Who in Serbia has the money to pay for an entire apartment upfront?

Almost 900 million euros in cash was circulated in the real estate market in Serbia during the third quarter of this year. According to the Republic Geodetic Authority (RGZ), the total amount of money in the real estate market exceeded one billion euros (based on registered contracts) over the three summer months, with claims that even 87 percent of the purchased properties were paid for in cash, while the rest was financed through loans.

This percentage was above 80 in the first five months of this year. For a country where laws do not allow cash transactions over 10,000 euros, such data may indicate some kind of anomaly or at least the quality of cash flow control. Moreover, according to the National Risk Assessment of Money Laundering and Terrorist Financing for the period from 2013 to 2017, the real estate market is one of the sectors most exposed to the risk of money laundering.

When information is added that the average salary in Serbia barely exceeds 500 euros, and real estate buyers in such a high proportion pay tens or even hundreds of thousands of euros upfront, instead of over years in installments, a completely justified question arises about the source of the money that is circulating in the domestic real estate market.

Chairman of the Council of the Association of Tax Consultants György Pap

It indicates that Serbia has good laws in this area, but the question always remains how they are applied, that is, whether all competent authorities are diligent in their enforcement. "It is possible that such a large amount of cash is circulating precisely because someone is consistently applying the laws. For example, banks are required to check every large sum of money that comes in. Thus, if someone deposits more than 10,000 euros into an account, the bank will ask where the money is from.

Financial forensics of Miroslava Milenovich

He responds to the question of whether the fact that 87 percent of real estate in Serbia was purchased in cash in one quarter should be interpreted as a "warning sign," stating that it could be, but not necessarily. "It all depends on the figures in question. The prices of apartments, the amount, and the source of the money are important. This fact is indicative, but on the other hand, there is indeed a lot of cash in the Serbian economy. In Serbia, there is a rule that all transactions over 10,000 euros cannot be in cash, but the question is how well this is enforced," says Milenović.