In Serbia’s real estate market, cultural tradition, financial caution, and limited alternatives intersect to create a unique investment landscape. NKO Partners Partner Branko Jankovic, BDK Advokati Partner Jelena Hrle, Bojovic Attorneys at Law Partner Marija Bojovic, Radovanovic Stojanovic & Partners Partner Milorad Gajic, and Gecic Law Partner Miodrag Jevtic discuss the enduring preference for property as a default investment, the historical experiences that continue to shape investor behavior, and the broader economic and geopolitical factors contributing to rising property prices across the country.
Real Estate as a Default Investment
Real estate has long been the go-to investment for many in Serbia, and in recent years, that preference has contributed to rapidly rising property prices, especially in major cities like Belgrade and Novi Sad. “The demand for new real estate developments seems to be ongoing, pushing prices far beyond the level of the average Serbian’s purchasing power,” Bojovic says. “The only logical explanation for this trend is a deeply rooted cultural preference for investing in real estate over any other asset or means of investment.” As a result, according to her, “excess liquidity among private individuals is predominantly funneled into real estate, contributing significantly to the upward pressure on prices, especially in Belgrade and Novi Sad.”
“From the COVID-19 pandemic onwards, it is noticeable that people have turned increasingly to real estate as a secure form of savings and a hedge against inflation and currency fluctuations,” Jevtic adds. But demand alone isn’t the full story, as other pressures are pushing prices up as well. “The rising property prices are a result of multiple factors,” he notes. “Aside from the increased demand, such factors include the rising costs of labor, materials, and other inputs, and a lack of supply of property, especially in Belgrade and other larger cities.”
Tangible Assets and Perceived Safety
Jankovic and Gajic emphasize that real estate’s physical nature plays a key role in its appeal. “This can largely be attributed to a cultural preference for ‘physical’ assets, such as real estate, which are often perceived as safer and easier to understand investments compared to other asset classes,” Jankovic notes. As a result, “many individuals view real estate as a stable and appreciating asset, leading to increased demand and, consequently, higher prices.”
Echoing this sentiment, Gajic notes that “real estate is widely perceived as a safe, tangible asset, something everyone needs, something that holds or even appreciates in value over time, generates steady rental income, and can be liquidated relatively quickly in case of urgency.”
The Long Shadow of History and Culture
This preference for real estate is not just economic, but it’s cultural and historical. “Historically, during socialism, there was no free market,” Gajic points out. “The economy was state-controlled and managed, while private ownership was reduced to a minimum. The socialist era was followed by political and economic instability, hyperinflation, Ponzi schemes in the banking sector, topped off with economic sanctions and embargoes.”
At the same time, “culturally, home ownership (according to Eurostat) rate in Serbia in 2024 was at 88.9%, one of the highest rates in Europe, which shows how much real estate ownership is valued in this part of the world,” Gajic continues. “This brick & mortar mindset is deeply rooted in Serbian culture and continues to shape investment behavior to a significant extent.”
“There is also a level of skepticism toward financial markets, due to historical turmoil in the banking/finance sector in the 90s,” Jevtic adds.
External Demand Drivers
Beyond domestic trends, international developments have also added fuel to Serbia’s property market. “It must be noted that there are other circumstances impacting property prices in Serbia,” Gajic emphasizes. “For example, Russian and Ukrainian immigration had a considerable impact on local prices, especially in the bigger cities.”
On the other hand, Gajic says that “internal migration to big cities, nostalgic real estate purchases by Serbian diaspora, and inflation are some of the other important factors that are driving the process up.” Sharing a similar viewpoint, Jevtic adds that “the Serbian diaspora also actively invests in properties in their homeland.”
Lack of Alternative Investment Options
While cultural and historical factors seem to have been playing a role, Hrle draws attention to another trend. “This phenomenon is not simply the result of entrenched cultural preferences but is more fundamentally driven by the general underdevelopment of Serbia’s capital markets,” she points out (see page 36). “While historical distrust in financial institutions and capital markets, particularly in the aftermath of the hyperinflation of the 1990s and the 2008 financial crisis, has influenced investment behavior, the primary challenge lies in the insufficient number of companies capable of and suitable for issuing securities.”
“Most investors in Serbia feel that there are relatively few alternatives for investing within the local economy,” Gajic points out, with Jankovic stressing that “the limited education, awareness, and understanding of diverse investment opportunities in Serbia, such as stocks, bonds, or mutual funds, further exacerbate this situation.”
“This mindset and general unfamiliarity toward financial instruments such as stocks, bonds, or mutual funds naturally funnels surplus capital into property, inflating prices,” Jevtic believes. “Moreover, the lack of attractive alternatives contributes significantly – the Belgrade Stock Exchange is relatively small and illiquid, while government bonds, mutual funds, and private pension funds remain poorly understood.”
Additionally, “banking products often yield returns below inflation, encouraging investment in real estate for perceived stability and steady rental income,” Jevtic explains. “It is worth noting that many have also invested in gold, due to its financial stability, though not quite as much as in real estate.”
The Road to Diversification
Looking ahead, Bojovic believes that no short-term changes can be expected. “The cultural and structural preference for real estate investments is deeply entrenched in Serbia,” she notes. “While legislative reforms (see page 36) are a step forward, market liquidity, transparency, and trust need to improve considerably to meaningfully redirect capital toward securities and other financial instruments. Until private individuals perceive capital markets as a secure and profitable investment option, real estate will likely continue to dominate.”
“As investors become more educated about alternative investment opportunities and as the market offers more attractive financial products, we may see a gradual reallocation of capital from real estate to capital markets,” Jankovic says in conclusion. “This shift could help stabilize real estate prices in the long run.”
This article was originally published in Issue 12.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
