Construction activity has recently shown signs of slowing down, prompting the president of the country to examine the underlying reasons. Despite the president’s observations, official statistics have yet to fully reflect this trend. Statistical analysis of construction activity for the first quarter of this year reveals a 22% increase in the value of completed construction works in current prices, with a growth of 18.3% in constant prices compared to the same period in 2023. While there has been a notable increase in building values, the issuance of building permits tells a different story. In March 2024, 2,293 building permits were issued, marking an 11% decrease from the previous year. This decline in permits signals a potential slowdown in future construction projects.
Milojko Arsić, a professor at the Faculty of Economics in Belgrade, suggests that this slowdown may be attributed to various factors, including reduced demand for high-rise construction, particularly in the housing sector. High interest rates and soaring real estate prices have deterred individuals from taking out loans, leading to a decrease in construction activity. Additionally, delays in obtaining building permits and uncertainties in the real estate market have further compounded the situation. Arsić emphasizes the importance of addressing the lack of affordable housing, advocating for the development of more accessible housing projects similar to the “Stepa Stepanović” settlement.
While investments in low-rise construction remain relatively stable, there are concerns about the future trajectory of construction activity. Arsić highlights the need for policy measures to stimulate investment in affordable housing and streamline the construction permit process. Despite challenges, Arsić remains cautiously optimistic, suggesting that a gradual reduction in interest rates may help alleviate some of the pressures on the construction sector. However, he cautions that significant improvements may not materialize until next year, given the complex nature of construction financing and market dynamics.
In conclusion, while the construction sector has shown resilience in certain areas, such as low-rise construction, there are clear indicators of a potential slowdown in overall construction activity. Addressing issues related to housing affordability and improving the efficiency of the permit process are crucial steps in revitalizing the construction sector and driving sustainable economic growth.
