From gloom to boom: Serbia’s residential

Written by Dejan Krajinović, Beobuild Core D.O.O, EECFA Serbia

Residential construction in Serbia is performing extremely well, and the long-awaited recovery is now well underway, with 2018 volumes again surpassing initial expectations. The situation on the market has been brewing for some time, with a strong investor confidence as well as very favorable financial conditions fueling expansion.

There has been a steady growth in construction activity for 4 years in a row now, but this trend has all the necessary conditions to sustain these levels and produce more growth in the coming years. Housing construction is flourishing, being already one of the best performing sectors in the overall building construction.

New projects are 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.

Top: Belgrade Waterfront/St.Regis Tower; Bottom left: Skyline complex; Bottom right: West65 tower – Source: : Beobuild Core D.O.O

Serbia’s residential market though is coming from a very low-end of its potential – hitting historical bottom after a long and very deep recession that ended in 2014. With such a small basis at the time, an upswing was expected in construction volumes, but the current strength and speed of the recovery seemed too optimistic.

Investment activity has accelerated, with the strong contribution of both domestic and foreign investors, creating a real 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.

The most notable is the Belgrade Waterfront development, a large-scale re-urbanization 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 investment fund ‘Eagle Hills’, estimated to be worth more than EUR 3bln. Continue reading From gloom to boom: Serbia’s residential

Russia’s mortgage boom

Written by Andrey Vakulenko – MACON Realty Group, EECFA Russia

The Russian residential market will long be the driving force behind the whole construction sector due to the continued high demand of most of the country’s population for improving their housing conditions. Mortgage loans, the most common means for purchasing homes in Russia in recent years, have finally strengthened, which compensates for the crisis years of 2015-2016 in Russia. As there has been a major drop in the population’s income, and it persists, mortgage lending is the only way to increase home purchases. The mortgage market easily overcame the crisis of 2015-2016 in Russia and already in 2017 exceeded the peak indicators of the pre-crisis year of 2014. During the first half of 2018, the trend towards growth further strengthened: the volume of issued mortgage loans rose by 68%, and its share in the total number of housing transactions reached a record 54% in the primary market. All this shows the current high demand for mortgage loans.

To explain the explosive growth in mortgage lending, the fundamental factors shaping the housing market need to be considered:

  1. Level of individuals’ living space provision (sqm/person);
  2. Demand for housing (how much more housing needs to be built, so that the level of living space provision can reach an acceptable value – about 30 sqm per person);
  3. Affordability of housing for purchase (the ratio of the income of buyers and the price of real estate).

As per the Federal State Statistics Service of the Russian Federation, to date, the total housing stock in Russia is about 3.4 billion sqm, only slightly more than 23 sq km in terms of the country’s permanent population (146.9 million as of January 1, 2018) per person. This level can be considered low compared to most developed foreign countries (39 sqm/person in France and Germany; 70 sqm/person in the USA, 76 sqm/person in Canada). Minimally comfortable living conditions are achieved with a security level of at least 30 sqm/person as per the social standards of the United Nations, and it is the target of public housing programs in Russia. To ensure that the population’s living space has reached this target, while maintaining the country’s population at the current level, another 1.0 billion sqm of living space should be built. Thus, the low level of housing provision is the guarantor of the preservation of demand for new housing projects for a long term.

The second factor ensuring long-term demand for housing is the quality of the existing housing stock, which has more than 33% (or about 1.2 billion sqm) of housing built before 1970. Even with the record volumes of housing construction registered in Russia in recent years (in 2014-2017 about 80 million sqm annually) and even if it stays at the current level, it will still take at least 28 years to reach the minimum acceptable security and to fully replace the old housing stock. In general, housing demand in Russia will not be Continue reading Russia’s mortgage boom