Construction Boom in Areas of Big Serbian Cities – Super Gentrification to Gain On Proportions That Most People Can Hardly Imagine

According to the 2022 report of the Republic Geodetic Authority (RGA), the growth of the real estate market in Serbia has continued for the fourth year in a row, measured by the number of realized transactions and the total value of sales and purchases. The total value of the real estate market in 2022 reached EUR 7.5 billion, which is 22% more compared to 2021.

Apartment sales increased 3%, the sale of garage spaces by 23%, office spaces 2%, whereas the number of sold houses remained on the same level as the year before.

In terms of territory, most real estate transactions were realized in Vojvodina (35% of all sales and purchases), Sumadija and West Serbia (25% of all sales and purchases), the City of Belgrade (24%), whereas South and East Serbia recorded the lowest number of transactions (16%).

These data point to where the biggest demand for real estate is, but also where investors should focus their money and projects. For years back, migrations toward bigger centers show that big cities are expanding, whereas the smaller ones are losing the race.

– Settlements outside big city centers also draw attention from purchasers, and investors are trying to follow the new trends in the market. In this case, the demand precedes the supply, and not the other way around. Investors are not the initiators of these changes – Dragan Markovic, the development manager from the Gradnja portal, says for eKapija.

Fewer permits issued in January

The latest data of the Statistical Office of the Republic of Serbia show that, in January this year, 1,568 building permits were issued, a drop by 7.9% compared to the same period last year. Of the total number of permits issued in January, 76.7% of the permits pertain to buildings. If only buildings are observed, 77.3% of the permits were issued for residential buildings, and 22.7% for non-residential ones.

– A consolidation of the investment capital is happening. As a consequence, the number of building permits is lowering, but at the same time, the number of mega-projects with several dozen or hundred thousand square meters is growing. Parallel with this, certain design studios and contractors are growing suddenly in order to be able to meet the new market needs. On the other hand, medium and small studios are fighting to survive in the market – our interviewee notes.



Price increase not followed by quality increase

The prices of apartments in newly raised buildings in large cities have become irrationally big, whereas the quality of living is dropping dramatically. Traffic jams and air pollution are just some of the urgent problems, Markovic says and adds:

– However, there’s this strange situation where the price increase is not followed by the quality increase, on the contrary. However, due to mechanical migrations, the demand is big, so we are pushed toward the periphery.

Besides, he says, the question that many people with enough capital are asking themselves is: why would I live in an apartment that I will be paying EUR 4,000/m2 for, when I can build a dream house for EUR 2,000/m2 for myself?

Where to invest?

As a consequence of the coronavirus, another new trend is the appearance of weekend settlements, residential complexes of houses and summer vacation houses in nature (renting a weekend vacation houses for a day), because people have felt how stifling and suffocating our cities really are.

– Although places on Avala, Kosmaj, Fruska Gora and other mountains, such as Zlatibor or Kopaonik, attract the most attention, the most interesting places are in fact those through which the Belgrade-Subotica fast railroad passes or will pass. Nova Pazova, Stara Pazova, Indjija and Sremski Karlovci are extremely attractive as places to live in and interesting for investments – points out Dragan Markovic.

However, places like Kisac, Vrbas, Mali Idjos and Backa Topola will be the hotspots of the future economic development, especially in the real estate market, he notes.

– Those who have capital might want to invest in the purchase of plots of land and houses precisely along the railroad which stretches between Novi Sad and Subotica.



What is the situation like in Vojvodina?

When it comes to Vojvodina, where increased construction activity has been noted, the situation is not the same everywhere. This difference in economic development directly depends on the degree of development of the infrastructure, that is, “the gravitational pull” that is in effect between cities, notes eKapija’s interviewee:

– That gravitational pull is roughly calculated by dividing the number of residents by the number of kilometers between the cities, plus the traffic connection. Due to the high concentration and the direct air line, for example, there’s a greater connection between Belgrade and Vienna than between Belgrade and Sombor.

He also points out that the biggest opportunity lies where responsibility is the most neglected. Vojvodina and its cities, parallel with the development of new regional traffic infrastructure, offer uncounted possibilities.

– Of course, it all depends on the degree to which the private and state sectors, but also local self-governments, recognize and use the potential of a more direct connecting of various parts of Vojvodina with the help of new traffic networks, and also the accompanying utility infrastructure – Markovic believes.

