Construction is recovering, as evidenced by the growth during the second and third quarters of 2023 at approximately 15% and 13% year-on-year. The recovery followed a reduction of 9.8% in 2022 and an additional decrease of 1.6% in the first quarter of 2023. This is noted by economist Ivan Nikolić in the analysis titled “Is the Stagnation in Residential Construction Temporary,” published in the latest issue of the publication “Monthly Analyses and Trends.”
“It should be noted that the growth is not evenly distributed within this sector but primarily stems from the realization of large infrastructure projects in transportation and energy. For example, projects such as the bypass around Belgrade, sections of the Morava Corridor, the highway from Preljina to Požega, the highway from Ruma to Šabac, the railway line from Novi Sad to Subotica, and the gas interconnector Niš–Dimitrovgrad have been implemented. Along with the increase in the value of completed construction works, there has been a simultaneous increase in the hours worked on construction sites,” Nikolić states.
However, there are indicators suggesting that residential construction lagged during this period. One of them is the segments of domestic production of products from other non-metallic minerals that supply residential construction, as well as the import of these products. The market for construction materials and building elements showed instability after the COVID-19 pandemic and the start of the war in Ukraine, affecting the dynamics of construction projects.
A real decline in demand for certain construction products related to residential construction has already been observed in the data on imported quantities during 2022. This decline was further intensified in the first nine months of 2023. Based on available foreign trade statistics, the quantity of imports of products belonging to the group of brick, blocks, etc., and roofing tiles during this period showed a significant year-on-year decrease of 70.8% and 35.8%, respectively. If this trend continues in the last quarter of 2023, the annual import level could be reduced to the volume realized before 2017.
A slightly better result was recorded in terms of import value. Year-on-year, the import in euros for the first ten months of 2023 decreased by 14.3% for finishing ceramics, 61.3% for brick and blocks, while the import of roofing tiles decreased by exactly one-quarter. Furthermore, concerning are the data from the Republic Geodetic Institute (RGZ) indicating that in the first six months of 2023, the total number of real estate transactions decreased by 14.1% to approximately 60,000 transactions, with the number of purchased apartments lower by 18.6%.
The value of the real estate market in the third quarter of 2023 amounted to 1.5 billion euros, representing a 10% year-on-year decline. The value of traded apartments was 777.9 million euros. The share of apartments in the total market value was 52%, which is four percentage points less than the previous year. It is important to note that within this data, there are also apartments that are not “new construction,” but this does not diminish the problem, as the recorded traded value is lower despite the fact that the price of apartments has increased.
“There are some indicators that during the third and fourth quarters of 2023, there was an improvement in residential construction activities, but at this point, it is still early to conclude whether residential construction will show growth for the entire year. The construction of larger residential complexes, such as ‘Belgrade Waterfront,’ ‘Depo,’ ‘Voždove kapije,’ ‘Wellport,’ ‘Viva Residences,’ ‘Zelena avenija,’ and a large residential-business complex in Niš with over 400 apartments, influenced the growth in the value of residential construction in the second half of 2023,” notes Nikolić.
The acute problem in residential construction should be primarily sought on the demand side, he adds. In the past three years, there has been a boom in the prices of apartments, especially in “new construction.” Prices continued to rise in 2023, although at a more moderate pace than before. Several factors contributed to this, but there is no doubt that the reduction in demand will quickly break this trend. Overall inflationary pressures in Serbia are weakening, which is also reflected in the real estate market, and this is a positive development. While tightened monetary conditions and rising interest rates have had an unfavorable impact on demand, their effect is very limited. Namely, in Serbia, only a small portion of real estate is still bought using credit funds. According to RGZ data, 16.6% of all traded apartments in the third quarter of 2023 in Serbia were paid for with credit, which is nine percent less than the previous year.
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