ROMANIAN RESIDENTIAL MARKET REPORT Q4 - 2020 CONTENTS 3 2019 vs 2020 7 Market overview 8 Residential price index 9 Price changes of residential properties 10 Evolution of prices in county seats 11 Rankings: the evolution of asking prices 14 Time on market and negotiation margin 15 Demand for residential properties for sale 18 Demand according to property type 22 Sold properties, nationwide 26 Number of properties for sale in the major cities 27 Apartments and houses newly placed on the market 29 Residential buildings 31 Primary market 32 About us demand 2019 2020 Demand for residential property purchases in six major cities (source: Analize Imobiliare) 482,000 455,000 Potential buyers Potential buyers Real estate properties sold nationwide (source: ANCPI) 540,000 603,000 Real estate properties sold Real estate properties sold Of which, individual units: 114,000 123,000 Individual units sold Individual units sold Credit balance for housing properties, granted to the population nationwide (source: BNR) 81.2 billion RON 89.2 billion RON balance Dec 2019 balance Dec 2020 Net nominal average salary (source: INS) RON 3,179 RON 3,411 Nov 2019 Nov 2020 Unemployment rate (source: INS, according to BIM definition) 4% 5.1% Nov 2019 Nov 2020 offer 2019 2020 Sales offer, existing (old) properties market, in six major cities (source: Analize Imobiliare) 44,000 41,000 Apartments and Apartments and houses for sale houses for sale Rental offer, existing (old) properties market, in six major cities (source: Analize Imobiliare) 56,000 74,000 Apartments and Apartments and houses for rent houses for rent Sales offer, new properties market, in six major cities (source: Analize Imobiliare) 17,000 22,000 Apartments in 500 Apartments in 540 residential projects residential projects Newly-built housing properties nationwide (source: ANCPI) 67,000 70,000 estimated by Analize Imobiliare Number of construction permits for residential buildings nationwide 42,000 40,000 autorizații estimated by Analize Imobiliare PRices and costs 2019 2020 Annual growth rate in asking prices for residential properties nationwide (source: Analize Imobiliare) +7.4% +3.5% Q4 2019 vs Q4 2018 Q4 2020 vs Q4 2019 Existing properties market (source: Analize Imobiliare Q4 2020 vs Q4 2019) +8.5% 0% Q4 2019 vs Q4 2018 Q4 2020 vs Q4 2019 New properties market (source: Analize Imobiliare Q4 2020 vs Q4 2019) +4.5% +5.7% Q4 2019 vs Q4 2018 Q4 2020 vs Q4 2019 Cost index in constructions for residential buildings nationwide (2015 = 100, source: INS) 134.6 136.4 Oct. 2019 Oct. 2020 POSITIVE PERSPECTIVES FOR THE RESIDENTIAL MARKET, SUPPORTED BY THE NEED FOR MORE SPACIOUS HOMES which almost 60% answered the net new demand manifested on the market - relocations, expansions, pre-leases. Deliveries of new premises increased by 155,000 square metres, which indicates that office project developers were not disheartened, but that they kept on building. Although the vacancy rate increased to 12.4%, last year did not see a drop in the developers’ trust in this market. However, 2020 marked the beginning of a major change with regard to design, the technological solutions which will be available for office projects in the future, the services which will be provided to lessees, particularly the property management services. As owner of the Oregon Park project, Lion's Head adapted to “the The residential market in Bucharest and Ilfov had its engines new normal”, which imposed restrictions, additional hygiene running at almost maximum power in 2020, in spite of the measures and the implementation of new rules, through services difficulties caused by the health crisis and, implicitly, in spite of the adapted to the health crisis. What we found was that, although the uncertain economic climate. At national level, the number of employees worked from home to a greater extent, this was not homes delivered in 2020 seems to have reached a new record, and automatically reflected in a reduction of the surface leased by the number of transactions increased, compared to 2019. Naturally, companies. The social distancing measures recommended by the in a first stage, the onset of the health crisis had a negative impact authorities were reflected in a reduction of the number of upon the residential market, but last year’s final months brought a employees present in the office space simultaneously, as well as in general improvement in terms of real estate purchases, while a reviewing of workspace division, so as to ensure sufficient area prices remained relatively stable. for each employee, to the purpose of preventing the spread of the new coronavirus. One interesting fact in 2020 consisted in the ever more organized development of the residential market’s middle market segment. Working from home is not necessarily the best option The buyers’ desire to live in larger spaces, in the home-based work