ROMANIAN RESIDENTIAL MARKET SHOWING RESILIENCE TO THE COVID-19 CRISIS

New housing has become more expensive in European countries over the last few years, including in 2019. Among the 23 countries participating in the Deloitte Property Index Study, 20 showed growth in prices of new dwellings and only three of them saw a price drop. Romania was among the former, with a price increase of 8.1 percent in the first quarter of the year.

By Aurel Constantin

H Eliade 9 Residence project in Bucharest

Experts in the residential real estate market expected the growth trend to continue in 2020, but they became less optimistic in the context of the COVID-19 pandemic. In almost half of participating countries, the residential market is expected to stagnate this year in terms of price, with experts in only six countries having positive expectations. “The residential market is usually sensitive to macroeconomic conditions, but also to the supply-demand ratio. Even if the European economy is forecast to contract, the accommodative monetary policy of the European Central Bank and of other central banks in the European Union aim to keep interest rates at low levels and, indirectly, to be supportive of the housing market. In Romania, house prices rose by 8.1 percent in the first quarter of 2020 compared to the same quarter of the previous year, according to Eurostat data. By the end of the year, we are expecting this trend to continue, supported by the legislative changes considered for the First Home programme and the announced extension to the law regarding the 5 percent VAT rate to the sales of dwellings, which is yet to be enforced,” said Alexandra Smedoiu, Partner at Deloitte Romania and Real Estate Industry Leader.

The biggest price increase on the residential market was recorded in Luxemburg, a country that participated in the Deloitte Property Index Study for the first time, with an advance of about 13 percent in 2019 compared to the previous year, followed by France (+12.6 percent) and Spain (+12.4 percent). Serbia is on the opposite side, with a 7.4 percent drop in housing prices over the same period. Among Central and Eastern European countries (CEE), dwellings in Hungary (+11.5 percent), Slovakia (+11 percent) and Poland (+9.7 percent) recorded the largest price increases on the residential market.

In the CEE, in countries such as Slovakia, Croatia, Poland, Hungary, and Serbia, prices ranged from 1,000 EUR/sqm to 2,000 EUR/ sqm. In this region, only prices in the Czech Republic exceeded the threshold, reaching 2,602 EUR/sqm, especially due to Prague’s high share of the national average.

In 2019, Paris was the most expensive city in terms of transaction prices of new dwellings, with 12,863 EUR/sqm, in a slight decline (0.4 percent) compared to 2018. By comparison, a square meter of a new dwelling in the city of Nis (Serbia) cost only 790 EUR and was the cheapest among the examined cities in 2019. The average price across all the 67 examined cities was of 3,758 EUR/sqm.

THE IMPACT OF COVID-19 The impact of the pandemic on the Romanian residential market will be different for each

category of buyers, correlated with the sale price of properties, according to a study by JLL Romania. The most affected segment will be the one that addresses buyers interested in properties with prices below 1,300 EUR/ sqm. This category represents the largest part of the offer of new homes in Bucharest, respectively 64 percent of the total.

Under these conditions, government measures such as the New Home programme or the reduced VAT rate will continue to support market dynamics in these times of uncertainty. “Increasing the unemployment rate will mainly affect this market segment. One of the short-term effects will be a decrease in the eligibility of potential buyers in this category, for whom it will be more difficult to qualify for mortgage loans. Transaction levels for this segment might see a sharp reduction, at least in the medium term, and therefore sale prices will follow the same trend,” says Andreea Hamza, Senior Director of the Living Department at JLL Romania.

The middle-upper segment which represents approximately 30 percent of the total number of units on the market and have prices between 1,300 EUR/sqm and 2,000 EUR/sqm will be moderately affected as buyers from this category presumably have more stable incomes and are more resilient to market downturns. Nevertheless, the small investors looking for buy-to-rent opportunities suitable for short-term accommodation will step back from this market in the medium term. Moreover, the presence of opportunistic buyers will increase as they will be more actively looking for distressed acquisitions.

