Date: 24/04/2020

Construction industry and real estate market in the time of Covid-19

AmCham’s Real Estate Committee joined a panel discussion on the challenges faced by construction and property development due to the coronavirus crisis

The panel first discussed the state of each individual segment of the construction industry, including supply and demand, property prices, and the many changes brought about by the ongoing pandemic.

Findings of an assessment of 279 developments in Belgrade led the panellists to conclude there were no major fluctuations in real estate prices. According to the assessment, major investors were continuing to offer the usual discounts based on the stage each project was in. A possible challenge for the future was the lack of bank finance for property development projects.

The drop in demand for office space was identified as a driver of the slowdown in bank financing. It was noted that many companies were cutting costs, so buildings currently under construction will prove more difficult to let due to the expenses involved in companies moving their offices. Even though the resale market for residential properties was seen as particularly vibrant, banks will realise new residential units in their projects are not selling and will stop extending project finance. This is likely to have the knock-on effect of ending all construction in a year’s time. The key role of the state at this time is to encourage banks not to stop offering project finance.

The discussion focused particularly on the hardest-hit sectors, including hotels and shopping malls, which are suffering due to restrictions on movement and travel bans.

There are two causes of the decreased demand for residential properties: movement restrictions and uncertainty. Demand has dropped the least amongst buyers purchasing units for their own use, and the most in cases where real estate is bought for investment purposes or speculation. The market is expected to recover by the end of 2020 or, at the latest, in early 2021.

Apart from participants active in the various sectors of the construction industry, the discussion was also attended by Aleksandra Damnjanović, State Secretary at the Ministry of Construction, Transportation and Infrastructure, who gave ear to the participants’ questions and shared the Ministry’s perspectives with the panel.

The event was moderated by Bojan Kaličanin, Chairperson of the Real Estate Committee, and Svetlana Vukelić, Vice-Chair.

For the video record from this event please click here.