they all have important universities and young people go there to study and don’t leave in the end. I think no one will stay in Baia Mare, although it’s a beautiful city.
What is a good zone supposed to offer?
I’m thinking about a park, good schools, infrastructure. If there is a park and you have children, you can walk with them or not; if you’re a jogger, you can jog in the morning, or you can ride your bike and relax. Then, of course, you want a good school for your child. In the civilized world, the prices in a residential zone depend on the school quality. If, for instance, on the street you have to attend school 17, the prices are 30% higher than those on the neighboring street. You can solve it with a transitory visa … I know some people who drive twice a day for 50 minutes to take their children to and back from school. So, they literally waste two hours of their lives. If you calculate the time it took during the eight school years, you may find that, if you live to be 80, you actually lived 60 because the rest was spent in traffic. I haven’t calculated it myself, but it sounds frightening.
New and old apartments. Who buys what and how will things change?
It’s a case of mentalities and expectations. Young people obviously will buy new apartments, in general. Although, honestly speaking, not only once did I put myself in the buyer’s boots and wished I bought an old one in town than one in the periphery. You know the famous announcement: “I’m looking for an apartment built before 1980 and close to the tube station.” Perhaps there is a different trend in the country. I’ve been to Brașov where I met a developer. The meeting was arranged for 9:30 and he told me he was supposed to meet someone else at 12:30. I looked at my watch and at 11:30 I told him: “Now, are we ready? You have to leave, haven’t you? “Well, it takes me only 5 minutes to get there.” In Bucharest, when you are supposed to drive two kilometers, you have to calculate in advance the time it takes: how long I’ll be waiting at the lights, how long it takes to park ….”
I wish that a project like Dumbrava Vlăsiei to be successful. It’s what is needed for such a concept. What does it mean to live 20 or 30 kilometers away from Bucharest? You waste some time, don’t you? But I have a liberal profession and am not supposed to be at 9 at work; I may come at 7 or 10 and avoid the rush hours. But instead I live in a house, in the middle of the forest, in a gated community outside town. It might be a solution at a certain age.
How did you access this selling branch, the medium high sector?
In 2005-07 I only made investments and bought lots of land. In 2007 I set up my agency, but we couldn’t do much because it was opened in the second half of 2008. In fact, I started working when the crisis broke out. To tell you the truth, I found myself introduced in this residential sector because nobody would buy land anymore, nobody invested, and I had to change my profile in order to survive. There is a wide range of mentalities in the real estate sector; there is a difference between investing and building houses. The residential sector is 80% emotional and only 20% rational. My first collective housing project was based on the ADNBA designs, and then came the second and the third.
*Dragoș Vodă 17, ADNBA project
How would you describe this sector as compared to that of mass housing? Maybe, among other things, there are fewer transactions.
Right. There are fewer. My segment is super-cool, because it doesn’t concern the hundreds of low cost apartments; it means we are not a factory; neither do we deal with luxury housing, where you bump into all sorts of guys. In general, my client is an extremely educated person who knows to approach things wonderfully. They have different criteria when they choose a dwelling. I’ve helped them buy but at the same time I’ve also grown up with them, following their life principles, their businesses, the way they inhabit a place, their friends. There are three-four clients whom I owe very much from what I’ve become.
I’ve encountered difficulties with my agency; for instance, I used to take money from my wife’s salary to pay my promotion bills. And I would also tell my client I’d rather switch to mass market; in the end it’s a matter of money; I can’t simply go to my son’s school and say I’ve seen some wonderful properties but I couldn’t sell any, so let me pay the tax next month. I live on it; I don’t do anything else. And my clients would tell me that if I do this or that and offer proper consultancy services and say ‘no’ when it’s right, I’ll develop and everything will be okay. It’s a sort of mutual education process. My most wonderful clients are those whom I told: “Don’t buy that property.” This is how our relationship started. And I would ask them: “What are you going to do with it?” “Well, I want to live there.” And I would tell them: “No. It’s okay as an investment but it’s not good to live in.” It didn’t fit them; it wasn’t the answer to their needs. At some point they became suspicious: “You don’t want to sell it? My money isn’t good enough? You don’t need some more money or what?” “I do, because I live on it, but I don’t sell for the sake of selling.” If I thought the property was not good for them, I wouldn’t sell it to them.
It’s a wonderful segment. It’s not as profitable as the others, but at some point I tried my hand in different types of properties which didn’t satisfy me. I’d rather stick to my niche, where I’ve known my clients for 10 years, and I enjoy it. If you asked me what I’d like to do from morning till dusk, I’d say I would like to meet and go viewing properties with people who want to buy from me. In the residential business, each comes with his story, with his “Why” when they decide to purchase; one buys because a new child was born to the family; the other buys because he’s getting a divorce – there’s always something behind their purchase. Each is a leading figure in his profession; they are the people about whom you can read in the ZF paper and in other publications. I wonder if I do live up to their expectations or if the property isn’t what they really need. Most of the time you discover super-cool people.
Is it a stable or a growing sector?
It’s growing. You asked me and I answered that the general education level seems to have improved significantly in this medium high sector. People have raised their expectations. Unfortunately, the market doesn’t deliver. It’s a yawning gap between the buyer’s expectations and what the market can deliver. I’m talking about this sector. For the low cost housing, most people choose according to their budget: “I have 55,500 euros. Where do I fit?” I met people who, for a 500-euro difference, couldn’t choose a better apartment and were not ready to wait and save the money. In my sector, things are more flexible.
*Concept 5, str. Potcoavei – Bd. Iancu Nicolae
Did the crisis change anything in the way people make decisions?
Had you asked me this question last year, I would have answered in the affirmative. Now, I really don’t know what to say because it seems to me we are about to jump off the tram again. I thought people learned something and are now more cautious. But I can’t help noticing how people, just for the sake of buying, buy properties although they know they are not what they want. No, it’s not the like of 2007, but we’re not far from it either.
(…) Our role is to convey some information that the consumer may or may not take into account. Truth is not always the path people walk on or like. I can see though very good smaller or moderate-scale projects. Yet, their rate is pretty low if compared to the total number of developments: some pay more attention to details, some have better finishing. There are also concept designs; I’ve seen one in Piper which points to an interesting direction; it contains several hundreds of units. I’m looking forward to seeing what Ikea will be doing in Sisești. My expectations are rather high in this respect. In my opinion, even if there are few projects of this sort, they can change both the market and the collective mentality: “If that guy can do it, I also want something of this kind.”
Interview by Vlad Odobescu, published on Zeppelin in September 2018