The high-end segment, which represents approximately 6 percent of the total number of units on the market with prices above 2,000 EUR/sqm, will be the least affected, as it has proven to be the most resilient segment in previous periods of distress. Specialists don’t foresee a change in potential buyers’ appetite for luxury residential properties, so demand is expected to remain stable.

The level of new unit transactions in H1 2020 was around 8,000 units for Bucharest and 3,000 units for Ilfov, assuming that 60 percent of Bucharest transactions officially registered by the National Agency for Cadastre and Land Registration were with new units, while for Ilfov new sales accounted for 90 percent of total transactions. This represents a 7 percent decrease when compared to the first half of 2019.

Overall, the new supply in 2020 will be less than 10 percent below the 2019 level, reaching approximately 12,900 units with potential delays in construction. However, the number of newly supplied apartments could fall by up to 50 percent in 2021, reaching approximately 6,500 units, and might continue the downward trend over the next 2 years. Therefore, the effects of the current crisis will

be clearer in the longer term, when we will be able to evaluate its impact on the projects currently in the planning phase.

In the medium term, we expect developers to be more cautious and opt for the breakdown of projects into a larger number of phases in order to limit exposure to market fluctuations and keep their flexibility in terms of adjusting their product to potential changes in demand.

The future residential supply might be increased to some extent by the new trend of reconverting previously planned office developments into mixed-use projects with a residential component.

TRANSYLVANIA RESIDENTIAL MARKET SETS NEW RECORDS At the national level, the residential market in Transylvania is settings new records in housing deliveries, an increase in the number of closed transactions and prices with a positive evolution, according to a report by real estate consultancy SVN Romania. Cluj-Napoca, Sibiu, and Oradea, the three biggest regional residential markets in Transylvania, registered in 2019 new absolute delivery records, according to SVN Romania’s calculation based on data from the National Institute of Statistics (INS).

Cluj-Napoca remained the most important regional residential market from Romania, after the Bucharest – Ilfov region. 7,557 new homes were delivered in 2019 in the city and its surroundings, up 6 percent compared to previous year, thus setting a new record. Over 55 percent of them were part of residential projects located within the city’s administrative limits. Sibiu, the second residential market in Transylvania and the fifth at the national level, with overall home deliveries in the last 13 years which are higher than the levels registered in Iasi or Brasov, also recorded new records in 2019. SVN Romania’s calculations show that almost 2,700 dwellings were delivered last year in the city and its surroundings, up 18.2 percent compared to previous year. The number of closed transactions in Sibiu in the first seven months from 2020 increased by 24.5 percent compared with the first seven months of 2019.

The most spectacular evolution was seen in Oradea, where the level of housing units delivered in 2019 almost doubled compared to the previous year, to 2,161 new homes.

The doubling in the number of new constructed homes came in a context in which Oradea has been registering good economic results for several years now, on both the industrial and tourism segments, while the capital inflows from emigrated locals have remained high.

Alba Iulia and Targu Mures represent the only two other cities in Transylvania with 500 to 1,000 new homes delivered annually. Alba Iulia experienced the most significant development in 2019, with an 85 percent increase in the number of new homes, setting a new local record.

BETTING ON SAFE AND RESPONSIBLE GAMBLING

By Anda Sebesi

With the local gambling market being hit hard by the measures taken by local authorities to limit the spread of the coronavirus outbreak, gambling operators are ready to restart their businesses and try to recover after this difficult period. While the current context is not as favourable as the period before the pandemic, things are moving in the right direction. Business Review sat down with Attila “Otto” Török, Game World Romania strategy director, to talk about how the company approached the local market and how it has been dealing so far with the challenges imposed by the new normal. To sum it up: a strong market position and a continuous push for responsible gambling have allowed Game World to become a sustainable business.

