Have square meter prices reached their maximum or will they continue to grow at a gallop in 2023. This is the dilemma that plagues all those who are on the verge of buying their first property. All the circumstances of the past months and years – from the corona virus epidemic, through the war in Ukraine, to high inflation, skyrocketed the prices of square meters and distanced them from that dream. Experts believe that even in the new year, it will not be easy for those who plan to buy an apartment on credit to find a place to live.
The average price per square meter in Belgrade exceeded 2,200 euros in the third quarter, and how much the buyers in the capital paid on average for an apartment at the end of last year will be known in the coming days when the Republic Geodetic Institute publishes the latest report. According to data from real estate agencies, prices continued their upward trend, especially in central city municipalities.
Professor of the Faculty of Economics in Belgrade, Dejan Molnar, tells Euronews Serbia that the increase in interest rates on housing loans in the past months has reduced the circle of those who can use bank loans and appear as buyers of housing.
“Each additional percentage point in the interest rate leaves one segment of potential buyers “out of the game”. This could cause a decrease in demand and a drop in prices at some point. This is especially important when considering that real estate prices depend to the greatest extent on economic growth which is slowing down, the level of living standards of the population which is under the impact of inflation and the conditions under which banks approve housing loans which are deteriorating,” explains Molnar.
The professor states that in the third quarter of 2022, there was a noticeable drop in the share of apartments purchased through housing loans from 33 to 25 percent compared to 2021, and that the number of apartments sold in the third quarter was 5.6 percent lower in compared to the same period in 2021.
“If one takes into account the fact that during the previous eight quarters, starting from June 2020, there was an increase in the purchase and sale of apartments, it can be concluded that the market has cooled down to a certain extent, although prices are still increasing. Reducing the share of credit funds in the purchase of real estate in the first half of the year, with an expected further decrease in the second half of 2022 and throughout 2023, will definitely have an impact on reducing the demand for real estate in Serbia,” Molnar believes.
“For credit buyers, neither scenario is good”
Nebojša Nešovanović, Director of Appraisals at the real estate company CBRE, told Euronews Serbia that the “real buyers of apartments“, who buy them to live in, are mainly loan clients, and that further growth of the Euribor is expected, so loans will be and less favorable than now. He adds that practically no scenario is good for those who should take on debt.
“If prices remain stable or if they continue to rise, it will be much less favorable than it is now to buy. If prices fall, what would really have to happen is a dark scenario of a serious economic decline, which would be accompanied by an increase in unemployment, real estate could be more favorable, but in that situation jobs would be more uncertain. There will also be pressure on wages, so it will not be favorable for those people again. If the economy overcomes the crisis well, the price will go up with high interest rates, and if in If the economy goes badly, people who work normally and earn money will feel the most,” Nešovanović points out.
He notes that for people who work some average and “normal jobs” and need to buy real estate, it becomes dramatic, because it is increasingly difficult for them to pay rent, and it is almost impossible for them to buy apartments.
“And then the question arises as to how young teachers, police officers or drivers, cleaners will be able to buy any apartment and live in this city. Who will teach our children and clean the streets and other things… If this continues, we must think how do we solve it? It is a really bad option for Belgrade to become a city of the rich where people who do “normal jobs” cannot afford to live. It is bad for the rich and for the state and for everyone. It is not our chronic problem, but can be maintained for a longer period, if the trend of price growth continues,” Nešovanović believes.
An obvious decline in credit buyers
The executive director of the City Expert agency, Miloš Mitić, tells Euronews Serbia says that it is noticeable that the economy is slowly entering recession due to inflation and notes that interest rates have more than doubled, which has affected the decline in the number of credit customers.
“Interests on housing loans were around 2.5 percent, and now they are around 5 percent, and because of that, borrowing is more expensive for those who are just taking a loan, but also for those who took it in previous months, installments of 300 to 400 EUR, now EUR 500 to EUR 550, which is not a small increase at all for a household budget. People who had savings were afraid of the value of their money and invested in real estate, so a lot of cash buyers appeared on the market who may not have even before were thinking about investing in real estate, but this situation led them to do so. They maintained that demand, even though the drop in credit buyers is obvious,” says Mitić.
He indicates that this is why prices are at the same level or have a standardized growth throughout the year. He also notes that December and January are generally the months when demand is slightly down due to the cold weather and the holidays.
“Whoever is urgent, he uses every opportunity, but those people who are on the fence and are reconsidering, they postpone their demand until after the holidays, because the market is activated from January 20,” says Mitić.
“All the forecasts so far have been mostly wrong”
He notes that all the forecasts for the real estate market were mostly wrong until now, because everyone expected that the market would fall after the corona, but that it is still relatively stable.
“The decline of credit buyers is evident, because of the interest rates, but also because we don’t actually know how high they can go. Uncertainty prevents people from getting into debt, and on the other hand, this situation means nothing to credit buyers, because they certainly take a home loan in the long term and the question is how things will change during the three decades of repayment. The most important thing is that at that moment the buyer feels able to withstand those variations and have a stable job, as much as possible, because certainly no one can predict the movement of interest rates rates in the next 20 years,” Mićić believes.
“Prices have gone up two or three times, which does not mean that they will remain in the long term. I think that the rental prices will start to fall already in the spring, as soon as the Russians stop coming in such large numbers. In the last month, the number has already decreased arrivals and demand decreased,” says Mićić.
The interlocutor of Euronews Serbia also states that the rental situation is already calming down, because the prices were not set exclusively for them, and our people could not even pay, so Mićić believes that the rents will start to fall, but predicts that they will not return to the old level, because that “never happens”.
“The real estate market has become the playground of the rich”
Nebojša Nešovanović reminds that the increase in turnover and prices in 2022 occurred for several reasons, but that low interest rates on savings also had a significant impact, which is why people invested money in real estate.
“It’s not that we haven’t exhausted those capacities, but we see that savings are now growing. There is still more money than ever, with the fact that I would say that it is concentrated in a relatively narrow circle of people who earn well and live well. The real estate market has become their playground. Rental income is nice and it becomes a very comfortable situation for people who have capital and have real estate,” says Nešovanović.
It indicates that the European markets are slowly “cooling down” when it comes to the prices of square meters, but that does not mean that this trend will take root in Serbia in 2023.
“For the first time in my 20-year career, I can say that it is difficult or almost impossible to forecast what will happen. Serbia is probably the only country where it is currently unpredictable. One of the main demand generators are the arrivals of Russians. This is something that on our market real estate also makes a considerable difference to our economy compared to all other European markets. If the strong arrival of Russians continues, we can expect continued rent growth, and somewhat milder continued growth in square footage prices. If it decreases or if we eventually introduce sanctions or visas, which the same is not unthinkable, our market could be much more similar to other European markets that are already in a slight decline, and are expected to further decline during 2023,” explains the director of valuations at the real estate company CBRE, Euronews writes.
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