12/11/2007

Whether in Zagreb, Tirana Athens or Sofia, housing demand is rising — but not as fast as the prices.

By Natasa Radic for Southeast European Times in Zagreb – 12/11/07
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On the Croatian coast, flats sell for prices approximating those on the French Riviera. [Getty Images]

Buying a flat or a house has become one of the vital problems of the younger generation in Southeast Europe. Real estate prices are high, approaching those in the Western capitals, while the average salaries are much lower.

For many, bank loans are the only option. But working people under 35 have lower credit scores, so this avenue is blocked also. They end up choosing either to live with their parents or settling on cheap flats in the remote suburbs, obliging them to commute long distances to work and spend less time with their families.

People in the former communist countries remember a time when housing was provided by the state. The flats were neither luxurious nor well-equipped, but they were free. Today, buying a flat or house is the average family’s number one expense.

With prices and demand soaring, the region is experiencing a massive construction boom. Cranes and heavy machinery can be seen everywhere, and new buildings are popping up almost overnight in all the major capitals. Analysts, meanwhile, warn that the average price of a square meter in Zagreb — well above 2,000 euros in all zones of the city — has become artificially inflated.

On the coast — especially around Dubrovnik — antiquated flats are now going for prices approximating those on the French Riviera. Illegal construction has become a severe problem, and a high percentage of newly-built structures lack valid permits. Not only are their buyers shelling out a fortune — and amassing huge loans — but they risk losing their property should it come under scrutiny by the authorities.

Although prices are also rising in Serbia, the market has been checked by weak demand. The prices per square metre in Belgrade start at 1,000 euros in the outer suburbs, though in the elite areas it can reach as high as 2,500.
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In Albania, more and more people are opting to buy instead of rent. [Getty Images]

With an average monthly income of only 300 euros, however, most Serbs simply do not contemplate buying property. While rents — 250 euros monthly in Belgrade — eat up the lion’s share of a paycheck, most feel they do not have a choice. Those city residents who do decide to buy typically opt for New Belgrade, where the bulk of new residential and business construction has been taking place.

In Albania, more and more people are opting to buy instead of rent, and the market is booming — along with the prices. Those most likely to make a home purchase are emigrants who live and work abroad but are planning to return in a few years.

By contrast, those who stay in the country have a much harder time affording a new apartment. In the capital, the prices range from 450 euros per square metre in the distant suburbs, to 2,000 euros per square metre in the city centre. Two-income couples making around 1,000 euros a month are in a position to take out loans. Bank employees, meanwhile, can take advantage of special low rates available to them.

The housing market’s growth is most noticeable in Tirana, but activity is also intense in Durres and Vlora, two seaside towns. Here, it is primarily foreigners who are interested, along with affluent Albanians from the capital who are looking for a summer home or a good investment. The prices on the coast go from 500 to 1,000 euros per square metre, depending on how far from the seaside the apartment is located.

As of December 2006, there were 1,237,891 people living in Sofia, according to official statistics. But the actual number is widely believed to be much higher, with estimates placing it at up to 2 million, including those residing in the Bulgarian capital on a temporary basis. The significant growth of the population in the Balkan country’s biggest city over the past decade has pushed up the demand for homes, as well as their prices.

In 2006, about 200 new apartment buildings emerged in Sofia with nearly 1,600 flats in them. Given the more than 50% year-on-year increase in the number of construction permits issued for residential buildings over the past two years, the current inventory of 525,500 apartment units is expected to keep growing.
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With prices and demand soaring, the region is experiencing a massive construction boom. [Getty Images]

The average price of new flats sold during the first quarter of 2007 was 811.9 euros per square metre. The average monthly wage in the public sector during the same period was 225 euros. Prices for apartments in the very centre of the city and its southern districts, close to the Vitosha Mountains, are much higher than those for flats in the northern parts of the capital and in the industrial zones.

The area around the Doctor’s Garden in the heart of Sofia remains the most expensive location in the capital, with asking sales prices now standing at just below 2,000 euros per square metre, according to a market overview by Colliers International Bulgaria. The most significant increase was noted in the Iztok residential district, also in close proximity to the city centre, where the average level went up by 29% over a six-month period and 51% year-on-year.

According to media reports in late August, a luxurious 95 square metre property in downtown Sofia was sold for the record price of 6,316 euros per square metre. That is around 22 times higher than the lowest average price of 285 euros per square metre in the capital’s northernmost area, Iliantsi.

Greece differs from other countries in the region in that it never belonged to the communist bloc, and was the first Balkan nation to join the EU, in 1981. As one would expect, the overall price levels are substantially higher. In contrast to some of the other regional capitals, prices in Athens are lower in the centre — where residents battle traffic, pollution, population density and crime — and higher in the suburbs.

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M.Stephan