Special edition newsletter
REAL ESTATE AND CONSTRUCTION - From vision to investments
Stable prices, weak demand for business premises and a significant share of the diaspora in the real estate market in Bosnia and Herzegovina - These are the trends that 2023 has brought us
Ilustration (Photo: Pavel L Photo and Video/shutterstock.com)
In larger cities, such as Sarajevo, Banjaluka, Tuzla, Bijeljina and others, the demand is certainly more extensive, prices vary more, and in some places they amount to, for the average buyer, an unattainable EUR 4,000 per square meter.
Statistically speaking, the situation is somewhat more favorable. The average price of new apartments sold in BiH in the second quarter of 2023 was 2,603 KM per square meter, the Agency for Statistics of BiH announced.
Knowing that the average salary for the first 6 months of this year in Bosnia and Herzegovina was 1,244 KM, and that a significant part of the workers` income is below this level, one of the most common questions that citizens ask themselves and others is who are the buyers of apartments in general, that is, how is it possible that everything that is built is sold. However, the situation with business premises is different.
The city center full of empty business premises
The demand for business premises is not at an enviable level. The reasons are insufficient economic activity, lack of new investments, but also numerous other factors, eKapija interlocutors point out.
- When we compare with the previous year, which was specific and when there was a significant increase in real estate prices, due to the increase in the price of construction materials, primarily steel, due to inflation, the tightening of criteria for raising loans, the growth of EURIBOR and, therefore, the interest on loans, this year is quite stable. There have been no significant oscillations. A slightly higher demand for business premises for IT companies and a slightly higher number of newly registered independent entrepreneurs were recorded in larger cities, primarily in Banja Luka - Dragan Milanovic, regional director of RE/MAX BiH and president of the Association of Real Estate Brokers of Republika Srpska, told eKapija.
Milanović adds that the requirements of business clients are different depending on the activity they perform.
- Craft and commercial activities require smaller business spaces in frequent locations, mostly on the ground floor, while IT companies are looking for spaces with larger square footage, open space, quieter locations... and of course the price is a crucial factor for everything. In recent years, the habits of clients and customers have changed, so business owners are adapting accordingly. Business activities have moved to shopping centers, where you can fulfill multiple needs in one place. Buy what you need, pay the bills and wash the car and have a drink... This is important especially in winter when movement and walking are limited. So we came to a situation where we have a lot of empty spaces in the strict center, which was unimaginable before. The owners of those spaces still keep rent prices quite high due to their old habits - explains Milanovic.
Aleksandar Vukovic from the real estate agency Condo Banjaluka also points out that, as far as business premises are concerned, they have been recording a negative trend in terms of demand for years.
In Banja Luka, there is a large number of empty business premises, and the reason is the oversupply of business premises, but also the change in the way of doing business, considering that working from home and outside the office is becoming more and more popular.
The diaspora buys bigger squares
(Dragan Milanovic) - Based on some of our experience and the statistics we have and if we take Banja Luka as an example of the most active market, the structure of buyers is roughly divided in half by people who are from Banja Luka, and the other half are our people who live abroad, people from smaller cities who buy apartments as investment real estate, and a smaller part that is not significant for statistics are foreigners - says Milanovic.
Apartments to solve the housing issue are mostly bought by younger people, married couples for themselves or possibly for their parents, and they take over their apartments if they are bigger or more suitable for their needs. While investment apartments are bought, which is logical, by people with better financial conditions, people from business, from abroad.
The Aragosta Invest company told eKapija that the structure of buyers depends a lot on the structure of the apartments offered, of course on the location and price, and global market trends.
- So at this moment, I can say that the diaspora is the majority buyer of larger apartments (three-room, four-room), because it is a matter of larger investments. Young married couples, who have their own funds or a smaller part from loans, are mostly buyers of three-room apartments, smaller in area, while two-room apartments and studios are always the most sought after and are bought by domestic buyers and the diaspora, mainly in terms of investment, from their own funds - they add in this company.
Vukovic from the Condo agency confirms that there is also a large number of diaspora people who buy apartments, but that domestic buyers are mostly dominant.
