Investing in Agricultural Land Is More Profitable Than Investing in Other Real Estate in Serbia
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Investing in agricultural land is more profitable than investing in other real estate in Serbia The pandemic has shown that investing in agricultural land in Serbia is even more profitable than investing in other real estate, except in parts of large cities where the price of construction land and apartments has also increased drastically. What agricultural and construction land have in common is that prices are constantly rising. The statistics of the Republic Geodetic Authority show large differences in the price of both agricultural and construction land. When it comes to traded construction land, where 76 percent of turnover was paid in euros, and 24 percent in dinars, in 2020, prices ranged from 10 euros per acre, to over 80,000 euros per acre. The lowest prices, where the acre cost 10 euros, were recorded in Sjenica and Aleksinac, and the euro was more expensive in Sabac, Mladenovac, Obrenovac, Jagodina, Paracin, Prokuplje and Bor. Land in Sopot (12 euros), Gornji Milanovac (13), Knjazevac (13), Sokobanja (15), Valjevo (15), Kragujevac (16), Leskovac (16), Grocka was bought for less than 20 euros (17), Krusevac (17), Cacak (17), Lazarevac (18), Bajina Basta (19) and Zrenjanin (19 euros). The most expensive is Belgrade. Investments in construction land pay off In 2020, slightly less than half of the traded construction land (45%) had an area of two to ten acres, 43% more than 10 acres, 8% had an area of up to two acres and 3% had an area of over one hectare. In the conversation with the owners of real estate and land sales agencies, it can be heard that investments in construction land pay off very well, because the money can be turned over faster. “Everyone who has excess money buys. In Vojvodina, fields are sold the most, and in the rest of Serbia, orchards and vineyards. The most expensive land is in Vojvodina, where the highest quality land is in Backa, which has the highest price, followed by Srem, and then Banat in third place. Once a piece of land was bought for a casserole of fish, and today, by God, that has changed, it’s worth a fortune,” says one of the agents from Novi Sad. The greater the economic freedom to invest, the more successful the nation will be, says Milan Kovacevic, an investment consultant. He reminds that it is one thing to invest, and something completely different to use the investment and make money out of it. “Unfortunately, investing in construction land in our country is often connected with corruption, and that should change. We had numerous situations that indicated that, and I am afraid that we, as a state, are constantly making mistakes. It happens that something that is free becomes private construction land, that land that is agricultural is bought, that is magically renamed construction, that an individual becomes so rich, and the state is at a loss,” Milan Kovacevic points out. Companies from other industries also invest in agriculture According to Aleksandar Bogunovic, Secretary of the Association for Plant Production and Food Industry of the Serbian Chamber of Commerce, the state has passed a number of regulations in the past thirty years that have enabled the development of the agricultural Investing in agricultural land is more profitable than investing in other real estate in Serbia land market. They primarily refer to the abolition of the land maximum, leasing of state agricultural land, reduction of taxes on the transfer of absolute rights, and even “ad hoc” incentive measures for purchase and lease and reduction of interest during the purchase. In that way, the demand for the purchase of agricultural land increased, and thus its price. “We are an agricultural country and investors from the non-agricultural sector invest part of their funds due to business diversification in agriculture, and in many cases immediately after their activity in agriculture, primarily in agricultural land. Agricultural companies and farmers who have a surplus of funds are also investing, and they are investing part of those funds in the purchase of agricultural land, increasing their holdings,” says Aleksandar Bogunovic. Data from the Republic Geodetic Authority for last year show that the highest average price of 10,300 euros in trade in agricultural land was realized in the Juznobacki district. In the last three years, the price of agricultural land in Serbia has grown by about five to seven percent a year. What affects price differences And what are the average prices per hectare? The difference from north to south is fivefold. Thus, in the North Backa district, the average price per hectare was 9,650 euros, the West Backa district 8,250 euros, the Srem district 8,500 euros, while the Belgrade region recorded 4,200 euros, Sumadija and Western Serbia 3,350 euros, and southern and eastern Serbia 2,750 euros per hectare. Of course, this is an average, which means that the prices were higher, but also lower. The large range of prices of agricultural land by regions in Serbia is conditioned by numerous factors that affect the price. Although agricultural land is good of general interest, it is in free circulation in Serbia (except for the right of pre-emption), so the market affects the price of arable land. “The relationship between supply and demand has an impact on the price, and the demand in certain regions is much higher than the supply, so the price of agricultural land in those regions is growing, and in the last twenty years almost continuously. The most important factors that affect the price of agricultural land are the locations where the agricultural land is located, so we have agricultural land that is of poorer quality, but is close to a large city or an infrastructure facility with a high price. Then its quality, as well as the size and shape of the plot,” points out Bogunovic. Larger land area is more expensive In most cases, our interlocutor points out – and this is especially true for new investors who want to buy a larger area – agricultural land of 20-50 hectares is generally more expensive than small plots. Except for a few exceptions, where farmers who have their own land want to buy a neighboring plot. Bogunovic cites an example from the vicinity of Leskovac, where agricultural land with an area of one hectare was paid 100,000 euros. Investing in agricultural land is more profitable than investing in other real estate in Serbia “But certainly the price of agricultural land decreases if you offer 1,000 ha or 5,000 ha or 10,000 ha, because the competition is much smaller, since you don’t have many people who can buy such large areas. The price is also affected by the condition of the infrastructure – roads, availability of electricity, irrigation, drainage. The impact of the demographic situation is not small either. In eastern Serbia or in the hilly and mountainous parts of Serbia, where the population is very rare, the price of agricultural land is low, although in a good part this is not the only factor that affects how much it will cost,” says Aleksandar Bogunovic. Agricultural heritage also dictates the price Comparing the average rent of agricultural land in Serbia and EU countries, Serbia is in the middle. Thirteen countries have higher rents, and 14 countries have lower rents compared to Serbia. The highest average rent in the Netherlands is 3.7 times higher than in Serbia, but it is a significantly smaller difference compared to the difference in the purchase price of agricultural land. The amount of rent in Serbia is five times higher than in Latvia, where the rent is the lowest among EU countries. The price of agricultural land is influenced by numerous factors, so if we analyze these factors, ie if we compare them by countries, we will get reasons why the price of agricultural land in Serbia is higher than in the countries of the region. “Serbia is traditionally an agricultural country. In Serbia and the countries of the former Yugoslavia, there were a large number of farmers during the socialist era who cultivated their land, unlike the neighboring countries of the Eastern bloc, where the population did not have their own land. So a good part of the heirs continued to be engaged in agriculture. For example, in Bulgaria, after the return of agricultural land, most people did not know or had the mechanization to engage in agriculture, so in the beginning, that agricultural land was in the parlor, and then companies bought it cheaply, before entering the EU. Also, in these countries, the demographic picture has drastically changed with the entry into the EU, because people have been given the opportunity to work in more developed countries,” concludes Aleksandar Bogunovic. However, the price of agricultural land in the countries of our neighbors that are members of the EU has also increased significantly in recent years. Primarily due to the construction of infrastructure and incentives that are significantly higher than before, so investing in the purchase of agricultural land is more profitable. Serbia is following this trend as well, eKapija reports..