Reading Fred's VC cliche of the week I realized that actually it is applicable in many more situations than the VC world -- specifically this is what is going on in the Romanian market with the real estate. People ask for huge premium prices for the apartments/houses in Bucharest that are not in line with the international market and their book value and hence probably won't pay off in the future. Their irrational behavior relies on Romania joining the EU and considering that after the country will be accepted herds of people will line up for getting an old apartment in Bucharest. Which is more expensive, btw, than the ones in Paris. Why would you do that?
6 years ago I had a boss who'd say about attractive opportunities: "right, it's a great deal, but we cannot afford it". It's simple and it's common sense - a good business principle I always followed and am glad to see it reinforced today by Fred.
Regarding Bucharest's real estate market (and the thing can probably be extended to the whole country), what can you do when you have no other options to consider? I find many of the people I know stucked in this situation. Btw, moving to Otopeni or Afumati or another village aspiring to become a town is not an option. :)
it is true that the supply is quite limited, but you can always have the renting as an option. Or, of course, you can pay $120k for a 3 br apartment.
http://www.corante.com/mooreslore/archives/2005/04/08/the_coming_real_estate_wreck.php
Firstly, I was surprised to read your comentary about the high prices of properties in Bucharest. As you may know the situation begun in 2000 when everybody took the risk to sell and buy apart. under pressure, caused by the unrealistic prospect of a market survey. The agents from real estate agencies went out and prospected the market, as a result of an explosion of prices in differant areas in Bucharest. In such circumstances people were concerned to sell apart. 'yesterday and buy tommorow', because the prices of properties was rocketing so fast. And hence today prices of real estate are still rising from this initial surge, as well as the iminent membership of Romania to the EU. About Paris, I can inform you that one single room apart. cost Euro 100.000 [2002] in the limits area, therefore much much more expensive then than the similar one in Bucharest today.
While you can also find extremely high prices for certain flats in residential areas of Paris, the prices are generally stable, and you can still find nice 2 room flats in the center within the range of 100k+ to 250k+ euros. For 1 room aparts the lower prices are of about 40k. Should you look towards the banlieue, you can find even better bargains. Since Paris is one of the most crowded and expensive cities in Europe, these prices seem natural. Paying half of this price for a flat in Bucharest is absurd, taking into account the much lower average wages and the general lower quality of life. I just pray that this real estate bubble won't last for long..