Construction and real estate were the weakest-performing sectors in Serbia in 2025. After several years of expansion, activity contracted sharply as financing costs rose, public investment slowed, and private developers reassessed risk. The financial impact was immediate and visible across the sector.
The value of construction works declined by approximately 8.4 % in real terms, reflecting reduced infrastructure spending and slower residential development. Revenues at construction companies fell accordingly, with many mid-sized contractors reporting turnover declines of 10–20 %. Fixed cost structures amplified the impact on profitability, pushing EBITDA margins down to 4–6 %, and in some cases into negative territory.
Real estate developers faced a mixed environment. Prime residential and commercial assets retained value, but transaction volumes declined. Financing constraints limited new project launches, while inventory turnover slowed. Net margins compressed as higher interest costs and longer sales cycles eroded returns. Typical developer ROEs declined from low-double-digit levels toward 5–7 % in 2025.
Balance-sheet stress increased. Higher debt servicing costs and delayed cash inflows strained liquidity, particularly for firms with aggressive pre-financing models. Working capital requirements rose, and access to new credit tightened. Factoring and structured financing mitigated pressure for some firms, but did not offset the broader downturn.
Investment behavior shifted defensively. Capex was curtailed, land acquisitions slowed, and project pipelines were trimmed. Companies focused on completing existing projects rather than expanding portfolios. Employment in construction declined, reflecting both reduced workloads and cost-cutting measures.
By year-end, construction and real estate stood at the trough of the cycle. Financial performance in 2025 was weak, but the correction also reduced speculative excess and reset pricing discipline. Firms with strong balance sheets and diversified pipelines survived, while weaker players exited or consolidated. The sector entered 2026 smaller, more cautious, and highly sensitive to financing conditions.
