Key conclusions:

• Total transaction volume in Q3 2023 in Belgrade was €456 million, which represents a decrease of around 21% compared to the overall amount of €579 million which was registered in Q2 2022, and this is a significant drop in volume of the overall market.
• The number of cash buyers compared to credit buyers remains similar to prior periods. The volume of cash transactions was 78% while the credit buyers represented 22% of the overall activity.
• This big drop in the volume of sales could have a more immediate impact on the overall economy before it could produce a significant reduction in the prices of apartments in Belgrade. Most people are not aware of the fact that the €7.5 billion total volume of real estate transactions last year represented around 12% of the total GDP.
• Some people are mistakenly equating the 20% drop in volume with the anticipated 20% reduction in prices of apartments. There is no empirical evidence for the past 15 years that would show such a huge reduction in prices in a short span of time.
• The overall impression is that there is still a lot of money just sitting and waiting on the sidelines for a good deal, from institutional money which prefers income-producing assets at a good cap rate or refurbishment deals at below replacement cost, to real estate developers who are looking for NPL deals or good land prices, down to individual investors who are looking for a discount in apartment prices.
• The apartment market in Belgrade has historically shown the propensity to act counterintuitively compared to the rest of the world. Fear of the Eurozone collapse during the big recession of 2008 stimulated apartment sales in Belgrade, as did the Ukrainian conflict last year, which caused a record breaking quarter at that time of €712 million. So, it is not likely that an intervening event could have a big impact on prices in a short span of time.
• The most likely situation in the coming months is probably more of the same: some price corrections, but necessarily in the popular areas of the city and a reduced number of transactions compared to some earlier periods. We have seen plenty of announcements for new projects in the past few months, and as of right now unemployment levels in the construction industry are not high, so there are no indicators which are suggesting a dramatic decline in the apartment segment.
• The apartment market in Belgrade is still heading for a €2 billion annual volume, which is still really high compared to some other regional cities. It is possible that some developers, whose primary business is not real estate development, but were attracted to this segment because of high profits, could disappear from the market, while some others will have to learn how to compete, which is something that did not have to do in prior years.