The potential introduction of real estate leasing in Macedonia could significantly impact the market, potentially stabilizing or even reducing property prices. This comes at a time when Europe grapples with the ripple effects of the subprime mortgage crisis, with inflated real estate values across the continent. However, Macedonia presents a unique case where purchase prices have stagnated, and rental rates have seen a decline. This article explores the current state of real estate leasing in Macedonia, the challenges it faces, and its future prospects.
Macedonia's real estate market has shown peculiar trends compared to its European counterparts. Over the past few years, while most of Europe faced inflated property values, Macedonia saw stagnation in purchase prices and a decline in rental rates. According to a report by the National Bank of the Republic of Macedonia, the average price of apartments in Skopje increased by only 0.1% in 2019, a stark contrast to the rapid increases seen in other European cities.
The business climate in Macedonia has improved significantly, attracting foreign direct investment in retail, manufacturing, and services. This influx has increased the demand for commercial real estate, including shopping malls, office spaces, and parking lots. Peter Roth, General Manager of Soravia Macedonia, highlighted in a statement to "Vecer," a Macedonian daily, the expected growth in real estate development and competition, potentially leading to higher prices not only in Skopje but also in other cities like Ohrid and Gevgelija.
Real estate leasing remains a relatively untapped financing vehicle in Macedonia. Major players like NLB Leasing and Hypo Alpe Adria Leasing offer leasing options, but it constitutes a small portion of their activities. NLB Leasing, established in 2000 and part of the NLB Group, offers financial and operational leases for up to 15 years on various properties. In contrast, Hypo Alpe Adria Leasing focuses on financing new constructions and sticks to fixed rates to mitigate risks.
Despite the apparent benefits, real estate leasing has not taken off in Macedonia as it has in other developing countries. One significant hurdle is the tax legislation, which places lessees at a disadvantage by requiring them to pay VAT upfront on the entire amount of the contract, including interest. This is in contrast to bank loans where VAT is not payable on interest payments. Additionally, lessees face a "real estate turnover tax" twice – when signing the contract and upon receiving the title after fully paying the lease. These tax issues, combined with the dominance of traditional banks holding about 75% of the market share, make leasing less attractive despite its potential benefits.
In neighboring countries like Croatia and Serbia, cross-border real estate leasing transactions have become more prevalent, with annual volumes reaching 1.7 billion euros and 1 billion euros, respectively. This success contrasts sharply with the situation in Macedonia, where legal and tax barriers still hinder the growth of real estate leasing.
There is a growing awareness and interest in leasing among individual buyers in Macedonia, partly due to scandals involving fraudulent activities in the property market. The leasing companies' foreign ownership and the retention of title until the end of the lease term provide a layer of security and trust for clients. However, for real estate leasing to become a more viable and popular option, significant reforms in tax legislation and reduction of bureaucratic red tape are essential.
In conclusion, while the introduction of real estate leasing in Macedonia presents an opportunity to stabilize or reduce property prices, its success depends on overcoming the current legislative and market challenges. With appropriate reforms, Macedonia could see a more dynamic and accessible real estate market, benefiting both investors and consumers alike.
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