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Bosnia-Herzegovina Real Estate Report Q2 2014 - New Market Report

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Boston, MA -- (SBWIRE) -- 02/26/2014 -- The uncertainty surrounding Bosnia & Herzegovina's political and economic backdrop continues to undermine growth in both the country's construction and real estate segments. While economic growth is expected to accelerate in 2014, rising to 2.1% year-on-year, it will be some time until this filters through into the real estate market and translates into new demand.

With a focus on the three principal cities of Sarajevo, Trebinje and Zenica, the report covers the property fundamentals of the commercial real estate market rental market and examines the office, retail, industrial and construction segments throughout the country, in the context of the struggling domestic and regional economy.

Meanwhile, ongoing political concerns may hamper long-term growth within the real estate sector, with the country's integration into the EU still far from assured. The country's politicians are coming under increased criticism from the EU for not showing the will to make badly needed reforms and drive the country's integration into the region. While growing pressure at home and abroad may push the government to approve measures, we expect ethnic concerns to continue to trump EU ambitions among the political leadership

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Meanwhile, the forthcoming general election continues to play on the mind of investors, given its potential to ignite current tensions between the various ethnic groups. However, over the long term, we expect the country's property market to benefit from growing interest in the Central and Eastern Europe region as a whole.

Recent Developments

- In Q114, the government of the Federation of Bosnia-Herzegovina revealed a privatisation plans which includes listing a number of public-owned industrial assets for sale over the course of 2014. These include tobacco factories in Sarajevo and Mostar, and several metals plants, which the privatisation agency value at a combined BAM517mn.
- There are plans for the redevelopment of the main bus station in the capital, Sarajevo, which will be converted into a commercial centre and will include a hotel with 150 rooms as well as a transportation centre and shopping mall. The complex is expected to measure 37,000 sq metres in size. Reconstruction of the station is due to begin from 2015 with completion due for the end of next year.
- The Daily Avaz has reported increased interest by foreign nationals in buying Bosnian real estate assets, with particular interest being seen from Russian and Middle Eastern buyers. According to the publication, real estate agents across the country are seeing growing international investment across a wide range of sub-sectors including residential, office and industrial.

Key BMI Forecasts

- The retail sector will continue to outperform both office and real estate in terms of rental rates in 2014.

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