Apartment prices in Serbia increased by 13 percent in the third quarter compared to the same period last year. New construction has increased in price by ten percent, and old construction by nearly 15 percent.
At the same time, according to the latest data from the Bureau of Statistics, the number of building permits in September was 16.5 percent lower, and according to data from the RGZ, the number of sold apartments in the third quarter of this year was 0.9 percent lower than in the same period last year years.
However, the value of sales is 10 percent higher, which also confirms that prices are rising.
According to the analysis of the German insurance company Allianz, after the rise in real estate prices during the previous ten years at the time of low interest rates in Germany, compared to 2015, apartment prices increased by 50 percent, but the ability of residents to afford an apartment decreased by 30 percent.
Thus, Allianz expects that by the end of 2024, prices in Germany will drop by eight percent, in France and Great Britain by five percent, and in Spain and Italy by three percent.
Under certain circumstances, Serbia (or at least Belgrade) could be the only country in Europe that will not suffer a fall in real estate prices.
“In Western Europe, real estate is mostly bought on credit, so an increase in interest rates is directly reflected in a drop in demand, which then leads to a drop in prices.” In our country, however, purchases for cash prevail, so a decrease in demand can occur when there is a drop in economic activity and less capital accumulation,” explains Nešovanović.
On the other hand, the decrease in the supply of apartments will be affected by the tightening of financing conditions by banks.
Nešovanović explains that in their projections they expected a gradual decrease in supply along with a decrease in demand for real estate, so the balance would be established at a lower volume of sales, but at approximately the same prices.
However, in addition to all those economic factors that should slow down demand, one, so far very strong, has appeared that works in the opposite direction. It is the arrival of Russians and Ukrainians in Serbia (according to some estimates, more than 167,000 have residence in Serbia) who first appeared as tenants.
“We did not expect a significant arrival of Russians, and they turned out to be a significant factor for the real estate market.” They raise rental prices, and that generates demand for apartments for our people who have money. They have been buying apartments until now, but mostly expecting capital gains (increase in the value of real estate), but now they can also have significant income based on rentals.
In addition, those people who came are mostly able to pay and increase the turnover of our businessmen. Because of this, we could do better than expected economically. On the other hand, this means that the drop in demand for real estate that we expected will not occur. This further means that we could be the only country in Europe without falling real estate prices,” concludes Nešovanović.
The negative consequence is that people who educate students in Belgrade or Novi Sad or people who cannot afford their own apartment and live as tenants have problems in providing affordable housing.
Dejan Šoškić, a professor at the Faculty of Economics in Belgrade, does not expect further arrivals of people from Russia and Ukraine, and he also thinks that inflation could begin to fall from the middle of next year.
“I do not believe that the influx of people from Russia will be permanent.” In addition, we are already seeing a slowdown in the economy, which will affect the demand for real estate. Inflation can also be expected to decrease in the second half of the year. “It seems that real estate prices are already above the equilibrium level, and their downward correction could occur by the end of next year,” assesses Šoškić.
He also points out that there is a noticeable decline in the construction industry in the third quarter, which is a signal of a slowdown in economic activity, and “given the expected recession in Europe, we can hardly be exempt.”
Jasna Atanasijević, a professor at PMF in Novi Sad, points out that in the previous period there was probably a drop in the demand for real estate, because we have seen a drop in the number of housing loans for three consecutive quarters.
“However, the drop in supply was obviously even more significant than the drop in demand, which resulted in a rise in prices.” In the following period, it can be expected that the supply will continue to decrease, as indicated by the decreasing number of issued building permits. The latter is a consequence of the increase in the cost of financing, i.e. the increase in interest rates in the previous months.
A reduction in supply, in itself, pushes prices up,” she explains.
The movement of real estate prices will be determined by demand.
“One scenario is that it continues to fall, due to increasing uncertainty, rising costs of living, falling real income and rising prices of new loans.”
Something like this has, in all probability, already happened in some of the markets of Western Europe, which we read a lot about in the news.
However, a specific development in the Serbian market, primarily in the segment of residential real estate, is that we have a significant influx of residents from Russia and Ukraine. When we have information about their decisions regarding settling in Serbia and buying real estate in the coming period, we will see how the prices will finally move”, concludes Atanasijević, Danas writes.