(AG Real Estate) investment research - Residential market in Serbia

Continuing with a survey of the real estate market in Serbia, it's time to present the Residential market situation in Serbia. Besides shopping malls, office space and logistics centers, residential projects currently probably constitute the most dynamic segment in an allover pattern of the real estate development in Serbia. We can openly say that this portion of the real estate together with office space has come most closely to the world already existing standards but still very demanding in our own market.

During the past decade, Serbian residential market has been influenced by many factors which included the political and economical situation and overall standard of the population. Due to these reasons, no extensive development or construction activity occurred in this period in the major Serbian cities causing a large gap between the present housing supply and the anticipated needs. Because of population migrations on micro and macro level and the overall development of the country, most effectively depicted in its economy revival, it is expected that the demand will steadily grow in the coming years. Additional support is expected to arrive in shape of constant strengthening of the macroeconomic picture and widening credit options.

Situation in neighboring countries

The neighboring countries, such as Bulgaria and Croatia, have gone through similar changes in the course of last decade, and they can be used as good comparison but also as guidelines to which direction Serbian residential market could or should develop in the nearest future.

The economic and demographic composition of the population of Zagreb and the constant and steady growth of its economic capabilities has influenced the growth of supply and demand for high-middle and high-end units. Apartments in central area of Zagreb sell for 1,700 to 2,000 EUR/m2. Depending on the exclusivity of the location, the prices can go up to as high as 3,000 EUR/m2. There are several large scale projects in the pipeline with amenities and finishing works which should meet the need of even the most demanding buyers.

In the meantime, Bulgaria has seen constant GDP growth, unemployment rate decreasing and thus residential sector remains the most dynamic segment in the real estate market. It is still a demand-driven market, with middle segment of it being the most attractive. Depending on quality of construction, location and the size of the unit, prices of apartments range from 500- 1,700 EUR/m2, and even up to 3,000 EUR/m2 for the most appealing units.

Situation in Belgrade

In Belgrade, most of the residential premises built in the last decade have out-dated layout, no property management and poor parking ratio, while our researches have shown that these are the conditions that most potential buyers expect to be fulfilled in its entirety. Having this taken into consideration, the investors started building new, quality apartments, the supply of which has increased significantly in the areas of Vracar, Dedinje and most recently New Belgrade. The most illustrious residential developments in 2005/06 in these terms are Oaza complex, Caryatidis complex, Panorama Dedinje, Mackov Kamen etc.

(Oaza)

Sales Prices

As a result of general supply increase and an expansion of housing credit options, the residential market has seen further demand strengthening. With only slight difference in price levels of old and middle-class apartments, potential buyers are rather focused on new buildings that offer finishing and amenities appropriate to today’s lifestyle. Smaller apartment sizes are in strongest demand. The highest average prices were recorded in the area of downtown followed by Dedinje, Vracar and New Belgrade. Considering both mid-end and upper-end category apartments, the sales prices have recorded the following ranges: EUR 1500-2700/m2 in downtown and Vracar, EUR 1500-2500/m2 in Dedinje and EUR 1300-2100/m2 in New Belgrade.

The price levels are not expected to stabilize or decrease until large scale developments (apartment blocks) start to appear on the market. First such decrease in prices is expected in 2009, when University Village is expected to bring more than 2,000 apartment units in New Belgrade.

(Panorama Dedinje)

Rental Prices

With a slight decrease noticed on a yearly level, the average prime rental level in Belgrade is EUR 11 per square meter. In the most prominent areas of Vracar, Dedinje and Senjak, rental levels showed a slight decrease in light of continually growing supply of quality apartments in those areas. Strong demand for rental apartments in New Belgrade has kept the rental values equivalent as in the previous years.

Single-family houses maintain upper range values of approximately 15 EUR per sq m per month due to limited supply. On the other hand, houses of more than 400 sq m are rented at a lower rate per square meter, due to their large size and the budget constraints of the tenants.

Only in rare cases the most luxurious, large furnished apartments are able to achieve rents from EUR 17 to EUR 19 per sq m per month. These apartments are most usually situated in the green areas of Dedinje or Senjak featuring beautiful yards or in the city downtown in close proximity to the pedestrian zone - Knez Mihajlova Street.

(Park apartmani)

Until the last year, residential market was in its entirety dominated by local developers. First foreign companies active on the market focused on mass market segment, building units with appealing layout and amenities for its tenants. Most active foreign developers are coming from Israel, such as GTC, which is developing one of largest and most attractive residential complexes in New Belgrade – the Park Apartmani. This unique development features 20,000m2 of space, with over 160 apartment units – offer ranging from studios to luxurious penthouse apartments with underground garage and different

amenities available for tenants. This development is expected to be finished by the end of 2007, while the sales process is being wrapped up with Colliers being the exclusive sales agent.

Another contemporary project which has proven to be very interesting for the market is Panorama Dedinje, done by a local developer – Meridian Balkans and with Colliers as exclusive sales agent. This project features 11 newly built objects, each one of them consisting of 4 levels, including the garage. The potential buyers can choose between deluxe townhouses and luxurious apartments. Being just 10 min away from the city center, this appealing project also offers state of the art finishing works, security systems and exterior and interior decoration.

However, it’s clear there is a room for many new residential projects in Serbia that should be catering not only to high end and upper middle classes but also to all segments of our fragmented society. Law of supply and demand will dictate price but now developers also have to pay much more attention to quality since our buyers are getting more educated and sophisticated and they know what they should be getting for their money.

author :

Jovica Jakovac

CEO

Colliers International Serbia d.o.o.

[email protected]

source :