Real Estate in Serbia: While sales drop, prices remain high
According to the report issued by the Republic Geodetic Authority (RGZ), in international-scale comparisons, the Apartment Price Index in Serbia has recorded a growing trend, like in many countries. The Apartment Price Index in the third quarter of 2022 stands at 138.08 and reflects a steep rise in apartment prices, which has lasted through the year. The Index has been developed in line with international guidelines and is based on a mass apartment appraisal model, which takes into consideration not only the prices stated in sales contracts but also different property features gathered from relevant sources. Its role is to transparently display developments in the real estate market. The current Index of 138.08 means that if one purchased an apartment in the first quarter of 2019, when the basic index was 100, the value of his property has appreciated by 38%. The Serbian Apartment Price Index line graph is as follows:
|Source of data: RGZ||– – TOTAL － OLD BUILD － NEW BUILD|
|Graph No. 1: Apartment Price Index in Serbia, the interrupted line marks the total number for the entire market; the light purple line marks new build, while the dark purple line marks old build.|
When it comes to price hikes, from the first quarter of 2019 to the third quarter of the current year, the region of Vojvodina with the Index of 142.13, along with Belgrade with the Index of 141.43, topped the list. The most dynamic growth of real estate prices in the third quarter, just like in previous ones, was recorded in the regions of South Serbia and East Serbia, but this partly stems from relatively lower prices, compared to the rest of Serbia.
Old-build apartments mark the fastest growth
The Property Price Index growth trend is largely fuelled by the escalating prices in the old-build sector, with the annual growth of 18.84%. This may indicate that the new-build supply is maladapted to a massive rise in demand. The third quarter of 2022 saw a continuing trend of sharp apartment price surges, which in the course of this year occasionally reached two-digit annual rates. Therefore, the apartment price growth rate in the Republic of Serbia amounted to 13% in the third quarter of 2022, while it stood at about 8% in 2019 and 2020. Apartment prices in the third quarter of the current year are up by 3.2% compared to the previous quarter. The annual apartment price growth rates are displayed on the line graph below:
|Source of data: RGZ||－ OLD BUILD – – TOTAL － NEW BUILD|
|Graph No. 2: Annual apartment price growth rates in percentages, for the entire market (interrupted, blue line), old build (purple) and new build (green).|
Dip in apartment sales
The number of apartments sold in the third quarter of 2022 has decreased by 5.6% compared to the same period in 2021. This plunge signals a settling down in the real estate market, as the indicator showed a rise in the number of sales over the past eight quarters.
Apartment prices advanced steadily in the third quarter, too, which pushed the value of apartments for sale up by 12%, in contrast to the third quarter of 2021. However, a deceleration in market growth is noticeable, for the same indicator has jumped by as much as 26.1% in the second quarter of the current year, as opposed to the same period last year. Fluctuations in the number of sales and their value are displayed on a bar chart below. The Foundation for the Advancement of Economics (FREN) has also stated that the signs of real estate market deceleration are emerging in Serbia; nevertheless, even though they anticipate a decline in demand, prices are not expected to drop.
|Source of data: RGZ||Number of sales Total value of sales|
|Graph No. 3: Annual growth rates of the number of apartment sales and the total value of apartment sales in Serbia, in percentages; the number of sales is marked in purple, while the total value of sales is marked in blue.|
The report mentions that the downward trend in the number and value of apartment sales results from a decrease in the number of apartment sales funded through bank loans. The share of these has fallen by 25.7% in the first quarter, 25.4% in the second quarter and by 31% in the third quarter, as can be read from the following graph:
|Source of data: RGZ||－ Number of loans — apartments|
|－ Number of loans — all properties|
|Graph No. 4: The annual growth rate of the number of apartment sales funded through loans (purple) and all other properties (blue), in percentages.|
When will the Serbian real estate prices firm?
The issue of real estate price stabilization in Serbia is related to several factors which encourage a high-price plateau. First of all, a huge demand for properties, sustained not only by the first-time home buyers but also by the growth of inflation rates, is still in evidence. The Euro is losing its real value and many Serbs and foreigners alike are investing in properties with the aim of preserving the value of money. Experts expect the negative trend of loan-funded purchases to continue as long as Euribor is growing.
Analysts estimate that the plunge in apartment sales stems from the decrease of both supply and new build, which will probably last into next year, too, having in mind that the number of building permit requests was lower in the third quarter of 2022. A slowdown in building next year will push the supply down and the prices up again. Currently, two to four buyers are interested in every property for sale, while real estate agents underline that sometimes there are as many as ten buyers interested in one apartment.