Moreover, eight months after the onset of the pandemic, it was context, the increase in revenue and the lower interest rates have proven that “work from home” was not really considered the best made the purchase of a new home in this category more solution by the employees, many of them preferring - or, actually, accessible. This is true given an annual increase of 2-3% in the needing - to work from the office, at least for part of the time. prices of housing properties, indicating a healthy market growth. Working from home was not exactly a good option for certain categories of employees, such as the new ones. For the year 2021, the continuation of large residential projects is envisioned, with some developers having plans to launch new Although there has been much talk about the fact that offices are ones; how such plans will materialize depends on the general becoming less important for the performance of people’s work, market conditions, as well as on the facilities which the Romanian our surveys indicate otherwise, and the lease collection rate (over state should grant to encourage the residential market - such as 95%) for office spaces speaks for itself. Against this background, raising the threshold for the application of the reduced VAT rate. the development of office projects having a cumulated surface of The macroeconomic climate and the evolution of the COVID-19 approximately 250,000 square metres is announced for the year pandemic will be the main factors which will leave their mark 2021. Lion’s Head has not lost its appetite for the office segment, upon the trust level of potential buyers, influencing their purchase which it still finds interesting, along with the residential one. decision. Anca Simionescu, Office developers are also continuing their projects Country Manager Lion’s Head On the office market, last year was uncharacteristic: although it started with high expectations in terms of lease demand evolution and with large projects in progress, it naturally suffered the effects of the health crisis. However, by the end of the year 2020, premises in excess of 240,000 square metres were traded in Bucharest, of 6 MARKET OVERVIEW The interest in the procurement of land, houses and apartments with a garden in the peri-urban areas remains high. Although most searches in the main six counties consists of apartments, the high interest in the purchasing of houses and land for constructions in the peri-urban areas of the major cities was clearly distinguished, starting from April of last year. In Bucharest and in the county of Ilfov, in the months when the general interest in the procurement of apartments was decreasing, more and more buyers were looking for apartments with a garden on the ground floor of apartment buildings. In Prahova and Brașov counties, which are areas with potential for tourism, an increase of over 50% in the demand for house and land purchases was registered. The residential constructions sector emerged stronger from the crisis. The most important indicators in the construction sector Asking prices increased by 3.5% in 2020, which is a lower rate registered increase in 2020, compared to the similar interval of than in 2019. 2019. In the first nine months of last year, 48,490 housing Although in the first quarter of 2020 the annual growth rate of properties were completed, 2,053 more than in the similar period asking prices for residential properties increased to almost 9.5%, of the previous year (according to INS). Also, the official data the effects of the pandemic were, however, felt in the following two indicates that, in the first eleven months of last year, the volume of quarters. It was only in the last three months that we saw a new construction works increased by 16.7% (gross series) compared to 1.9% increase in asking prices for residential properties, compared the same period of the previous year. In spite of the two lockdown to the previous quarter, and thus the difference compared to last months, the major developers continued the construction and year reached +3.5%. Prices increased in the new properties delivery of housing properties, with sales above expectations in segment (units sold directly to developers) at an annual rate of 2020. 5.7%, while, in the existing properties segment (resold properties), asking prices stagnated. Low demand and oversupply maintain the pressure over lease prices. The growth rate for trading prices is also lower: the latest data The rental market in the six major cities was more generous in published by the National Institute of Statistics (INS) indicates, for 2020 than in 2019, more than 74,000 apartments and houses were the third quarter of 2020, an annual increase of 2.3% (compared to put up for lease, compared to 56,000 in 2019, representing an 6.6% in the second quarter, respectively 8.1% in the first three increase of more than 30%.