When did Game World make its entrance on the Romanian market and what was the environment like back then? Game World has been operating in Europe since 1995. The group entered the local market in September 1999, through an investment that was to become our flagship operation in Romania, the Game World Bucharest Mall gambling hall. At that time, it was the first gambling hall located inside a large shopping mall, and Bucharest Mall was the first such facility opened in Romania. As a result of ongoing investments in improvements and expansion, Game World Bucharest Mall is now the largest gambling hall in Eastern Europe and one of the most modern in this region. When Game World decided to invest in Romania, the country’s economy wasn’t really doing well. We all know about the 1998-2000 economic downturn, a difficult time marked by restructuring and unemployment. But the gambling regulations at that time – open to competition and relatively liberal compared to other countries’ – were the main points of attraction for investors in the Romanian gambling industry. Subsequent experience has proven that the industries that operated under a regulatory framework that facilitated competition were among those that experienced growth and hence brought benefits to consumers. Such an example is the competition between internet service providers, which has led to a level of service quality that has turned Romania into a benchmark for European states.

How has the Romanian gambling market changed since then? I would say that the most noticeable change is that the market has matured. Gambling halls operating without a license or unauthorized gambling machines have almost been eliminated from the market. Plus, Romania has a modern and coherent regulatory framework, unlike many other European countries. Credit is due to both authorities and gambling operators, who understood that upholding professional standards is the only way to be successful. I would also mention the investments, sometimes substantial, made in training staff or the quality of services and equipment. For example, Game World Romania invested about EUR 1 million in the most recent expansion of its Bucharest Mall gambling hall. We brought in stateof-the-art equipment only Game World has in Romania, based on a completely new concept inspired from Asian casinos. Over the past 21 years, the company has grown from 50 slot machines to over 800 and from 35 employees to about 400 today.

Operators’ increasing support for responsible gambling and the industry’s contribution to the fight against gambling problems is another change for the local market. Along with actively supporting the Responsible Gambling program, Game World also runs an academic scholarship program aimed at psychology graduates and undergraduates who study the underlying mechanism of various addictions. We want to have as many clients as possible who drop by just to relax and spend their time in a pleasant and safe environment, and gamble any amount they think it’s OK just to have fun with. However, we do not want clients coming in for more than entertainment, looking for high wins or a blowout and putting their personal finances at risk. Generally speaking, I am not aware of

a successful business that is not interested in the wellbeing of its clients. Last but not least, the diversification of services offered to customers is another trend that will consolidate in the future. The diversity of both gambling and equipment has reached unprecedented levels and technological advances very much support this trend.

What can you tell us about Game World’s presence in Romania and how it is positioned on the local gambling market? All our seven gambling halls provide premium quality services, a segment where we are the market leader. We are present in large shopping malls and central locations in Bucharest, Constanta, Alba Iulia, and Brasov. All our locations are elegantly designed, to provide customers with a full sensory experience. Our hall designs, the quality of materials and the state-of-theart equipment complete the experience we provide to our clients and contribute to a welcoming working environment of our employees. Along with our gambling offerings – based on a wide diversity of options – the Game World gambling halls include many facilities and additional services: parking, elevators and separate entrances reserved for our clients, open terraces for summer and winter, bars, large TV screens, just to mention a few.

What is the profile of the

Game World client? Our gambling halls are entertainment destinations for everyone who wants to spend their free time in an elegant environment and enjoy quality services. Our customers have active, dynamic lifestyles. For them, leisure is important and they want to spend their time doing interesting things. They look for a diversity of gambling and betting options and appreciate them as much as the fact that they can gamble in a way that entertains them. Meanwhile, they also want to have access to other entertainment options – from parties and live music to simply having the opportunity to relax on a terrace. Our customers have high expectations, they know how to appreciate the quality of our services and of the environment we provide. Although men generally represent the majority of our clients in casinos and gambling halls, I am happy to see that women account for over 20 percent of our total number of customers. For us, this proves they feel safe in our gambling halls and they appreciate our staff’s assistance, along with the elegance and cleanliness of our interiors and the quality of our entertainment offerings.

