Resilient Investment Amidst Rising Borrowing Costs

The increase in borrowing costs has significantly impacted the commercial real estate market across Europe. However, Southeastern Europe has seen a smaller effect, with investment volumes increasing by more than 30% in 2023 compared to 2022, driven by the Serbian and Croatian markets.

MARKET OVERVIEW

Serbia’s real estate investment scene experienced volatility, with notable growth in 2023 after a record low in 2022. According to CBRE’s “2024 SEE Region, Real Estate Market Outlook,” investments in 2023 exceeded €400 million, with 85% directed towards commercial properties. Hungarian investors accounted for 60% of these investments, 30% were local, and 10% came from Israel.

Belgrade stands out for both commercial and residential real estate investments. The report highlights a significant focus on commercial real estate in 2023, comprising 50% of the total volume, while the hotel sector, particularly in Croatia, was also active.

TRENDS AND DEVELOPMENTS

Unlike Europe, which saw a 50% decline, the region’s developing market has shielded it from such drastic downturns. The office sector has driven growth, especially in Belgrade, where the market is less developed compared to the region. The industrial sector is expanding, with further investments expected.

Belgrade’s housing market is one of the largest by volume in the region, but its competitiveness is in question

In the first two months of 2023, there was a slight decline of about 10%, initially affecting credit buyers due to rising interest rates. However, cash buyers dominate the market, setting trends. This has led to a slight slowdown, but the next three months will determine if we are heading towards a price reduction trend, though not as drastic as in Europe, especially not in Belgrade.

RESIDENTIAL MARKET AFFORDABILITY

Over the past five years, the affordability of buying residential properties has increased in Serbia and North Macedonia, while it has decreased in Slovenia, Croatia, and Bosnia and Herzegovina. In Serbia, it takes two and a half average net salaries to buy a square meter of a new apartment in Belgrade, which has reached €2,000.

The key is maintaining a favorable ratio where average salaries can buy more square meters over time. Despite intensive construction, price increases are inevitable. A planned €17 billion state investment cycle over the next three years will attract foreign investments and private capital, much of which will end up in residential construction.

Belgrade’s housing market is one of the largest by volume in the region, but its competitiveness is in question. With substantial construction and supply, price fluctuations are slower, meaning demand increases do not drive prices up as rapidly as they might seem locally.