Bosnia-Herzegovina Real Estate Report Q2 2012

Bosnia & Herzegovina (BiH) officially came out of its recession towards the end of 2010. The impetus came largely from strong growth in demand from the country’s main trading neighbours, most of which are in the EU. This created a strong market for exports and enabled revival of the manufacturing sector in particular, as well as impacting on utilities and tourism. Despite still struggling with high unemployment, the country is headed for a moderate recovery. However the ongoing eurozone debt crisis and renewed market volatility in 2011 has somewhat stalled the optimism of our previous updates, albeit only in the short term.

Our latest data collection for full-year 2011 has revealed an industry-wide contraction in rental rates across all geographies surveyed, undoing much of the positive growth seen in 2010. The industrial sector has weathered the storm better than its counterparts due in part to the increased lease-length cycle, but in the medium term we expect the retail sector in particular to outperform.

Key opportunities in the real estate market:

• Revisions of land ownership and construction laws are under way, which will provide the industry with a more comparable legal base from which to operate.  
• Projects to improve local infrastructure and increase foreign direct investment into the sector will positively impact the real estate segment.  
• Improvement of legislation related to foreign investment, including tax incentives and a reduction in bureaucracy. Included are attempts to strengthen the protection of assets, and to encourage freedom in their management and disposal.  
• The introduction of the new (Global Navigation Satellite System) GNSS reference station network represents the first step in the Ministry of Civil Affairs’ spatial information services development programme. It is hoped that the network will help with legal and land administration, as well as the rapidly growing real estate sector and its necessary spatial planning.  
• Over the medium-term, the under-developed retail segment in the country will see increasing activity and improving supply and demand dynamics.

Key risks to the real estate market:

• Political issues remain the hottest topic for Bosnia with a key concern being that foreign investment – which is needed in the real estate sector – will be put off.  
• Ongoing instability in the eurozone will negatively affect Bosnian economic performance and a slower than anticipated return to growth would further mute the real estate sector.