The prices of new constructions in BiH increased by 100% in five years - Buyers are turning to houses and suburbs, what awaits the market in the coming years?

- The state of the real estate market in BiH can be said to be stable. I would not say that it is in a phase of strong growth, but moderate growth, aligned with inflationary trends, increasing input costs, labor costs and the supply-demand ratio. This means that in the last few years, the price growth was single-digit, in contrast to 2022, when prices grew by more than 30% - Milanović says.

According to him, there are no significant differences between the larger cities in BiH when it comes to general market trends. The situation is different in smaller communities, which face depopulation and weaker demand, which is why the situation in their real estate markets is less favorable.

Official statistics show that the average price per square meter of an apartment in Banja Luka was 4,154 KM in the second quarter, but the prices of individual properties deviate significantly from that average. According to Milanović, it is difficult to find a new building today at a price lower than 3,500 KM per square meter, even in settlements further away from the center, while in the central city areas the prices range up to 7,000 KM.

- The statistics shows the average price of sold apartments, so the average will be lower when cheaper apartments make up a larger share of the total number of transactions. Currently, it is difficult to find a price lower than 3,500 KM per square meter in new construction, and that is in neighborhoods further from the city center. In the center, prices reach 7,000 KM, and there are also announcements that they could exceed that level by the end of the year - Milanović says.

As he explains, the formation of prices is still mostly influenced by location, quality of construction and structure of the apartment. However, the question is how far prices can go before purchasing power becomes a limiting factor.

- A few years ago we thought that no one would want to pay 5,000 KM for a square meter apartment, but today it has become common. Even at current prices, some buyers give up buying apartments and turn to houses or lots in peripheral settlements. For the amount that would be allocated for an apartment of 40 to 50 square meters in the center, they can build a house of 100 square meters, Milanović points out.

He believes that prices cannot rise indefinitely, but that the market will only establish a balance between the supply and the paying ability of buyers. When prices exceed their purchasing power, investors, he adds, will have to adjust the offer to actual demand.

Such expectations point to a market that could continue to grow in the future, but at a slower pace. At the same time, the relation between prices and purchasing power will be particularly important, especially in cities where the prices of new buildings have already reached levels that direct some buyers to alternative solutions.