People decide on this type of money placement because it preserves their capital
In his interview for our magazine, Ervin Pašanović, General Manager of Adventis Real Estate Management, talked about the challenges this industry is facing and why people in Serbia invest in real estate despite high prices.
Real estate prices are still going crazy in Serbia. How do you explain this price increase?
Price growth is simply determined by supply and demand. The current situation in Serbia is such that we have a small supply of real estate, but a high demand. The latest wave of price increases is a direct result of the COVID epidemic, as well as the war in Ukraine, which all led to no new construction projects being developed. It takes 3-4 years to develop a project, and any instability, just like this one, caused by the global pandemic and economic-political upheaval, causes a decrease in supply, hence prices continue to rise. All of the above mentioned leads to the fact that buyers in the real estate market are ready to pay more at the moment, which leads to further growth in real estate prices.
What affects the high demand that leads to growth?
Primarily it’s purchasing power. Real estate is the safest place to invest for those with money in this market. Everyone who has excess money invests in real estate and buys apartments, bars or houses. If a person buys an apartment that costs 200,000 euros today and rents it out for 1,000 euros per month with an average annual occupancy of 80 percent, it takes 20-25 years to recoup the investment in the best-case scenario, and often even longer. Most often, people decide on this type of money placement because it preserves their capital. The supply and demand are such that there is a demand for more apartments here. Most of the apartments are sold even before they are finished.
Today’s buyer of real estate in Serbia is very demanding
Global trends show that real estate prices are falling after the previous decline in building material prices. Will this also be the case in Serbia?
I don’t think so because we still have far greater demand than supply. The fact that building materials have become cheaper cannot significantly affect the price of real estate, because the material makes only about 10-20% of the square metre price, so it cannot significantly reduce the price of real estate, considering the discrepancy between supply and demand. Although the logic is that when interest rates rise, real estate prices fall and purchasing power decreases, in our case, over 65% of real estate purchases are done without a help of a loan. The capital market, i.e. the stock market, doesn’t exist here, so everyone invests in real estate as the safest investment.
What is most in demand in the real estate market in Serbia today? How much have customer habits changed?
Today’s buyer of real estate in Serbia is very demanding. They are looking for a complete service. They want to live in a good neighbourhood, in a well-built building. They want to have a nice property and live as close as possible to the city centre, as well as have all the services they need – from kindergartens, schools and clinics to playgrounds, sports parks, pet parks, etc. – at their fingertips. The block building system has proven to be the best answer to the needs of real estate clients because people prefer new neighbourhoods, rather than new buildings, in attractive locations. This implies large investment projects that can be carried out by a very small number of developers in Serbia, given that the cost of capital is high, and therefore the cost of carrying out construction works is high. All of this together affects current prices.
What needs to happen for the trend of returning to the suburbs, nature and villages near big cities to prevail in Serbia? Life in such places is far more humane, but In Serbia, these trends are far from being widely accepted.
I would disagree with your statement. I believe that there are no trends of living in the suburbs anywhere in Europe, as is the case in the United States of America (suburban area), and that even in the USA there is an increasing trend of people moving to the cities and not out of them.
We can see all this by observing the trend of population growth in large cities. Almost 50% of the population of Greece lives in Athens. Moscow’s population has doubled in recent years, as well as Istanbul’s. Life in the city is more humane, for the simple reason that all required services are close and available – health care services, education, theatres, cinemas, and also, as a very important factor, there is a much greater opportunity for employment and better income. Although the Internet has resulted in many jobs not being tied to a geographical location anymore, the countryside still loses value, precisely because of the lack of services that meet basic human needs.