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Bosnia and Herzegovina Property Opaque with Title Problems

Bosnia and Herzegovina Property Opaque with Title Problems

Article: Title documents in Bosnia and Herzegovina can be forged or illegally obtained.

Bosnia and Herzegovina is an economy in transition, reformed only to a limited extent. The private sector is growing but foreign investment has dropped sharply and government spending accounts for about half of GDP.

Bosnia & Herzegovina, Bridge in Mostar

Bosnia & Herzegovina, Bridge in Mostar

The Bosnia and Herzegovina economy

Because the government is decentralized, there are problems with coordinating economic policy and reform.

  • The economy depends heavily on metal export as well as foreign aid and remittances.
  • The civil war caused production to plummet and unemployment to soar.
  • The country experienced a decline in GDP of almost 3% in 2009 because of the global economic crisis.
  • One of the main challenges for the country has been to reduce social spending and cut back on public sector wages in order to meet IMF conditions for funding.

The real-estate market outlook

The market is presently in a state of uneasy stability after a decline in rental rates that negated the growth witnessed earlier.

  • Commercial real estate has performed relatively well because of the longer lease cycles but, in the medium term, the retail sector is likely to perform well while the office sector is the most likely to suffer in 2013.
  • The short-term outlook for growth remains pessimistic with forecast growth of less than 1% for 2013
  • Growth is expected to pick up in 2014 and the medium term outlook is a growth rate of 3%.

Prices and financing

  • Presently, the average price of an apartment in the capital Sarajevo is between EUR €1,000 and EUR €2,000 psm, depending on the location and the age.
  • Because the domestic banking system is dominated by leading banks in Europe, local funding is available and banks are competing to provide cheap loans.

Hire a lawyer to check property documentation

You should be particularly careful with documentation because of local problems.

  • Real estate can be subject to a restitution order
  • Property documents may be forged or illegally obtained
  • There may be competing claims on the property that are not recorded on the land register
  • The transfer of title does not become effective unless the ownership is recorded on the land register (since the process can take some months, it is better to make payment on staggered terms)

Who buys in Bosnia and Herzegovina and where

According to a local newspaper, Arabs and Russians in particular are showing interest in buying property in the country.

  • The capital Sarajevo attracts Arabs interested in buying houses, apartments and land for commercial construction. These buyers include investors from Kuwait, Jordan and Syria.
  • Russian interest is centered around Trebinje, the warmest city in the Republika Srpska, and one of the warmest in the entire country. It is only 28 km from the famous Croatian city of Dubrovnik.

To be sure, foreign investors are becoming increasingly aware that property can be acquired cheaply, either directly or through a local company.

  • The new C5 corridor linking the country to southern Croatia and Budapest is expected to boost property growth.

The bottom line

Investors continue to be put off by the political and economic uncertainty – and construction activity is likely to remain subdued. And while the country continues to be fiscally sound in comparison with its counterparts, investor confidence is key for economic growth.

For obvious reasons, you should stay away from property investment in Bosnia and Herzegovina.  Local problems such as opaque markets and dodgy titles can make such investments higher risk than in many other places.

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One comment on “Bosnia and Herzegovina Property Opaque with Title Problems

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