- The method of payment is mostly through credit, or part on credit, part through savings, especially if it is about domestic customers, while the diaspora mostly finances it in cash.
- Young married couples buy mainly for living, while buyers from the interior and other cities see real estate as an investment, so after buying it they rent it out, while the diaspora uses it for a stay when they come on vacation or rent it out in order to achieve a certain return - says Aleksandar Vukovic.
- As far as the location is concerned, everything depends on who the buyers are, young married couples and buyers who take out a loan adjust and see what is more convenient for them, and at the same time that they are close to important institutions, schools, kindergartens, and the like, so some settlements further from the center are also acceptable to them - he adds.
- Of course, the most dominant is shopping for living, i.e. for solving the housing issue. Buying vacation properties, cottages, apartments on the mountain or apartments for rent is also quite common, but it is meant for buyers who have "excess" capital. And there are, unfortunately, much fewer of them than the others - Dragan Milanovic tells us and adds that recently the focus of interest in some other types of real estate has changed.
These are individual objects, plots for building houses or apartments in older buildings in some less attractive places.
Aragosta invest states that the highest demand for apartments is still in the central part of the city and urban settlements in the wider circle of the center.
- However, this year, in addition to the central locations, we also offer a residential and business complex in the suburban Banja Luka settlement of Lazarevo, which is the farthest location from the center where we built. It is a location that has a very good traffic connection with the city and all important functions, so the demand for apartments in this location is also high, which means that the city is expanding and that buyers are becoming aware of it - we are told in this company.
Regarding the resale of apartments and this form of income, Vuković clarifies that such cases do occur, but not to a significant extent, given that there is a tax on capital gains, so the possibility of large profits is reduced. Mostly these are people who buy apartments for living or it is a type of investment, and if they decide to sell the apartment later, it is only after a few years, very rarely as soon as the building is finished.
Ilustration (Photo: STUDIO GRAND OUEST/shutterstock.com)
- Especially when we talk about smaller apartments and more attractive locations. The reason for the early purchase is not resale and profit, but precisely because it is difficult to buy a finished new apartment. Although there are also examples of buyers with excess funds investing in real estate and selling it later when it reaches a slightly higher price. Otherwise, investors do not make a big difference in price when buying at the beginning or near the end of construction.
Stable prices are expected to continue
Dragan Milanovic also says that the current situation on the real estate market is quite stable.
- Of course, when I say this, I`m referring to larger cities where you can even talk about the market. We have small municipalities where there is almost no interest in real estate transactions. It is very important that this economic branch is stable, because construction involves many other activities. And the revenues for budgets at all levels are one of the most significant from this economic branch - he points out for eKapija and says that it is difficult to assess with certainty in which direction the market will go.
- It is the healthiest when it has a natural, organic growth based on the market parameters of supply and demand. And when some instabilities occur, as was the case last year, then it is difficult to forecast. As things stand now, I don`t expect any disruptions. There is no room for price growth because demand has fallen due to everything I mentioned. But it is still satisfactory that there would be a significant drop in prices - Milanovic believes.
Ilustration (Photo: Freepik / jcomp)
- Our market is specific and related to the countries of Western Europe because a large number of our people live and work in those countries, and also a lot of people who live and work in the Republika Srpska and BiH depend on the economic situation in those countries,
so you should follow what is happening in those countries, it will certainly affect the real estate market in our country, as well as the level of interest rates, which is currently on the rise. All of this could lead to a drop in demand, which could then affect the price of real estate here. As long as we have demand at this level, real estate prices will remain stagnant or grow minimally from year to year, as it was in the period before the corona and high inflation.
Aragosta Invest also tells us that the current situation on the market, as far as prices and demand are concerned, is more stable.
- There is still a trend of price growth, certainly with a lower intensity than in 2022, when a drastic increase took place. The demand is satisfactory, and what we build and offer to our customers, we sell within the given deadlines and we expect it to stay that way. In addition to quality construction, which customers recognize year after year, we are dedicated to the architecture and design of our facilities, both exterior and interior spaces, and finally the time has come for us to value design as well - they state in Aragosta Invest.
Senka Trivić
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