Is It the Right Time to Invest in Real Estate? – Here’s What the Experts Say

If you’re wondering whether this is the right time to purchase real estate, the experts agree – it is. The first moment that was the best for investments in this field was 30-40 years ago, the second one is now. When choosing real estate, three things are important – location, location and location. Also, it’s an investment where you will never lose in the long run.

This is the message from the conference Business with a Purpose, which was recently held in Belgrade.

Real estate market in the region – who buys the most and where are most investments made?

Last year, there was a high growth of residential construction in the whole region, especially in Serbia.

– We’re talking all kinds – social, and them medium-level construction, but also the exclusive kind. In Belgrade alone, at the moment, we have around two million square meters in various phases. In addition to residential construction, the growth of the construction of industrial facilities is noticeable as well, and these are for the most part foreign investors with interesting new programs. We also have two big chains from Europe which are building tourism complexes, of which one has around 450,000 square meters in the first phase alone. When it comes to shopping centers, it seems that there is a saturation and the Belgrade, as a market, no longer has the potential for the development of a new one, despite some projects that are being discussed – said Dragan Budjevac, a professor at the Faculty of Civil Engineering in Belgrade and the director of DB Design & Construction.

Talking about Montenegro, he said that a certain drop in some segments was noticeable and pointed out that there were several projects that had been discussed for years, but that there were no concrete activities regarding them.

– In the region, other countries also have a considerable market growth. Perhaps the biggest boom is in Albania. Around 20 resorts, of which one has as many as 265 buildings, are being built on their seaside. In Bosnia and Herzegovina there is also an increase in construction, and in Sarajevo and Banjaluka some exclusive settlements are being raised, which are comparable with the best projects in Zagreb, Ljubljana, or Belgrade – Budjevac said.

A partner at the Montenegro Prospects agency, Sasa Vukicevic, said that, since Covid, the country had been recording a constant market growth.

– Last year was a record-setting year, the first quarter of this year is also great. The prices are growing constantly. Despite losing the Russian market due to the sanctions, some new ones have opened. Last year, Germans invested the most in real estate. I believe that, in Montenegro, our advantage is that we are a small market. If we take Germany as the example, which has around 83 million citizens, only 0.01% of that market means 8,300 sales for us, which is excellent. Not to mention other countries of Europe – Vukicevic said.

The majority of the investments is still made in the seaside area, and the biggest problem in Montenegro is the infrastructure.

– We have kind of followed the tempo of the investors and put a huge number of residential units on the market, but the road infrastructure has not followed that. The situation now is that it takes up to two hours to travel from Budva to Tivat, and in the Tivat region alone we have two of the most exclusive resorts. That is a problem which could potentially have an impact on the further development of the market in the coming period, but some investments have started as well, so I hope that won’t be the case – he pointed out.

The real estate market in Croatia is also recording a strong growth in the post-Covid period, and the ex-Yu diaspora is showing a special interest in purchasing apartments, said Branko Papes, the director of the Dogma Nekretnine agency.

– The real estate market in Croatia, and I believe that this pertains to the whole region, I would split into two parts, before and after the coronavirus. During the coronavirus time, we believed that the sales would stop and that the market would die out, and the opposite has happened. We see two reasons for that. The first is that, during the lockdown, people realized that real estate is not just the place where you sleep over, but the place where you live, and they wanted to change something. That’s how the investments started. The second reason is the diaspora, not just from Croatia, but from all countries of the former Yugoslavia – said Papes.

As he said, it is precisely them that currently invest the most in real estate in Croatia.

– After the coronavirus, we have 10 times as many inquests and realizations as before. The prices have grown as well and the problem is that the real estate is increasingly unavailable to the local populace. In the past two years, we’ve had a price increase of up to 50%, and the market niche which has grown the most is the sale of exclusive real estate. In the segment of those units which cost EUR 400,000 or 500,000, there has been a 500% increase – he added.

Miroslav Cvetkovic, the regional operating principal of Keller Williams Serbia Cvetkovic-Roskov, pointed to the fact that the financial market of Serbia had grown 90% in the preceding three years.

– Last year, the real estate market in Serbia was worth EUR 7.5 billion, which is a serious step forward. Parallel with that, the number of transactions and the value, that is, the volume of the sales, grew as well. As a consequence of the inflation and the increasingly expensive loans, it started dropping in 2022, so the number of transactions grew only 1.8% – he said.

According to him, 53% of the total transactions is realized in Belgrade, of which 65% pertains to apartments.

– If we observe the four biggest cities – Belgrade, Novi Sad, Nis and Kragujevac – we will notice that the share of loans in the sale of real estate has dropped by a considerable percentage and that it all now amounts to below 25%. Fewer and fewer people are taking out loans, and the negative trend has continued this year as well. In the first quarter, there was an increased volume and a market value of EUR 1.64 billion, but the number of transactions has been lowered. All this tells us that the real estate market in Serbia is investment-oriented and that people buy real estate in order to protect their capital and prevent the inflation from devaluing them – Cvetkovic said.

Zivorad Vasic, the director of Kadena Properties from Belgrade, said that there was an interesting piece of data showing that there had been a drop of some 400 million in the first quarter of 2023 compared to the final trimester of 2022. However, if we compare it to the first quarter of last year, we get an approximate value of some EUR 828 million.

