Ten days ago, the Serbian government announced plans to provide state aid to young people for purchasing an apartment. The proposed support would include a reduction of the initial down payment to between three and five percent, alongside monthly installments of 200 euros. However, the specifics of how this program would work in practice are still unclear. Some experts have raised concerns, particularly about the feasibility of such conditions on the current banking market in Serbia, given the high prices of real estate, especially in Belgrade.
High property prices pose a challenge
According to the Republic Statistical Office (RZS), the average price of newly built apartments in Belgrade for the first half of this year was approximately 2,600 euros per square meter. The average size of these apartments was 58 square meters, meaning the cost of a typical apartment in Belgrade exceeds 150,000 euros.
On a national level, the average price for a new building was about 1,800 euros per square meter, with apartments averaging 54 square meters. This means that an average apartment in Serbia would cost around 98,000 euros.
Analyzing the loan and payment scenario
The consumer protection association “Efektiva” has calculated that, under the proposed scheme, young people would struggle to pay off a loan under the conditions announced by President Aleksandar Vučić. If an apartment costs 100,000 euros, with a down payment of five percent (5,000 euros), the loan amount would be 95,000 euros. For a monthly installment of 200 euros, the loan would need to be issued at an interest rate of just one percent over 50 years — an unrealistic scenario, as no such loans currently exist on the Serbian market.
If the loan were issued with the maximum term of 30 years, at an interest rate of three percent (which is also not available on the market), the monthly installment would increase to around 400 euros — far above the proposed 200 euros.
For a more affordable apartment, say priced at 50,000 euros with a five percent down payment (2,500 euros), a loan of 47,500 euros would still need an interest rate of around three percent and a 30-year repayment period for the monthly installment to remain at 200 euros.
However, “Efektiva” also pointed out that an apartment priced at 40,000 euros (with a 5 percent down payment) could result in a monthly installment of about 204 euros, but the question remains: Where can one find an apartment for 40,000 euros in Belgrade?
Practical realities: Can banks approve such loans?
Miroslav Marinković, the owner of the business consulting company “Econoversum,” expressed skepticism about the viability of approving loans under such terms. He pointed out that it would be practically impossible to obtain a loan for a 100,000-euro apartment with a 5 percent down payment, 5 percent interest, and monthly installments of 200 euros. This would effectively mean repayment over several decades, far beyond the expected life span of a borrower.
In the current market conditions, with the planned interest rate of five percent on housing loans starting in January 2024 and a maximum loan term of 30 years, monthly installments for a 95,000-euro loan would amount to 504 euros, a far cry from the proposed 200 euros per month.
How can the state help?
Given the realities of the current housing market, the state will likely need to step in with financial assistance, as confirmed by President Vučić, who mentioned that the government is considering ways to subsidize apartment purchases.
Dejan Gavrilović, the president of “Efektiva,” suggested three potential ways the state could help: subsidizing the interest rate, reducing the loan amount, or subsidizing construction costs to lower apartment prices. Gavrilović believes that the most likely approach would be for the government to subsidize part of the loan.
Marinković added that subsidized loans have been used in the past, with the state either covering part of the principal or paying some of the interest, through programs like the National Housing Credit Insurance Corporation (NKOSK). He suggested that the government could build on these past models, but it would need to work closely with banks to ensure the success of the new program.
Could young people qualify for existing family subsidies?
Recently, the Ministry of Family Care and Demography introduced subsidies for families with children to help them purchase their first property, offering up to 20,000 euros for apartment or house purchases. Given that many young families might also struggle to buy property, could they be eligible for similar subsidies?
Marinković believes that this subsidy should be targeted at families whose financial situation genuinely prevents them from accumulating significant funds. While it’s possible that some young families could qualify, there are also many young people with strong monthly incomes who wouldn’t need the assistance. He emphasized the importance of establishing clear socio-economic criteria to determine eligibility.
Even with a subsidy of 20,000 euros, however, it would still be difficult to find an apartment in Belgrade for 60,000 euros, which is the maximum amount that could allow for monthly installments of just 200 euros.
Conclusion: Financial assistance may be necessary
Given the high prices of real estate, particularly in Belgrade, and the current market conditions, it seems highly unlikely that young people would be able to afford an apartment under the terms currently proposed without significant state intervention. The government will likely need to introduce subsidies — either to lower the loan amount or subsidize interest rates — in order to make homeownership more accessible for young people. Until these measures are put into place, however, the dream of affordable homeownership for Serbia’s youth may remain out of reach.
