We are studying the housing market in Serbia and Belgrade: Will prices recover?

Real estate researchers claim that the market has finally stabilized. EURACTIV is investigating the situation on the ground to see if this is true.

After two years of bad news about real estate and its prices, the State Geodetic Authority finally has some good news: stabilization has occurred. As stated in the real estate market report for the second quarter, inflationary pressures in Serbia and the European Union are easing, which is also affecting the real estate market in Serbia. However, is this really the case?

Although, after the extreme price surge recorded last year, there is currently a noticeable lack of such activity in the market, the fact is that prices are not falling, both in the sales market and in the rental market. This is evidenced by Tamara Kostadinovich, the director of market research at CBS International, a real estate consulting firm. "Prices in the residential market were at historically the highest level last year, and in the first half of this year, the growth trend was halted, and it is expected that prices will stabilize by the end of the year," Kostadinovich told EURACTIV.

The rise in prices observed in the previous period worldwide, in Serbia, and especially in the real estate market, has caused concern among many individuals and investors. The resolution of housing issues has been postponed, and some planned investments have been delayed indefinitely. As our interlocutor notes, the main driver of price growth is strong demand, as well as a lack of quality real estate across all segments. "This is particularly evident in the case of Novi Sad, where there is a shortage of quality and modern office buildings, which is why rental prices for new buildings in the most attractive locations have reached the level of Belgrade." Source: Provided photo / CBS International

What influences the rise in prices?

Kostadinovich also claims that a multitude of external economic factors influence the rise in real estate prices, such as inflation and the increase in energy prices. "In the residential market of Belgrade, record price growth was driven by strong demand, as 25,000 apartments were built and 58,500 residential units were sold between 2020 and 2022. However, in addition to the fact that the number of sold apartments significantly exceeds the number of built ones, external factors such as the rise in construction materials and energy prices, as well as the increase in labor costs, have also had a significant impact on price growth. Furthermore, in Serbia, residential properties are the main investment opportunity, which was particularly evident during the period of high inflation that marked 2022 and the beginning of 2023," our interlocutor explains.

However, judging by the average salaries in Serbia and Belgrade, one can conclude that the average resident of Serbia lacks the purchasing power to keep up with the selling prices of apartments, and that the population buying apartments for their own needs cannot afford to purchase an apartment under such conditions. "In Belgrade, no significant price reductions are expected in major projects by well-known investors, which are planned meticulously and built in phases, offering buyers many additional opportunities. Certain price adjustments may be possible within smaller residential projects in less attractive locations and without bank project financing, or in the area of old construction in neighborhoods with a large supply," emphasizes Kostadinovic for EURACTIV.

What is the situation with the real estate market for other purposes?

Our interlocutor also touches upon real estate markets with different purposes. According to him, the market in Serbia is currently in a phase of expansion, but not all segments are developing at the same pace, so it is impossible to speak of a single trend for all segments. "As for commercial real estate prices, rental prices in office buildings increased last year, and in 2023 they remained at roughly the same level. Regarding the most attractive shopping centers, considering the fact that more and more high-street tenants are moving into shopping centers, rental prices have not decreased, and a stable trend is expected until the end of the year." Speaking about the industrial real estate market, Kostadinović says, especially regarding logistics and warehouse spaces intended for rent, it has been continuously growing since the beginning of 2022 due to the rise in online shopping and increased demand for warehouse spaces. Source: MONDO / Uroš Arsić

Game of strength and muscles

The fact that the market situation remains challenging is confirmed by real estate expert Milić Đoković. He also points out the high demand compared to supply as one of the key issues. "The current situation in the real estate market is a game of strength and muscle, where the first to give in loses.

He is confident that prices will not decrease. "Buyers hope for a drop in prices, but that won't happen; real estate prices will follow rising inflation," predicts Djokovic. Nevertheless, our interlocutor advises that now is the best time to buy an apartment for those who can and need one. When asked which apartments are currently in demand and selling, he says there is demand for small apartments, around 30 square meters, and for very large ones, around 150 square meters. This, he says, clearly reflects the divide in society. Speaking about prices, Djokovic notes that a normal apartment cannot be found for less than 2000 euros, while the actual price is half that. "You can't find a normal apartment for 2000 euros in Belgrade right now. The real price per square meter is half of what it should be based on purchasing power."

Construction reduction

Another reason for the rise in prices, according to Djokovic, is that 20-25 percent fewer apartments are being built. This is based on data from the first quarter of this year. In the second quarter, data from the Republican Statistical Office indicates a slightly different situation. It is noted that in the last two months, after an eight-month decline, the number of building permits is increasing, and consequently, so is construction activity. If we believe the Minister of Construction, Goran Vesić, a record will be broken in July, although a decrease was recorded in the first quarter of this year. Source: MONDO / U.Arsić

Let us remind you that Vesic stated that in July, 2,682 building permits were issued in Serbia, which is 13.16 percent more than in the same month last year. "The estimated cost of all construction works in July 2023 is 95,954,435,000 dinars (about 818.5 million euros), which is 2.24 percent more compared to July 2022," said Vesic. He added that the estimated cost of construction works in July is the highest in 2023 when looking at the monthly figures, as reported by the Ministry of Construction, Transport, and Infrastructure. How this will affect the real estate market, with a focus on prices, remains to be seen after a certain trend is established. (EURACTIV.rs)