What impact did the SARS-CoV 2 outbreak have on Game World employees? Were there any layoffs? There were no layoffs and we did not cut employee pay. We hope not to be forced to make such decisions in the coming period. We received state aid and we made up the difference so we could be able to cover the legally mandated 75 percent of each of our employees’ wage. We organized communications so that all of our colleagues would be constantly informed about the current situation and the decisions made or actions taken. At Game World, the strength of our team has always been one of our main competitive advantages and therefore their health and material safety, a safe job, and wellbeing are aspects we believe to be of special importance.

What can you tell us about the reopening of gambling halls? What are the main safety measures you have taken? As I mentioned above, the Game World gambling halls operate at premium quality standards. As they are often located in shopping malls, most of them have separate entrances with private elevators running through the exterior of the building or through the underground parking lot. This allows us to control access. Upon entry, everyone is required to wear a mask, disinfect their hands, and have their temperature taken. Wearing a mask is mandatory indoors, surfaces are periodically disinfected, and slot machines are disinfected for each new user or upon request. Disinfectant dispensers are at the ready inside each room and we have positioned the gambling machines so as to ensure proper spacing between players, as directed by regulations. Physical distancing is ensured by plexiglass separators placed between the slot machines. Last but not least, our employees were tested for COVID-19 using PCR tests before

gambling halls reopened, and they all tested negative. Staff training was a separate and extremely important measure: employees wear masks both indoors as well as in crowded exterior areas, they are very careful about hygiene and place a lot of attention on maintaining all player spaces clean and disinfected. Periodically, we do a complete disinfection of all of our gambling halls using modern technologies. Special equipment that allows us to disinfect surfaces using ozone treatment is one such example.

How does Game World support the principles of responsible gambling? We are among the biggest promoters of these principles, which are part of our business strategy: we want responsible customers, who come to our gambling halls to be entertained and spend quality time with their friends and families. We do not encourage individuals who gamble excessively. In problem gambling cases, the players are referred by our staff to get tested and attend psychological counseling – either online or at the offices of professional therapists who work in the Responsible Gambling program. Players can easily find information about this program in our gambling halls, at info-point terminals where they can immediately access a support website. Training managers and front-line employees have a major role. They are informed about what the Responsible Gambling program offers and how it can be accessed; at the same time, they are trained to recognize the signs of a gambling problem and to talk with these gamblers to provide them with the needed support in order to access this program. Our employee chart includes the position of Responsible Gambling Counselor, whose main responsibility is to inform and provide support to potential program beneficiaries.

What kind of CSR activities does Game World run? Last year, Game World Group directed about RON 1.7 million towards social responsibility initiatives. The company supported 29 beneficiaries, among them Hospice Casa Sperantei, Daruieste Viata Association, MagiCAMP, Little People Association, the Community Foundation (the organisation’s Brasov branch), and Inima Copiilor Association. During the lockdown, the group’s companies made donations and provided sponsorships worth over EUR 100,000 to support the efforts in the fight against COVID-19 in Bucharest and 11 other cities in Romania, supporting hospitals or SMURD teams. The company is actively involved in supporting the education of future psychologists who conduct addiction research. The first Game World Scholarships were awarded in October last year. The program is aimed at psychology graduates and undergraduates at all accredited universities in Romania who choose to specialize in addiction research. This is an ambitious program, the only one of its kind in Romania, meant to support university-level education and research in psychology. Also, we recently signed a partnership with former goalkeeper Helmut Duckadam, with whom we will work to support the Responsible Gambling program. The values of the Game World brand are in line with his public image and his presence on our team is a true inspiration for our colleagues.

Are you present in online gambling? The new normal made us accelerate our plans in this direction and led us to launch the GameWorld.ro online casino. The popular games our clients enjoy in the Game World gambling halls are now available online. Although we launched it recently, we intend to provide the same premium experience online too, with high quality offerings, diversity, bonuses and jackpots that can be found in physical gambling halls. It is an alternative we recommend to those who want the Game World experience but live in cities where we don’t have a physical presence yet, as well as to those who sometimes don’t have the time to enjoy being in an offline casino.

