Residential boom in Serbia

Residential construction in Serbia is reported to be performing extremely well, and a long-awaited recovery is now well underway, with 2018 volumes again surpassing initial expectations.

In a report from Beobuild Core, the Serbian member of EECFA (Eastern European Construction Forecasting Association) which conducts research on the construction markets of eight Eastern European countries, Dejan Krajinović said the situation on the market has been brewing for some time, with a strong investor confidence as well as very favourable financial conditions fuelling expansion.

He said there had been a steady growth in construction activity for four years in a row now, but that this trend had all the necessary conditions to sustain these levels and produce more growth in the coming years.

“Housing construction is flourishing,” said Krajinović, “being already one of the best performing sectors in the overall building construction.”

Beobuild Core has found that new projects were lining up, boosting permit numbers to record levels.

“Although it is expected for permits to hit the roof in 2020, the amount of permitted homes will certainly drive this growth cycle for several more years.”

It was pointed out, however, that Serbia’s residential market was coming from a very low point, having hit a historical low after a long and very deep recession that ended in 2014.

From this point, an upswing in construction volumes was expected, but the current strength and speed of the recovery seemed too optimistic, according to Krajinović.

Investment activity has accelerated, with the strong contribution of both domestic and foreign investors, creating a boom in the construction of multi-unit buildings.

“Investors from around the world have already entered the market, particularly Belgrade’s starved luxurious segment and yielding high-end residential projects. The competition of large-scale projects by international and domestic investors is bringing a whole new level of market sophistication, with different services, features and amenities.”

Waterfront development

He said the most notable of these projects was the Belgrade Waterfront development, a large-scale re-urbanisation of the banks of the Sava River in Central Belgrade, covering 80ha of prime construction land. This project is a joint venture of the Republic of Serbia and Abu Dhabi-based Eagle Hills investment fund, estimated to be worth more than €3 billion.

The area that was once home to the city’s old railways station is now part of an ongoing residential boom, with 900 units already under construction and thousands more planned in the coming years.

High-rise residential complexes dominate the master plan, including the construction of a 42-storey landmark tower on the Sava quay. Preparatory works have already begun, and the main contractor is expected to be announced by the end of the year.

“There are indications that Besix (Belgium) is the main candidate for the job which includes the construction of a skyscraper with exclusive 220 residential units and branded St Regis apartments,” said Krajinović.

The trend of high-rise residential construction is said to be visible in other ongoing projects as well, particularly the Skyline Belgrade with an 80m tower, and West65 at 150m.

“Urban planning rules were loosened in order to improve the investment climate and investors rushed to monetise their exclusive locations with high-rise residential buildings. There are already a dozen residential towers planned or under construction in the premium and high-end segment.

“This will supply the market with a couple of thousands high-rise apartments, all landing the market in a relatively short time. Beside the aspiring class at home, one of the main target groups for project marketing is the large Serbian diaspora as well,” said Krajinović.

Positive development

Together with a booming premium market, there is another positive development looming on the horizon for the construction industry, he added.

With budgetary surpluses, the government has announced plans to restart housing programmes for public servants in 2019, in order to subsidise the construction of more than 8,000 affordable units in the next few years, primarily for public servants, military personnel and the police.

Currently, this programme is estimated to be worth more than €250 million in total, but it can easily be expanded in the coming years, he said.

“The intention is to provide preferential home prices – significantly lower than the market ones – as a fringe benefit and incentive. As this is not a social housing programme, these projects should represent low density, quality family homes on relatively good locations.

“Furthermore, most projects in this programme will be located in smaller towns around Serbia.”

The resumption of the state housing programmes seems to be a confirmation that the residential segment should sustain growth and add more volumes in the coming period, added Krajinović.

“This will also provide a needful injection for smaller local construction companies, giving them opportunity to boost their business and references.”

In 2018, home permits were reported to have continued to grow against 2017, after four consecutive years of expansion. The yearly number of permitted homes increased from around 8,890 in 2014 to an estimated over 21,000 units in 2018.

“This just shows the scope of the change in the market and the potency of this growth cycle. It now seems certain this cycle will very soon break the peak levels of the pre-crisis years,” said Krajinović.