Obrenovac recording an increase in the number of building permits with each year

In 2022, at the Department for Urban Planning and Utility-Construction Affairs, the Section for the Implementation of the Unified Procedure issued 10 location requirements and 9 building permits for the construction of residential facilities for several families, the City Municipality of Obrenovac says for eKapija.

– Since the beginning of 2023, location requirements and two building permits have been issued for the construction of said facilities in three locations, and one request for the issuing of location requirements and one request for the issuing of a building permit are currently in procedure – the specify.

The advantages of Obrenovac when it comes to the construction of residential facilities for several families are the proximity of Belgrade, the traffic connection (the proximity of the Milos Veliki highway), the lower price of building land and the utility equipment, they believe at this city municipality.

– As for the development of the municipality in the coming period when it comes to the construction of facilities for several families, an increase in the number of issued permits with each year has been noted. It is thereby expected for the number of requests to continue growing in the future, but in order to meet such demands, it is necessary for the development of the utility infrastructure, as well as other side features, to also have a growing trend (schools, kindergartens, healthcare, social services…) – they say for our portal.



Construction industry birthing new trends between the hammer and the anvil

The construction industry in Serbia is between the hammer and the anvil. On one hand, the lack of qualified engineers and contractors is increasing. On the other hand, the prices of materials are constantly growing. Furthermore, the demand is not showing the signs of slowing down – as many as around 90% apartments in new buildings are bought for cash, and not on housing loans, our interviewee reminds.

– When these opposing forces are combined, new trends of more efficient construction, implementation of systemic solutions and new technologies, as well as the joining of companies which offer various types of turnkey services, appear. Solutions which are faster, better and smarter are sought. BIM implementation is becoming mandatory, and the digitization of the construction of industry in Serbia is becoming quicker and more widespread – Markovic says.

He also points out that said fight for survival in the market could be very dangerous.

– To explain, there’s a situation where, in the past few years, certain companies have more than doubled or tripled. That kind of non-organic growth entails challenges with the organization and management of people who are not necessarily complementary in character. In addition to that, there is a great deficit of medium-level seniors and managers, as well as people who have work experience on large-scale projects. Being included in mega projects can bring either great gains or great losses, except that rarely anyone counts on the worst case scenario – says eKapija’s interviewee.

“There will be projects like Marina Dorcol all over the place”

Super gentrification will gain on a whole new dimension that most people can hardly imagine, Markovic believes and claims that there will be projects like Marina Dorcol all over the place. In the absence of state intervention in the real estate market, there will be a redistribution of capital according to the Pareto principle, so the difference between the super rich and the super poor will continue increasing.

– There is that invisible impact of the diaspora, which numbers several million people, of which at least 100,000 at this moment prefer to buy real estate in Serbia. In addition to that, more than 200,000 Russians have moved to Belgrade alone, who will switch from long-term lease to purchase, which will push the local populace toward the periphery. We are looking at a scenario identical to that which happened in Montenegro several years ago – he points out and adds:

– The disparity in the monthly earnings will have its spatial parallel, so we will have “spatial enclaves” and “luxury condominiums” swimming in an ocean of poverty.



Markovic also says that an enormous increase in product demand in the “lux” and “premium” segments is expected:

– The local economy and production will not be able to follow this growth, so there will be an increase in the importing of luxury goods, furniture and equipment. At the same time, as a consequence of the inflation, the weakening of the middle class and a reduction in the demand for all “medium category” products and services are expected.

He concludes that Belgrade and other cities are not the kind of megalopolises that exist, for example, in America:

– However, it is quite certain that the conception of a linear city will manifest itself in some way here too, precisely as a consequence of the traffic connecting of Belgrade and Subotica, that is, Belgrade and Budapest.

Aleksandra Kekic

Republički geodetski zavod Beograd

Republički zavod za statistiku

Gradska opština Obrenovac

Republic Geodetic Authority

Statistical Office of the Republic of Serbia

Gradnja rs

City Municipality of Obrenovac

GO Obrenovac

Dragan Marković

Avala

Kosmaj

Fruška gora

Nova Pazova

Kisač

real estate market in Serbia

sale of apartments

Belgrade Subotica fast railroad

construction industry in Serbia

super gentrification