What are your plans for the local market? In the current context, we intend to stay abreast of the market through all the investments we’ve made so far, to keep our clients and employees satisfied and maintain our market leader position on the premium gambling segment.

We need to be optimistic and think about the fact that after this crisis ends, we will return to our development plans for the Game World brand in Romania.

Technology to reshape future of gambling industry

With the gambling industry open to adopting the latest advanced technologies like virtual reality (VR), augmented reality (AR), blockchain and artificial intelligence (AI), both globally and in Romania, it is clear that technology is going to play a crucial role in redefining the gambling experience and client communication in the future.

By Anda Sebesi T he coronavirus pandemic has set back the Romanian gambling industry by five generates, the upstream and downstream industries – HoReCa, IT&C, security – generate another 5 RON,” years, according to the most recent notes Török. He adds that Game available data from the National InWorld currently has about 400 stitute of Statistics (INS). Gambling employees, while the parent group operators in Romania experienced has a workforce of about 2,000. one of the most severe declines of When talking about the biggest the last 30 years between March challenges the gambling industry is and May this year. The local gamnow facing, Török says these are rebling and entertainment industry lated to the coronavirus pandemic fell by about 24 percent in March and the health crisis, even though 2020 compared to the same period all operators have strictly impleof 2015. The gambling sector’s mented all the measures required March turnover was only 57 perby authorities to limit the spread of cent of February’s, which means the virus. “Still, we are indirectly that the entire sector sank by close affected by restrictions imposed in to half within a single month. Then, in April and May, gambling other fields like HoReCa, event planning, sports competitions, and businesses reported almost zero revenue. “Given the situation, we tourism. Along these, client behavior has changed,” Török explains, made the necessary business continuity decisions and decided that adding: “Figures show a drop in the time spent gambling as well as the safety of our customers and employees was our main priority. in the frequency of visits to gambling halls. In this context, we shall We focused on the long-term business principles and we organized see whether and how gambling operators will adapt and manage to our activity so that we would be able to adapt as quickly as possible pay their taxes and cover the costs related to wages, rent, and operato the multitude of changes that occurred during this period. For tions over the next few months.” example, over the past three months we went from “closed until furAt the same time, the pandemic has also brought some opporther notice” to being open round the clock and then back to limited tunities to the market, especially for online casinos, which did well opening hours (until 11 PM, later extended to midnight), and we hope both when physical casinos were closed and, after the lockdown was to be able to return to our non-stop hours as soon as possible. During lifted, while the latter were still struggling to overcome difficulties. all this time, we’ve been focusing on communicating with our clients “For offline operators, the current situation is an exercise to adapt and employees, for whom we’ve taken extra health and safety meato the most difficult and unpredictable conditions,” argues Török. sures. Maintaining communication with professional associations Given such complex conditions, what will the gambling industry and the authorities for accurate information on the latest developlook like ten years from now? “Technology is one of the engines of ments concerning gambling halls was equally important,” says Attila this sector and the dynamic of the last few years has proven it. The “Otto” Török, Game World Romania strategy director. industry experienced significant growth with each year that passed

According to the latest data provided by the National Gambling and the changes we will witness by 2030 will certainly be more Office (ONJN), 250 gambling operators are currently active on the impactful than those that have occurred since 2010,” he adds. The Romanian market. They contribute about EUR 600 million to the Game World official also points out that the implementation of AI, state budget every year. At the beginning of 2020, there were about VR, AR, blockchain or other innovative technologies in all areas of 45,000 direct employees of the local gambling industry and a few the business, from the gambling experience to client communication other thousand worked in related and dependent fields. “Accordand transaction security, are trends that the gambling industry is ing to Romslot data, for each RON the Romanian gambling industry expected to follow in the future.