Serbia, Growth in real estate prices must come to an end

Published on 3. January 2023., News

Persistent, and in Serbia very high, growth in real estate prices must come to an end and the question is whether this year is the one when the trend will (finally) reverse

The just ended year 2022 was excellent in the real estate sector, and there are only slightly lower expectations for 2023 as well, experts in this field tell 24sedam.

First of all, those who had apartments and houses for sale last year are rubbing their hands, because the price continued its multi-year rise. She even amplified it. According to data on sold real estate of the Republic Geodetic Institute, the price of apartments in the third quarter of 2022 increased by an average of 13 percent, while in 2019 and 2020 the annual price growth was around 8 percent.

Until the end of the year, the investors were also satisfied, who, despite the increased costs, continued to build extensively in 2023. However, the number of requested and approved building permits began to fall as the year drew to a close.

This world trend of stagnation in real estate, prices have already fallen in some markets, will hardly be reflected to the same extent in the specific Serbian market. The “price bubble”, the bursting of which is announced in the world as well as in the Serbian real estate market for every next year, will not explode even in 2023, real estate professionals are convinced.

– The balloon can eventually be deflated slowly and gently. Prices fell five percent in the US, let’s say seven, eight in Denmark… But that’s it, there is no explosion and there won’t be one. The world has learned a lesson from the global financial crisis caused by the collapse of the real estate market and 2008 will not be repeated. And prices in Serbia can only fall if there are significant changes in the world. Maybe they will just stop in 2023 – Dušan Mirkulovski, owner of the real estate agency “ZidArt” from Belgrade, tells 24sedam.

Incorporation of investors

Housing construction in Serbia is quite large, but still not close to the demand. However, there are currently problems there as well, at least judging by the drop in the number of building permits issued. However, Mirkulovski does not see any long-term problems.

– The number of construction permits is lower, but that does not mean that fewer apartments are being built. There was an overcomposition among investors on the market. Changes in regulations, the introduction of mandatory energy passports for buildings, stricter anti-fouling regulations… all this affects the cost of construction, but also the consolidation of investors because not everyone can afford it anymore – Mirkulovski points out.

Igor Manjenčić, founder of the real estate portal Mojanekretnina.rs, tells 24sedam that he expects prices to drop, precisely because of the aforementioned permits.

– Housing construction, i.e. fewer building permits, is the first sign that there will be a correction in real estate prices. Investors simply do not believe that they will make a profit in the next few years. Whether the bubble will burst or just deflate remains to be seen, but 2023 is certainly the year in which it could happen. There will be almost no credit buyers at all, while cash buyers will also falter the moment inflation calms down. At the moment, cash buyers are fleeing to real estate to preserve the value of their money. The moment they realize that the drop in real estate prices is around the corner and inflation is under control, then they will start thinking about postponing investment in real estate, which will lead to a drop in prices – predicts Manjenčić.

Mirkulovski, on the other hand, is not convinced of a large nominal drop in prices, but rather of “leveling and normalization”.

– Prices are already regulated by inflation, and this year it was very high both in our country and in the world. And even if the prices drop a little, it quickly comes to the “real” price of the property. We cannot just compare prices today and five or ten years ago, because the value of money is not the same – explains Mirkulovski.

As for the sale of apartments in 2022, almost everything that was on the market has been sold. Even what used to “never sell,” real estate agents say.

Cash buyers inflate prices

Real estate prices in Serbia increased by 21.48 percent in November compared to the same month of the previous year, according to Mojanekretnina.rs data. In Belgrade, prices rose less than the national average, by 14.28 percent, which is a signal that real estate prices in Belgrade are overestimated, so investments are flowing to other cities as well. The reason for this growth lies in inflation, people want to preserve the value of money, considering that we have a large share of cash buyers.

– Prices have skyrocketed in Novi Sad, not to mention Belgrade. Rarely where in a more decent location can you have a square meter under 2,000 euros, and until a few years ago you could buy anything you wanted in the city for 1,200 or 1,300. The price has increased in a year from 20 to 30 percent, since covid and over 80 percent. And on the real estate market, even five percent is a serious shift – Dejan Čagorović, owner of the Magnat Nekretnine agency in Novi Sad, told 24sedam.

Now new apartments are waiting on the market, both in Novi Sad and Belgrade.

– Belgrade currently lacks 500 to 600 apartments that would have buyers to move in immediately, and those who would like to buy apartments for further renting. Of course, if they leave such a profitable rental price – says Dušan Mirkulovski.

For the Serbian phenomenon of constant growth in real estate prices, Mirkulovski finds an explanation in the structure of buyers.

– In Serbia, people still buy apartments in a large number of cases in order to rent them out. There is a large number of customers who buy in cash, which is also a consequence of relatively high income taxes, so many of them do not register in full. Or they do jobs on the side that are not reported, so it doesn’t even show up on the bills. These are not savings, but money that keeps coming in and because of which that “well” is slowly emptying. We should not lose sight of the fact that Belgrade and, for example, Zlatibor, are attractive for investment not only to our diaspora, but also to others from the region and the former SFRY, from Montenegro onwards – concludes Dušan Mirkulovski, BiF writes.

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