– If we deconstructed that sum, we would notice a much bigger drop in Serbia, because, on one hand, there are fewer pieces of real estate bought, but on the other, there’s the price growth in Belgrade. That’s why this approximately same number occurred – Vasic said.

Investing in real estate – a smart decision or not?

Taking all this into consideration, the question is whether the time is right to invest in real estate.

– First of all, several factors need to be taken into consideration. First, there are credits, and it’s not just about the growth of interest rates, but also about the growth of Euribor. We should take that into account. When it comes to investments, people but real estate when the projects are good and when they also improve their way of life in some way, but also if, as an investor, you have offered a good price – Vasic said.

Talking about parts of Belgrade such as Stari Grad, Savski Venac, Vracar and New Belgrade, he said that the price was still growing, but that it would stop at some point.

– When it comes to rental prices, they have dropped around 15% and I believe they will stay where they are. The prices of construction materials are stabilizing as well, which will certainly have an impact on the market. That is an important factor, because we have witnessed that, at one point, there was an increase in the prices of construction materials, and then this thing with the banks happened, all of which had an impact on the very prices of square meters, which started growing. Despite all this, I believe that purchasing real estate is always a good investment, that it is better to invest money in that than keep it in a bank. When it comes to Serbia, it should be in capital cities, and not seasonal ones – Vasic pointed out.

That investing in real estate is always a good decision is an opinion shared by Branko Papes.

– There were two moments to buy real estate. The first one was 40 years ago, the second one is now. Things are clear. If we look at things in the short term, in a period of four to five years, real estate prices will always go up or down, there will be rises and drops. However, in the long term, everything you observe over a period of more than six or seven years can only lead to a gain – he said.

Sasa Vukicevic agrees with him.

– The three most important parameters to pay attention to when you’re buying real estate are location, location and location. For example, the purchase of a stone house or an apartment in a stone building by the sea is always a good investment, there’s no way you can lose there. Their value will only grow, because the number of such pieces of real estate is now limited – he said.

On the other hand, if there is a residential block that is being built on a vast field, which will constantly grow, that’s a potentially risky investment, because, in the long run, it may start appearing dilapidated compared to the new buildings that are raised, he added.

– For example, if we’re talking lifestyle real estate, people buy such facilities for themselves only, they are ready to pay for that luxury, and the economic moment is not too interesting to them. However, if we’re taking investment real estate, we always have one piece of advice for our clients, and I believe that it is applicable to the whole region. Take a look at the neighborhood and say whether you can predict what it will look like in 15 years. If you can, then it's the right location, and if not, then there is a risk of something happening that you will not like and that will decrease the value of that location and that real estate – Vukicevic said.

– Stock exchange trading is not in our genes, what is in the essence of our people is to trade real estate and what we put in real estate is something that maintains and even increases the value that’s been invested. Today, even leasing has become very good and earns money far greater than can be gotten in a bank. That is why the time is right to invest in good, quality real estate – added Miroslav Cvetkovic.

What can be expected in the coming period?

When it comes to prognoses for the coming period, all the panelists agree that it is impossible to predict what will happen in the market.

– It is true that the prices of construction materials are dropping, but it is difficult to predict what will happen in the market. I believe that the situation this year will continue the way it was last year, with some slight ups and downs, but there will no great boom or a drop of prices – believes Budjevac.

Cvetkovic mentioned Belgrade, saying that it is a big market, where people are selling real estate in considerable numbers, in order to make further purchases.

– These are chains of four or five different pieces of real estate. For that reason, I don’t expect the prices of real estate to drop, because it is truly a very big market. We expect a drop in the lease segment, because, with the arrival of Russians, the prices jumped 50%. There was even real estate which jumped at EUR 30 per square meter per month for small apartments. I expect those things to revert back, but not fully. There is now the social problem of our people not being able to compete with the Russians who have stayed here – he said.

However, as he said, although the arrival of a large number of Russians has upset the rental market, they have not had an impact on the purchasing segment.

– I believe that we will be busy and have enough inquests. We still have the situation where the demand is far greater than the supply, we lack quality apartments, so everything that is put on the market quickly finds its purchasers – he said.

Vasic agrees and says that numerous projects will be built in Belgrade in the next year and a half.

– These are all excellent projects and good investors. In Belgrade alone, we’re talking over a million and a half square meters, and this is all real estate that has had the urban projects approved, it has the location permits, which are either in the phase of being issued, or the building permits have already been issued, so these are safe projects. I don’t expect the prices to grow, but in the end, that depends on the investors, but also the situation in the market. I would like to mention Montenegro. It is true that the infrastructure is still a great problem there, as it doesn’t follow such beautiful projects, but when you look at Porto Montenegro, you see that the project has educated Montenegro. That’s why Portonovi, Lustica Bay… happened. I believe that, as the Balkans, we are truly on a good path in terms of construction, I believe that we have great potential and that real estate purchase is a good investment. My opinion is that it’s always better to invest in construction than keep money in the bank – Vasic concluded.

The regional conference Business with a Purpose 2023, under the slogan “The Whole Region – One Conference”, was organized by D. R. Gilbert Group and the Slovenian Business Club.

The eKapija portal is a media partner of the event.

D. Obradovic