” This is the best time to buy real estate in Serbia .” ” Prices will not fall, they can only rise.” “The real estate market in Serbia is not like in other countries, prices will continue to rise.”
These are just some of the announcements, mainly by real estate agents and other persons who do their business precisely on the real estate market, either as investors or agents. All of the above happens when the world economy is shaken by a new economic crisis for various reasons – some would say that it is again speculation on the banking market like in 2008, others that the result is a paralyzed world during the COVID pandemic, and still others would blame the war in Ukraine. Either way, inflation has seriously threatened the world economy and the excessive printing of money in recent years has taken its toll. Almost all national banks have raised benchmark interest rates to curb inflation and flush large amounts of money out of the market. Thus, the EURIBOR from the negative value it had in previous years reached almost the reference interest rate from 2008. However, in the first half of the year, our media was still dominated by calls to take advantage of the ” best time to buy real estate “, that prices are still going up, that demand is still high and that the moment should be seized.
Although the prices of the real estate market are primarily an economic issue, in this article we analyze one of its legal aspects, i.e. we analyze whether due to the interests of certain participants in the real estate market, a wrong image was created about the state of the real estate market in Serbia, i.e. whether consumers, that is, customers, misled.
Conflict of interest
Conflict of interest is a concept that often intrigues and causes various implications in the business world. It exists when an individual or an organization has conflicting interests that can affect the objectivity and correctness of decision-making. In the business world, this can be challenging as it can lead to dishonesty, bias or loss of trust by the parties involved.
Therefore, depending on the sphere of industry in which there is a conflict of interest, we can distinguish:
- Conflict of interest in companies: This may include situations where managers or employees have personal interests that are opposed to the interests of the company;
- Conflict of interest in the public sector: Occurs when officials or public servants have private interests that may influence decision-making that should be in the public interest.
The consequences of the conflict of interest are that the persons who are in conflict do not make decisions objectively but subjectively, as a rule obtaining some benefit for themselves or others. Therefore, the decisions that are made are in favor of the person who is in conflict of interest and, as a rule, to the detriment of those for whom the person in conflict of interest works or whose interests he represents.
This often raises the question of how to overcome potential conflicts of interest. When it comes to companies and persons who have special duties in them according to the Law on Business Companies, reporting the existence of a conflict of interest when concluding a certain legal transaction and approval of such transaction by the competent authority, i.e. members who are not in a conflict of interest.
Outside of companies, the problem of solving conflicts of interest should be solved in a similar way, respecting the following principles:
- Transparency: Being open about potential conflicts of interest can help overcome problems before they arise.
- Ethics and codes of conduct: Establishing strict ethical guidelines and codes of conduct can help avoid situations of conflict of interest.
- Impartiality and professionalism: Focusing on a professional and impartial approach to decision-making can reduce the risk of conflicts of interest.
Who can be in a conflict of interest?
When we talk about the conflict of interest, first of all it is necessary to determine who actually has an interest in the growth of the real estate market. Mainly the persons we immediately include are construction companies and investors. However, there are also all those who participate in the sale of construction materials, as well as real estate agents who deal with mediation in the sale of real estate.
Therefore, all of the above-mentioned persons have an interest in the real estate market growing, in increasing prices, considering that the aforementioned directly affects their business.
The economic crisis and its impact on the real estate market
Economic crises are phenomena that periodically shake the global economy, causing uncertainty, market decline and economic turbulence. Although the causes and manifestations of crises vary, understanding how they manifest, as well as strategies for responding to them, can be critical to survival and recovery.
The key characteristics of the economic crisis are:
- Market Crash: Economic crises are often accompanied by a decline in stock market values and instability in capital markets.
- Unemployment: An increase in unemployment is often one of the most visible symptoms of an economic crisis, with consequences on a global and local level.
- Spending Cuts: Consumers tend to become more cautious during periods of crisis, cutting back on spending which puts additional pressure on the economy.
- Reduction in Production: Companies often respond to economic crises by reducing production or halting investments, which further affects economic growth.
Therefore, the mentioned characteristics of the economic crisis have a significant impact on our daily lives and are primarily reflected in the following consequences:
- Financial Losses: Companies and individuals often suffer significant financial losses during periods of crisis.
