Photo: PixabayDue to the uncertain economic situation and the war in Ukraine, an increasing number of citizens of the region decide to invest in real estate. For many, it is the most efficient way of saving, so they convert cash into squares. Low interest rates on deposits for years have established a trend in which the capital of the rich is dispersed, not to the stock market and investment funds, but to the real estate sector.
The market reacts so that those with lower paying power have fewer and fewer options. In Serbia, in the third quarter of this year, real estate buyers "cashed out" 1.7 billion euros, which represents an increase of 10.6 percent. Real estate prices in some cities rose by up to 30 percent last year.
In the same period, the variable interest rate (Euribor) on housing loans increased by 1.63 percent, inflation jumped to 14 percent, while average wages are nominally higher by 16.5 percent, and in real terms by 2.9 percent, according to the data of the Republic of the Statistical Office of Serbia, writes Al Jazeera Balkans.
FILLING OF CITIES AND EMPTYING OF VILLAGES
"Low interest rates that have made housing loans cheaper, there are buyers from abroad who buy real estate in order to return to the country after retirement, the impossibility of placing savings in other types of investments, because starting a new entrepreneurial venture is perceived as high risk due to the existence of uncertainty in the market and bad business environment, including high corruption, interest on deposits is below the level of inflation while the capital market has not yet come to life. Those properties are then leased," says Mihailo Gajić, director of the research unit of the Libertarian Club "Libek" from Belgrade.
Authorities at the local level are directly responsible, he adds, who lag behind in providing public services in the area of infrastructure, as a result of which the demand for real estate is directed towards territorially limited parts of cities.
That's how the cities fill up, and the villages remain empty.
"This further increases the price increase in the cities, because in practice there is a lack of basic infrastructure outside the center." The answer should also be found in the expansion of the appropriate infrastructure outside the larger city centers, in order to attract more people ready to move there, if this means that they will also have access to the communal infrastructure there and that they can quickly get to the other side of the city, by car or public transport. notes Gajić.
He, however, does not want to get involved in assessments of whether real estate prices in Serbia will soon fall, because he believes that all the factors that stimulate demand are still present, except for the announcement of an increase in interest rates.
This claim is supported by data from the report of the Republic Geodetic Institute, according to which in Serbia in the third quarter of this year, 25 percent of apartments were purchased with credit, but only 10 percent of real estate traded.
In the second quarter of this year, 29 percent of apartments were bought on credit, and in the whole of last year, 39 percent.
DOMINATION OF CASH
Therefore, ready money dominates, and in addition to people from the diaspora and domestic customers, about 120 to 150 thousand citizens from Russia and Ukraine bring it to this country.
The situation is similar in Montenegro, where, according to the Ministry of Interior, there are 24,600 citizens of Russia and Ukraine with temporary or permanent residence.
The domestic population is losing the battle on the market in front of rich investors from abroad.
And not only when trading new buildings.
Problems pile up when renting real estate. Renting apartments for many becomes an impossible mission, noting that the tenant population consists of tens of thousands of the most difficult socio-economic cases, already burdened by inflationary effects on the standard of living.
"We have a huge increase in real estate prices, as well as rents." Unfortunately, in the middle of the war, a large number of citizens of Ukraine and Russia came to Montenegro. By buying real estate and paying much higher rents, they unwittingly influence the enormous increase in real estate prices and rents. We are in contact with domestic real estate agencies and can only expect a momentary stagnation of newly created, otherwise too high prices or even their further growth. All of the above represents a very strong blow to the standard of the tenant population in Montenegro, which was already very bad. Now it has already taken on dramatic dimensions," announced the Association of Tenants of Montenegro.
The question arises as to what to expect from the state system as a possible price regulator and meter, without further jeopardizing the position of this population, because any introduction of additional taxes can burden the tenants' backs even more?
"At this moment, the state must react quickly and introduce subsidies/social packages for the most vulnerable families of tenants - subsidies for renting real estate, bills and everything that can currently make life easier for tenants." Last year, Podgorica launched a social service for 500 tenant families, with subsidies of 50 euros each for 12 months. The same could be done in other municipalities. The state should have started mass construction of social housing long ago, which would have a positive effect on real estate prices and their rents. Control in this area must also be established", according to the tenants of Montenegro.
"Neither does the state know how many tenants there are, nor does it do anything about it." Ninety percent of rented apartments are rented without a rental agreement, which avoids paying taxes. Because of this alone, the state loses millions of euros annually. The same money could be used precisely for starting social housing or subsidizing tenant families," they add.
CONTINUOUS GROWTH OF REAL ESTATE PRICES
Real estate prices are continuously rising in Bosnia and Herzegovina. A roof over your head is getting more expensive, regardless of the fact that the prices of materials for the construction of new housing units are falling.
They returned to last year's level, before the big price increase, but the material is obviously not a decisive factor in creating prices.
"The trend of real estate price growth has not just started, nor can a possible drop in inflation stop it quickly." It is caused by a fundamental disruption of the market, both on the supply side and on the demand side. When it comes to supply, too few new apartments are being built, more and more of a more luxurious character for a certain category of buyers, rather than for the wider market. Demand is divided into two categories. The first is made up of the majority of local citizens who either cannot afford a new property, or find it difficult to do so, with unfavorable credit debts and the multi-decade burden of loan repayment," says economic expert Igor Gavran.
The second category, according to him, is "a small number of wealthy domestic citizens - often politicians and persons connected with them, businessmen, but also criminals who do not invest in real estate only for their own needs or as a business investment, but as a form of 'money laundering' and "hiding" illegally obtained income and wealthy customers outside the country".
"The purchasing power of the second category of demand completely changes the image of the market and leads to an enormous increase in prices, because they are ready to pay much more than the average domestic customer." A large number of new apartments are specially adapted to their demand, square footage and luxury. This then makes it easier for those who sell new apartments of modest square footage and quality to raise prices unrealistically. The result: maintaining prices far above the level justified by costs and the average purchasing power of citizens," adds Gavran.
"INCONSTANT MEASURES OF THE AUTHORITY"
He does not expect a significant drop in total demand or prices, but only an additional increase in the gap between different categories of customers and further adjustment of the offer to more affluent customers.
"The recession and the increase in interest on loans will certainly affect that part of the demand of domestic buyers with modest purchasing power, because it will be even more difficult or completely impossible for them to decide to buy apartments." Not for those who can easily afford the most luxurious real estate, for whom the crisis plays a secondary role, and the recession limits the number of alternative investment options," says Gavran.
The Government's measures so far have been either imperceptible or insufficient, and economists believe that they have benefited banks and real estate sellers more than citizens. Some things could be "overwritten".
"In some countries, when you build a building, you are obliged to build a certain number of apartments that will be sold or rented out at lower prices, which ensures at least a minimum balance and prevents only luxury buildings from being built due to profitability. Some other states or local authorities limit the amount of real estate rents by regulation and thus indirectly affect sales prices (because if rents are relatively low, pressure is automatically created for sales prices to fall). Some build a large number of apartments themselves and offer them on the market at reasonable prices, forcing the private sector to adapt to such prices through competition. A possible measure is relief for employers who provide their employees with accommodation, permanent or temporary. It is also possible to act fiscally, that is, to tax excess housing space and excess real estate in relation to needs," concludes Gavran.
Source: balkans.aljazeera.net
