The construction and real estate sectors in Serbia experienced significant downturns in 2025. Following a period of growth, both sectors faced sharp contractions due to rising financing costs, a slowdown in public investment, and a reassessment of risk by private developers. The financial repercussions were evident throughout the industry.
Data indicates that the value of construction works fell by approximately 8.4% in real terms, driven by decreased infrastructure spending and a slowdown in residential development. This decline led to reduced revenues for construction companies, with many mid-sized contractors reporting turnover drops ranging from 10% to 20%. The impact on profitability was exacerbated by fixed cost structures, resulting in EBITDA margins decreasing to between 4% and 6%, with some firms even facing negative margins.
In the real estate sector, developers encountered a mixed landscape. While prime residential and commercial properties maintained their value, transaction volumes saw a decline. Financing challenges hindered the launch of new projects, leading to slower inventory turnover. As interest costs rose and sales cycles lengthened, net margins contracted, causing typical return on equity (ROE) for developers to drop from low double-digit figures to around 5% to 7% in 2025.
The financial strain on balance sheets intensified as higher debt servicing costs and delayed cash inflows put pressure on liquidity, particularly for companies employing aggressive pre-financing strategies. Working capital needs increased while access to new credit became more restricted. Although some firms utilized factoring and structured financing to alleviate pressure, these measures did not fully counteract the overall downturn.
Investment behavior shifted towards a more defensive posture. Capital expenditures were reduced, land acquisitions slowed significantly, and project pipelines were narrowed. Companies prioritized completing existing projects over portfolio expansion. Employment within the construction sector decreased as firms adapted to reduced workloads and implemented cost-cutting strategies.
By the end of the year, both the construction and real estate sectors had reached a cyclical low point. Financial performance was subdued in 2025; however, this correction helped mitigate speculative excesses and reestablish pricing discipline within the market. Firms with robust balance sheets and diversified project pipelines managed to endure the challenges, while weaker entities either exited or consolidated their operations. As the sector approached 2026, it appeared smaller, more cautious, and highly responsive to prevailing financing conditions.