- Social Insecurity: Increasing unemployment and decreasing income can lead to social problems and insecurity.
- Pressure on Governments: Governments face increased pressure to respond and provide support to the economy and citizens during the economic crisis.
In order to overcome the above-mentioned crisis, states usually resort to various mechanisms such as:
- Fiscal and Monetary Intervention: Governments and central banks often implement fiscal and monetary policies to support the economy in times of crisis.
- Stimulating Consumption and Investment: Initiatives to stimulate consumption and investment can help restart the economy.
Thus, in 2023, the aforementioned mechanisms were applied , given that inflation in our country reached an incredible 16.2%, which is already the amount of inflation we had as a result of the world economic crisis in 2008. In order to mitigate the inflation in question, the National Bank of Serbia raised the reference interest rate to 6.5%, which represents the highest interest rate amount since 2015. Given the predictions that the European Central Bank will maintain the high level of the reference interest rate until 2025 , and bearing in mind that in our country inflation has started to rise with a lag of some three months, it can be clearly predicted that until the normalization of the economic situation it won’t come until 2026. It should be borne in mind that in the agreement with the International Monetary Fund and the package of assistance for overcoming the aforementioned crisis , Serbia committed itself to three increases in the price of electricity (the last one in March 2025) as well as an increase in the price of gas.
Additionally, at the Social and Economic Council, it was agreed to increase the amount of the minimum wage for 2024 by 17.8% . In addition to the above, the state announced pre-election benefits, so high school students already received 10,000 dinars each and pensioners 20,000 dinars each. In addition to the above, from December 1, students will be able to receive student cards that will have 1,000 dinars instead of 500, as originally announced. Beneficiaries of social assistance will receive 10,000 dinars each, and high school students will receive the same amount of money, only that the money will be paid to their parents’ account, which makes the total amount of about 320 million euros.
Therefore, all of the above will undoubtedly lead, or have already led, to additional printing of money, which will have an impact on the height and duration of inflation in our country, and therefore a negative impact on the standard of the population.
Real estate market in Serbia
As we have seen, the economic crisis has a deep and complex impact on various sectors, and the real estate market is no exception. In times of economic instability, the dynamics of this sector can be significantly affected, creating challenges but also providing certain opportunities.
Some of the common characteristics of the real estate market in times of economic crisis are:
- Decline in Real Estate Values – One of the first and most visible effects of the economic crisis on the real estate market is a decline in real estate values. During periods of crisis, the price of real estate often declines and sales slow down due to reduced purchasing power of buyers. This can lead to stagnation or decline in the real estate market.
- Decrease in Demand and Supply – The economic crisis can lead to a decrease in demand for real estate, as potential buyers become more cautious when making major financial decisions. A decrease in demand can cause an oversupply of real estate on the market.
- Difficulty Obtaining Credit and Financing – During periods of crisis, banks and financial institutions often become more restrictive in granting loans and mortgages. This can make it more difficult for buyers to finance real estate purchases, reducing overall activity in the market.
The just mentioned consequences of the economic crisis are not present in the economic market of Serbia.
Namely, according to the data of the Republic Geodetic Institute, traffic in Belgrade for the first three quarters decreased by 25% compared to the same period of the previous year. The biggest drop in turnover in the first three quarters was in April and July, with a 35% lower number of concluded contracts each compared to the same months last year. Everything indicates that this is only the beginning of the trend of falling real estate prices, as indicated by the data for October and November, where in October the turnover was also lower by a third, and the data for November indicate that the decline in turnover in this month compared to the same month of the previous could be higher than 40%.
Therefore, the above indisputably indicates that the standard of the population is declining, and that people are less and less interested in entering into large financial transactions during the economic crisis. Often, as an example of customers in the previous period, there were people from the IT sector as a part of the population that, as a rule, earns more than the average resident of Serbia. However, the economic crisis has also affected this sector, there have been layoffs, so this sector is also in a kind of stagnation, which certainly has an impact on real estate transactions. Also, although our real estate market is infamously proud of the extremely small participation of credit buyers in real estate transactions, such a percentage is even smaller and currently amounts to less than 10%. This was certainly influenced by the stricter conditions for obtaining loans as well as more expensive loans due to the increase in the reference interest rate.
