Serbia, Construction industry issues

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The number of building permits issued in September was 16.5 percent lower than in the same month of the previous year. Experts say that it is expected that, under the pressure of high prices of construction materials and energy, investors will slow down their investment. They reported the construction of 2,886 buildings, and as much as 84.6 percent refer to buildings in which 3,809 apartments will be built. The green light was given for the construction of about 300 fewer apartments than in August.

Considering the growth in the number of building permits in previous months, it would not be such bad news, nor a big drop for the real estate market, if the demand for apartments was not at such a high level. Real estate agents point out that the reduced volume of construction, in the current circumstances, will at best contribute to keeping the prices of square meters at the high levels they are at now, and that they will hardly be able to reverse, because the supply of new real estate will be smaller.

Companies on alert due to expensive material The Association for the Construction Industry of the Serbian Chamber of Commerce said that the current values ​​are the result of caution on the part of construction companies to start implementing new projects in view of the disturbances in the prices of construction materials on the world market, which inevitably spilled over to our country. They indicate that the fluctuation of the prices of materials in procurement is still high and that suppliers often cannot follow the situation with the deadlines in the offers. They also add that some materials are not in stock, but then replacements can be found or the delivery can take several months.

“There is a current announcement of a reduction in the production of ceramic tiles, brick products and roof tiles due to the rise in gas prices. The companies especially emphasize the need for an official regulation related to the contracting of the clause on “sliding scales”, which is in the form of a recommendation, so it should be formalized. The collection of the performed works is good, although it is sometimes slowed down by the formalities related to the registration of ownership”, says the Association of the Construction Industry.

They state that “moderate optimism regarding the investment cycle next year” prevails, primarily due to the challenge of the energy crisis, and the geopolitical situation, which makes it difficult to find imported equipment for which there is no substitute on the domestic market. They also point out that this year the leading construction companies expanded their portfolios with new contracts, and that the opening of new construction sites would be more intensive if it weren’t for the problem of insufficient labor force, so it is sometimes difficult for subcontractors to meet deadlines.

Hard times

The President of the Construction Chamber of Serbia, Stojan Čolakov, tells that due to the current market circumstances, housing construction is in a slightly better position than other construction activities, but that, in essence, construction is in an extremely difficult situation. “Earnings at construction companies almost always go into development. These are not trading companies, we have a long process of returning money, and that’s why none of the big businessmen deal with construction, building infrastructure. The exception is real estate, because when the currency you keep in the bank or in a mattress, and all prices are jumping, banks still don’t give serious interest rates, everyone is then looking at how to put it in concrete and mortar”, says Čolakov.

When construction activity grows, it drags other economic branches along with it, and that is why its growth is always a good sign for economic activities, but it is just as bad when construction slows down. “Input parameters, payment methods, forms of contracts that are given to builders are difficult to sustain. We are also left without a market outside the country, because each country protects its local companies and arranges regulations in such a way as to protect them and provide them with work. On the other hand , our market is unfortunately sold, because 90 percent are interstate contracts, and our companies are in the status of subcontractors and work at some prices that are only to cover direct costs”, Čolakov points out.

“Black swan” on the real estate market

According to RZS data, in the first nine months of this year, investors received permits for the construction of 30,358 apartments, while in 2021, the construction of 35,053 apartments began. Much more is being built than in previous years, but still insufficient in relation to the needs of the real estate market. Director of consulting and appraisals at CBRE Nebojša Nešovanović says that in the coming period, a smaller supply of apartments is expected, but also a drop in demand among the population due to the change in the economic situation, which is why a drop in turnover is forecast for the next year.

“However, we do not expect a significant movement of prices either up or down. We have a significant influence in the real estate rental segment, because they have gone up, which is another generator of demand for apartments. They have become attractive as real estate that generates income, not only real estate that creates capital gains. It may happen that the influence of the Russians, which is now important in terms of leasing, will be significant both for the real estate market and for the entire economy due to the consumption they make, and that this will keep the demand at a higher level than we predicted”, Nešovanović points out, Euronews writes.