Will real estate prices in Serbia start to fall?

Although the largest part of real estate transactions in our country is done in euros, the events on that market in Serbia are not related to those in the eurozone, points out the deputy president of the group of real estate brokers in the Serbian Chamber of Commerce, Nenad Djordjevic. He is convinced that the growth of real estate prices in our country will not stop soon.
The European Central Bank (ECB) has recently assessed that real estate prices in the eurozone are too high and that they are threatened with correction.
“The risks of price correction in the medium term are significantly increased due to estimates of excessively high value of residential real estate,” the ECB stated in the report on the financial stability of the eurozone, which it publishes twice a year.
Families saved more during the pandemic, the household saving rate doubled at the beginning of the pandemic, and in the first half of this year it was 20 percent, exceeding all estimates, the ECB said, noting that in times of crisis, wealth is kept in gold or real estate.
Does the eurozone have an impact on real estate prices in Serbia?
In addition, more and more citizens worked from home, which resulted in increased demand for housing and rising real estate prices, which amounted to about seven percent in the second quarter and is the strongest since 2005.
With the pandemic, real estate prices in Serbia also recorded a growth trend that did not decrease from month to month, so in October they were higher than in September, despite some announcements that in those two months the prices could calm down and even fall.
When asked to what extent our real estate market follows the events in Europe and whether the possible price correction there can be maintained in our country as well, Djordjevic is explicit that this is not the case.
Apartment as an investment
“The real estate market in Serbia is an investment market and the events on it are not related to the one in the Eurozone, because in the Eurozone, as well as in the USA, the real estate market mostly depends on the purchasing power of the population, ie the creditworthiness of those who buy real estate. In our country, loans participate in the total real estate turnover with about 14 percent, and in the apartment turnover with about 32 jobs per year,” he says for Sputnik, referring to the data of the Republic Geodetic Authority for 2020.
That is why he believes that the current trend in our country will continue, unless there is a disturbance caused by the increase in interest rates on savings, which, he is convinced, will not happen in Serbia in the medium term.
Sales are going well because demand is the only factor that affects the price, despite its growth, notes this real estate expert. He explains that the demand is generated by clients who invest money in real estate because it is the safest form of saving for them.
What is China doing?
In order to curb the growth of real estate prices, China announced the introduction of a tax on residential real estate in some regions. With the conclusion that apartments are used for housing, and not for speculation, it was estimated that by increasing the costs of holding real estate, their purchase would be more accessible to citizens with lower incomes.
Can a higher property tax be a way to curb apartment prices in our country?
“The property tax in Serbia has increased in the past few years, but it is still significantly lower than the property tax in the eurozone countries and in developed economies in general. So, the property tax rate is still stimulating for investing in real estate,” states Djordjevic.
That is why he is convinced that there will be no significant events on our real estate market.
“If you have only about 14 percent share of loans in financing the purchase of real estate in Serbia, and in the eurozone and the US it is 70 to 80 percent, there is no reason to change because demand does not depend on the creditworthiness of citizens and their earnings,” said our interlocutor.
When asked when we could expect prices to calm down, or if they start to fall, he underlined that it is in case the interest rates on savings increase and it is more profitable for people to keep money in the bank than to buy real estate, or if there is a big macroeconomic disturbance in the financial market in Serbia.
He says that it is not impossible for real estate prices to return to the previous level, since they have soared at some point. He reminds that this happened during 2008, 2009, 2010, but also points out that in general, from 1991 until today, our market has recorded a continuous increase in prices, regardless of individual declines, Sputnik News reports.