Therefore, if we look at the real estate market in Belgrade, and bearing in mind the above data, it is clear that the demand for real estate is in a drastic decline by 25%, with a tendency to increase this decline considering the trends in October and November.
On the other hand, it seems that the supply is not decreasing. Namely, after the initial drop in the number of issued building permits, the number of issued building permits has increased significantly and already exceeds the figures from the previous year. Therefore, the above indisputably indicates that the supply of new construction is stable, while the demand is the one that has drastically decreased during this year.
Given the predictions that only in 2025 or 2026 can we expect inflation to return to regular flows, reference interest rates to decline and economic activity to increase again, it seems that this trend will undoubtedly affect the creation of an excess supply of real estate, and therefore their prices fall.
Market speculation or not
However, despite the above data indicating that the demand for buying real estate is decreasing, that is, there is an excess of supply in, or demand, which could lead to a drop in the price of real estate on the market, exactly the opposite announcements could be heard in the media during the first half of the year. Such announcements came from representatives of investors, representatives of the construction industry as well as agents for mediation in the sale of real estate. The aforementioned statements, i.e. their contrast with what should be a logical sequence of events, were also the motive for the analysis in question.
Reminders for the statement that we could hear during this year on this topic are:
Because of all this, the person who waits to buy real estate is essentially just wasting time and missing opportunities to buy something that is currently advantageous on the market, and does not realize that transaction because he thinks that something more favorable will happen in a while. People who have money that they intend to invest in real estate should not postpone the purchase, said Đorđević .
Real estate prices are rising, as is demand, and Serbs are taking fewer loans to buy them, statistics show.
The main driver of price growth is strong demand , as well as the lack of quality real estate in all segments.
The growth of real estate prices in Serbia was pronounced again, although in July stabilization was visible, in August the price per square meter increased in almost all municipalities. The highest increase in the price per square meter was recorded in Palilula in Belgrade, while Mirijevo still has the lowest price per square meter .
Despite the expectations that the real estate market will finally stabilize, data from month to month show that this is not happening . Although construction has slowed and there are fewer apartments for sale, the data shows that the demand for buying real estate is still strong, which continues to push the price per square meter forward. The fact is that these price increases are not even or even approximate when it comes to all cities in Serbia, and there are large variations in municipalities as well. Although until recently the most sought-after and most expensive properties were in the city center, the data show that the prices of apartments on the outskirts have come close to them, and in Novi Sad they have even overtaken them.
Nenad Đorđević, president of the Management Board of the “Klaster nekretnine” association, tells that the citizens of Serbia have been investing their money in real estate since the time of the former Yugoslavia because it is the safest investment. He points out that even in times of crisis, a certain number of citizens and investors buy real estate to save their funds because they are afraid of what will happen to banks and currencies. Đorđević advises that the purchase should not be postponed and that citizens should not be afraid of what they see in the ads.
And to conclude that the demand for real estate in Serbia will most likely continue to grow by the end of 2023 as well as in 2024. This trend could lead to an increase in prices in some areas, but it should be noted that it will depend primarily on the global economic situation in the world and of course in our country, and all of this can affect the formation of the sale price of real estate in Serbia.
In the second quarter of this year, the real estate market in Serbia continued with the trend of rising apartment prices . According to the latest data from the Republic Geodetic Institute (RGZ), apartment prices increased by 11.19% compared to the same period last year.
Therefore, it is clear that professionals in this field who have daily insights into the state of the real estate market still insist that prices will not and cannot fall. On the other hand, our preliminary analysis of the market indicates that the sellers have already started to lower the price and that it is only a matter of time before it will be felt in the official statistics.
Conclusion
Everyone should assess whether in the specific case there were speculative actions on the real estate market in Serbia, taking into account all the mentioned facts. The fact is that the aforementioned actions and statements do not represent a violation of any positive regulation in Serbia. Nevertheless, bearing in mind that the purchase of real estate is one of the most important and important decisions for the majority of Serbian residents, all participants in the real estate transaction should first of all responsibly stand behind the given statements, and that the media, when collecting information on the relevant issue, should also collect information from persons who do not have a conflict of interest regarding the mentioned topics. It is absurd that the Law on Consumer Protection protects us from unfair business practices when buying clothes, shoes and other consumer goods, while the same or even greater degree of objectivity and transparency does not apply when dealing in real estate.
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