Serbian property market’s growth seems unstoppable

Property prices in Serbia have been rising steadily in recent years.

The average square metre of residential space costs 30% more than it used to, while the value of the real estate market has increased by 100 million euros to 4.2 billion euros in one year. And that’s not all. Demand continues to grow and one wonders why property prices are continuing to rise and whether there is a property ‘bubble’ that will eventually burst?

The question is all the more topical because the increase in the price of square metres of residential space in many cities can also be monitored on a monthly basis.

Thus, for example, flats in the Belgrade municipalities of Voždovac, Novi Beograd and Mirijevo have increased in price by up to 5% since the beginning of the year. An average price of a square metre of residential space in Novi Sad follows suit, while in Niš, in some parts of the city, real estate prices have grown by 30% since December. In Kragujevac, prices are stagnant, while in Pančevo. they have increased by up to 10% in the last five months.

While it has long been predicted that the “bubble” would burst, or rumoured to be about “monetary vicissitudes”, experts say that the growth of real estate prices is influenced by realistic factors.

“Property prices in Serbia are dictated by the real estate market. In a situation where the supply of flats and houses for sale is limited and there are plenty of potential buyers, i.e. the demand is strong, it is usual that the price of goods, in this case, real estate, is increasing,” says the director of the website, Anita Pešić.

Of course, the simple law of supply and demand is not the only cause of rising prices, and there are several other factors that influence the prices on the real estate market.

The most significant factor in the growth of housing market prices is interest rates on housing loans. With lower interest rates, which are now even twice lower compared to 10 years ago, loans are becoming cheaper. Therefore, more people are able to buy real estate and this leads to higher prices. It is also true that more and more people are able to afford a property, which can be linked to falling unemployment, i.e. rising employment.

Investing in real estate is therefore not an unreasonable business decision for a bank, insurance company, investment fund, entrepreneur or someone who has decided to buy real estate to live in.

Serbia doesn’t have a developed investment culture and there are no real opportunities in the capital markets. While in more developed countries, savings are invested in stock exchanges, investment funds, etc., in Serbia, this type of economic intervention is still in its infancy. In this context, buying a flat to rent is a safer option than investing in an underdeveloped capital market or putting that money in a bank.

“In this part of the world, we are not in the habit of investing in securities or precious metals, but we invest acquired or inherited capital in real estate,” says Anita Pešić.

Moreover, the real estate market in Serbia is full of ‘tied sales’. When money is made by selling a larger flat or land, the sellers themselves usually decide right away to reinvest the money in purchasing several smaller properties. This is one of the reasons why the report of the Geodetic Authority states that as many as 84% of real estate transactions are paid for in cash.

(Blic, 09.05.2021)

This post is also available in: Italiano

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