Building the Future: Construction Sector Boom in Serbia

Serbia’s Strategic Position as the Gateway to Western Europe

Situated at the heart of Southeastern Europe, Serbia is often hailed as the gateway to Western Europe, thanks to its strategic location. The country hosts three crucial European transport corridors: VII (the Danube River), X (the international highway and railway), and XI (linking Central Europe to the Adriatic Sea), establishing excellent connections with Western Europe and the Middle East.

Construction Sector’s Pivotal Role in Economic Development

The construction sector in Serbia has played an important role in the country’s economic development, most particularly in:

1. Infrastructure Investments: Serbia has made substantial investments in infrastructure projects, including roads, bridges, railways, and airports, enhancing both internal and external connectivity. Many of these projects receive support from international funding and partnerships.
2. Residential and Commercial Sector: Economic growth and housing demand have driven the need for new constructions in both residential and commercial sectors. Real estate projects and commercial developments have been prominent in major cities.
3. Foreign Investor Participation: Attracting foreign investors has been a priority for Serbia in the construction sector, offering incentives and favorable conditions. This initiative has led to increased diversification and internationalization of the industry.
4. Regulations and Standards: The Serbian government has worked to improve regulations and standards in the construction sector to attract investments and ensure the quality and safety of structures.

Financial Challenges and Government Initiatives

Financial challenges have historically plagued the construction sector. In recent years, the government has taken significant steps to address this issue, providing substantial assistance through subsidies and loans, particularly in the highway sector. However, there is still much work to be done.

In December 2019, the government announced a new National Investment Plan, allocating approximately $14 billion for major development projects to be completed by 2025. The majority of funds are earmarked for infrastructure projects, including road, rail, air, and water improvements, offering opportunities for Italian and European companies in these areas.

Upcoming Construction Projects

The period between 2025 and 2030 anticipates further growth in construction, transforming and restructuring existing residential and commercial complexes, activating undeveloped areas. These plans define the ways and possibilities of constructing residential and commercial buildings on approximately 1,000 hectares in various zones. Some of the most prominent projects that are developing in the biggest cities are:

1. Silva (Vidikovac, Belgrade): A project encompassing 40,000 square meters with 250 exclusive apartments, scheduled for completion in 2026.
2. Lastavice (Blok 58, New Belgrade): Two phases comprising apartments, commercial spaces, and extensive underground parking, with Phase One expected to finish in the first half of 2024.
3. Marina Dorcol (Dorcol Port, Belgrade): A residential complex with 15 buildings, the first phase featuring 200 apartments, set to complete in the first half of 2026.
4. Matijevic Kula (Novi Sad): A large residential and commercial complex with a tower over 50 meters, incorporating office spaces and residential units.
5. Telep Residential Complex (Novi Sad): A 47,000 square meter development with 364 apartments and 405 parking spaces over two underground levels.
6. Banovo Brdo Residence (Belgrade): A planned residential complex with 900 apartments on 5 hectares, currently in the land expropriation phase.
7. King’s Circle Residences (Belgrade, Slavija): Ground preparation started in August 2023 for a residential complex spanning over 48,000 square meters.

Construction Companies and Entrepreneurs

Recent data from the Business Register reveals a significant increase in the number of construction-related companies and entrepreneurs in Serbia. This growth has led to increased employment in both the material production and construction sectors, as well as in engineering and architecture activities.

Construction Output and Foreign Projects

In 2022, construction works in Serbia reached a value of 614.7 billion RSD (5.2 billion euros), showing a 5.8% increase in current prices compared to 2021. The majority (44.1%) of this value represents buildings (residential and non-residential), while the rest is attributed to civil engineering (transport, pipelines, complex industrial structures, etc.).

Latest Trends in the Construction Sector

September 2023 witnessed the issuance of 3,113 construction permits, marking a 7.9% increase compared to September 2022. Of these permits, 85.4% were for building construction, and 14.6% for civil engineering.

2023 Market Dynamics and Future Predictions

As of the last quarter of 2023, a slight decline in the real estate market is observed due to high prices, inflation, and rising loan costs. It is expected that by the end of the year, a small drop in end-user prices will be felt, and a 10% decline in property prices (apartments and houses) could occur in 2024. This is seen as a market stabilization following the expansion in 2022/2023.

The decline in construction permits in the fall of 2023 suggests investor uncertainty about the market dynamics in 2024 compared to the robust activity in 2022 and the first half of 2023, demonstrating cautious investment behavior.

Financial Overview of the Real Estate Market

In the first half of 2023, total financial transactions in the real estate market in Serbia amounted to 3.3 billion euros, a 7.4% decrease compared to the same period the previous year. The majority of these transactions occurred in Belgrade, followed by Vojvodina, Šumadija (Central Serbia), western Serbia, southern, and eastern Serbia.

Construction Forecast for Southeastern Europe

In the broader context of Southeastern Europe, the Eastern European Construction Forecasting Association offers insights into the construction outlook for neighboring countries:

1. Bulgaria: The new coalition government aims to mitigate the anticipated economic slowdown in 2023 through EU program absorption and recovery plan implementation, expecting real growth in total construction production.
2. Croatia: Despite inflation and increased interest rates affecting residential construction, non-residential construction and civil engineering benefit from higher public investments.
3. Romania: High construction costs contribute to a predicted decline in the sector this year and the next, with expectations of recovery by 2025.
4. Slovenia: The Slovenian construction sector remains resilient, particularly in non-residential and civil engineering, benefiting from increased public investments.
5. Serbia: While Serbia faces the consequences of economic slowdown in the EU, the construction sector experiences a mixed picture with a contraction in volumes for building construction and a probable record high in civil engineering in

RP Balkans, being present in Serbia for more than 15 years can play a crucial role in providing valuable services and support to our clients interested in construction sector by offering markets researches, strategic planning, certification assistance through our partners and strategic partnerships with local companies.

Sladjana Lucic

At Roncucci&Partners we help companies develop themselves and their business, embrace change and evolve to thrive in a world that is increasingly complicated, insidious and requires great expertise. We do this by applying punctual methods and rigorous strategies, the result of many years of experience and the richness of the numerous success stories we have conducted all over the world. Passion and method are indeed our guides to enhance the present and build the future.