In Novi Sad, at least one million square metres, or about 20,000 housing units, are planned to be built in the next two years. This will surely lead to an over-saturation of the market, and the fairytale of enormous prosperity will slowly come to an unhappy end.
It is not just Novi Sad… Despite the low purchasing power of citizens, real estate prices are rising rapidly throughout Serbia. Not only has the price of square footage skyrocketed, but flats are being sold faster than they are being built, and it is often impossible, or very difficult, to buy a suitable and desirable flat even if you have the money ready.
How and why does this happen? How do we explain the paradox that the explosion in real estate prices and demand is happening at a time when, by all standards, the average family cannot even cover its basic expenses, let alone buy flats and houses?
Experts first point out that Serbia lives mostly from the construction and investment sector if one does not count the huge and continuous foreign loans. They say that this is serious anomaly, because the state should not rely so heavily on a branch of the economy, particularly the construction sector, which is subject to severe fluctuations, even under normal economic and political conditions. They claim that for now, a kind of figurative Perpetuum mobile is going on, which is based on the circulation of money and real estate.
‘Surplus money’ from the budget (and these are the funds that have ended up in private coffers in various ways, i.e. what the Progressives (members of the Serbian Progressive Party) have stolen from taxpayers), as well as some loans and foreign investments (it is believed that up to 25 per cent of funds from Chinese investments abroad end up in the pockets of the domestic political elite, as a pre-calculated bribe quota) flows into the construction sector, which then fills the budget again. The new emerging elite, which has a lot of money, invests in what is familiar to them, that is mostly real estate. This also applies to other citizens, who are far from investing in stock market shares.
It must be said that this is not the case only with real estate in Serbia, but also abroad; Greece and Turkey are particularly popular for these kind of financial endeavours. A large building contractor in Ankara, sought an intermediary in Serbia when he saw the statistics a typical foreign buyer of real estate on the Turkish coast.
Growing prices are also influenced by the systematic emptying people’s private savings (usually kept at home) in the context of the devaluation of foreign currencies and high inflation. In order for money not to lose value, people invest in real estate, which is a smart solution for now, as the value of a square metre is constantly rising.
Buyers often don’t rent out the housing they buy, because they do not want to deal with tenants, as they are practically making money even if a flat is not rented out. When it comes to Novi Sad, we must also add the fact that this city has a very strong IT industry and that IT specialists have high salaries as a result of direct cooperation with foreign companies, so employees can easily afford home loans. Given the surplus of money on the world market, banks are now lending very easily and generously.
In Novi Sad, there is a lot of money from the Republic of Srpska (RS) coming into the real estate sector. Capital does not favour dangerous areas, and the neighbouring country seems to be just as safe. Novi Sad is considered a safe city, quite a few companies from the Republic of Srpska have been buying flats and construct buildings here. There have even been humorous proposals to name a new boulevard in Novi Sad after Milorad Dodik (the Republic of Srpska president). In addition to the Republic of Srpska, buyers of real estate in Novi Sad also also come from Kosovo, Montenegro and central Serbia.
The great pressure exerted on Novi Sad is a result of the fact that there are good employment opportunities here and a large state university. In the past, we have seen villages being emptied and people moving to neighbouring towns, and now the towns are being depopulated. The towns in Vojvodina, once successful economic centres, are rapidly losing population who is predominantly moving to Novi Sad. Or at least they buy real estate here, if they have extra money, so that their children have somewhere to stay when they go to school.
However, this whole complicated fairy tale, in which developers, the state and even flat buyers benefit, has downsides and an inevitably unhappy ending. The downside is so-called urban violence committed against the city, which is particularly visible in Novi Sad, and whose goal is to maximise profits and build as many housing units as possible on a small plot of land. The funds that real estate developers give for various municipal taxes, which should then be invested in infrastructure development, end up who knows where. That is, the new buildings and structures do not have adequate infrastructure. Novi Sad is regularly flooded when it rains, the Danube coast stinks of sewage, and it is very likely that there will soon be serious problems with the water supply.
In the next two years, the plan is that at least one million square metres, or around 20,000 housing units, will be built in Novi Sad. This will certainly lead to market saturation and thus, according to experts, the fairytale will slowly come to an unhappy ending. Since the rise in Euribor has also led to an increase in loan instalments, which may double or even triple, some people might not be able to pay their mortgages and that cannot end well.
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