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Bosnia and Herzegovina Real Estate Report Q4 2010
Business Monitor International, Aug 2010, Pages: 61
Business Monitor International's Bosnia and Herzegovina Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Bosnia and Herzegovina's Real Estate industry.
Although smaller in absolute terms and perhaps less well integrated into the global economy than other countries in Central and Eastern Europe (CEE), Bosnia has not escaped unscathed from the global financial crisis. Economic growth at near double-digit rates in the middle of the decade was followed by expansion of only slightly more than 5% in 2008 and a 3% contraction in 2009. The recovery is likely to be gradual. Households are likely to contribute far less to economic growth than they have in the past, and the government is pursuing a tough fiscal policy.
Economic conditions were such that a number of real estate projects have been shelved. Nevertheless, the supply of commercial space (for offices, retail and residential use) from projects whose construction ended in 2009 (or which are due to be completed in early 2010) means that pressure on rents will be downwards in Sarajevo and most other centres.
We interviewed our in-country sources at the beginning of 2010 and again in the middle of the year. The second round of interviews gave us clearer details of yields in Zenica, but generally confirmed our earlier findings.
We expect that yields in all sub-sectors will continue to fall in Sarajevo through 2010 and 2011. This is because rentals will likely fall further in an environment where there are few property transactions. However, we expect that capital values (prices) will reach market-clearing levels in 2012 and that yields will rise gradually thereafter.
The patterns for Trebinje should be different. The development of the airport appears to have fostered sufficient interest in commercial property, relative to available space, such that yields are currently well below those of Sarajevo. We expect that rents will rise faster than capital values, with the result that yields move upwards towards those prevailing in the capital. For the time being, though, we expect yields in Trebinje will continue to be well below those of Sarajevo – across all three major sub-sectors – through to 2014.
We envisage that yields will rise in Zenica as well, and that they will still be below yields in Sarajevo in 2014.
Key Features Of This Report
This is the latest edition of a new series of industry reports published by BMI that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. The questions that we seek to answer for each country remain as follows: What are the main issues for actors in and around real estate development in the country concerned, over both the long and the short term? What are the main constraints that they face? What are the key insights to be gleaned by comparing the real estate sector of a country with its regional peers?
In Q3 we introduced a very substantial improvement to our reports. We incorporated data and qualitative observations provided to us by commercial real estate agents operating in the countries we survey. As a result we have gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors – office, retail and industrial. We have also introduced a new approach to the forecasting of rental yields, which is discussed in the methodology section of this report.
In Q4, we have incorporated a lot of new data in relation to rents and yields in 2010. We gained this data through a new round of interviews with our in-country sources in mid-2010. In some cases, the latest information from our sources has caused us to make significant revisions to our forecasts for 2011-2014. We asked our sources to indicate what growth in rents is likely for 2011. We explain their answers in the Forecast Scenarios.
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