Industry and Market Analysis

It is surprising that being the second largest country in Central-Eastern Europe with a total population of 23 million people, foreign investments and real estate development in Romania remain still far behind the levels of Hungary, Poland, and the Czech Republic. Romania lies strategically at the crossroads of Europe and is looking at a very dynamic future, also in light of the fact of EU funding worth 60 billion EUR underway in the next 2 years. Vision Holdings strongly believes that it can capitalize on this foreseeable growth.

There are several key factors that support these arguments:

Romania has joined the European Union (accession date Jan 1, 2007).
Romania has joined the NATO.
In the last 3 years Romania has shown great economic and legislative improvement and has demonstrated high levels of compliance with the “acquis communitaire”.
Yields have been falling for years in Western Europe and with an expanded EU, Romania is offering interesting opportunities for significant cash returns to investors far above the levels of Western Europe .
Real Estate markets in Central-Eastern Europe and especially in Romania are experiencing positive long-term economic growth and an increasing inflow of FDI.
The Real Estate market in Romania having entered into a second stage of development still shows attractive indicators of growth.
Romania will follow the footsteps of its smaller and already developed neighbors in the region.

The Romania – EU integration certainly is a major driving force for growth of investments which many believe will bring economic, political and strategic stability to the region. EU accession covers a huge range of areas of benefit - no field left outside the integration scope - which means access to the entire western European economic engine with huge overflow of EU funding for roads, hospitals, public transportation and other public infrastructure. EU integration will be a gradual transition in which rewards will precipitate long after 2008.

With the first anniversary after EU accession and a secure political and economic landscape, Romania is showing a tremendous and promising demand for new developments. With continuously stable economic indicators and under-valued property prices an environment of huge real estate potential has emerged. Many present investors have entered the Romanian arena, hoping to capitalize on the relatively low cost of land, construction and labor during the pre-EU integration period. The legal impediments to real estate investments that were once prohibitive due to the inconsistencies derived from Romania's ever-changing laws, have evolved into an ever stable and market friendly environment.

On the 1st of January 2007 In 2006, Romania's Real Estate market continued its upward growth for all types of property investments - residential, commercial & land. This boom is fuelled by a growing national economy that has a solid basis to it - having attracted higher levels of FDI in 2005 than any CEE country apart from the Czech Republic. Romania's GDP growth in 2005 was second only to Latvia. The country has consistently enhanced its political stability since 2000, and has strengthened its relationships with both European and US administrations. The economy has recently been upgraded to “Investment grade” by Fitch. And, the Romanian currency has been appreciating against the USD, EUR and GBP, providing additional growth potential for investors in Romanian property assets.

After several years of steep losses from 2000 to 2005 for the major European stock markets indices, and low yields on return and still very weak and low interest rates, investors are searching for alternative investments that offer higher yields and a calculated safety to stabilize their portfolios. For many investors, this search has led to an increase in their allocations to real estate, particularly in Eastern-Central Europe, which contrary to declining global economic trends, continued to deliver stable income returns and low volatility.

The Romanian real estate market for residential development is enjoying an increasing interest from both, local and international investors and prices are growing on all properties. All its segments have seen explosive development. The residential market has seen the first signs of interest from professional developers looking for large scale developments that will have an impact on the medium and high end consumer.

Western European investors, in particular German and Austrian open-end funds, which in recent years have been a significant source of capital in Europe , represent an extraordinary sum of equity – estimated to be about 23 billion EUR – trying to find their way into the Eastern European property markets. Their demand for property and the sheer amount of capital they control are already exerting their presence in Eastern Europe and in recent months also in Romania.