Macedonia: Overview

RENTAL YIELDS

Last Updated: Sep 23, 2009

Macedonia remains attractively valued

Neither prices nor rents have moved significantly over the past couple of years in Skopje, Macedonia, according to Global Property Guide research.

Buying prices range from €1,000 to €1,250 per square metre (sq. m.), while rents range from around €7 to €8.6 per sq. m./month. So a 120 sq. m. apartment would cost around €125,000, and produce a rent of around €1,030 per month, generating a yield of around 9.9%.

Our conclusion is that Macedonia is attractively valued, because its yields range from 7.4% to 10.6%.

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TAXES AND COSTS

Last Updated: Dec 07, 2007

Income taxes in Macedonia are moderate

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	7.5%	7.5%	7.5%
Click here to see a worked example
Source:			Disclaimer

Rental Income: Rental income is taxed at a flat rate, and the applicable rate depends on the category of the rental property. Unstudied business space is taxed at 8.11% and accommodated business space is taxed at 7.52%.

Capital Gains: Capital gains are taxed as ordinary income at 12%, levied on 70% of computed gains after expenses are deducted.

Inheritance: Inheritance tax is levied on the market value of the inheritance at 3% for second degree relatives.

Residents: Residents are taxed on their worldwide income.

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BUYING GUIDE

Last Updated: Apr 12, 2007

Buying costs are very low in Macedonia

Roundtrip transaction costs, i.e., the total cost of buying and selling a property, are around 5% - 6.6% of the property value. The 3% sales tax is the greatest cost, and is usually paid by the buyer. The seller pays for the agent’s commission of 2%. However, the first turnover of buildings and apartments is subject to 18% VAT, dramatically increasing the transaction cost.

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LANDLORD AND TENANT

Last Updated: Jul 17, 2006

Macedonian tenancy laws are pro-landlord

Rent: Rent and rent increases can be freely negotiated. The lease contract must clearly state the rent, type of rental payment, and the payment schedule.

Tenant Security: Lease agreements automatically terminate at expiration of the lease contract.

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ECONOMIC GROWTH

Last Updated: Jul 23, 2008

Choice of name continue to hamper growth

The former Yugoslav Republic of Macedonia (pop 2.1 million) is one of the countries that emerged from the disintegration of Yugoslavia. Given the circumstances of its birth, it is a wonder that Macedonia is the only Yugoslav country that became independent without bloodshed.

However, inter-ethnic tension between Macedonian Slavs (Orthodox Christians) and ethnic Albanians (Sunni Muslims) came to a head in a civil war in 2001. A subsequent accord, the Ohrid Agreement, gave more rights to the Albanian minority, through revisions to the constitution in 2001. In 2004, legislation was approved redrawing local boundaries and giving ethnic Albanians greater local autonomy in areas where they predominate.

The Macedonian economy did not experience economic growth until 1996 because of the absence of infrastructure and a Greek economic embargo over a dispute about FYR Macedonia's constitutional name and flag. The name “Macedonia” is seen by Athens as implying territorial ambitions over Greece’s northern region of Macedonia, which is contiguous.

The country’s economic development continued on from 1996 to 2000. Inter-ethnic tension between Macedonians and ethnic Albanians in 2001 resulted in a 4.5% economic decline due to decreased trade, intermittent border closures, increased deficit spending on security needs, and investor uncertainty.

After rising by less than 1% in 2002, the Macedonian economy grew by an average of 3.7% annually from 2003 to 2006. In 2007, the GDP growth rate was 5%, the best performance since independence. Although Macedonia has maintained macroeconomic stability with low inflation, it has lagged behind in attracting foreign investment.

Talks on possible EU candidate status are already on the way. Most Macedonians hope that their contentious relationship with Greece will not affect their membership chances. EU candidate status was granted in December 2005 but no formal negotiations are under way. Greece has successfully blocked Macedonia’s entry to Nato in 2008.