The price falls are concentrated in the capital city, Skopje:
- In Skopje, the average price of dwellings dropped by 1.8% (nominal and inflation-adjusted) to MKD 52,916 (USD 963) per sq. m. in 2015 from the previous year.
- House prices in other parts of Macedonia only decreased by 0.8% (nominal and inflation-adjusted) y-o-y to MKD 33,243 (USD 605) per sq. m. in 2015.
Demand has slowed in recent years, with a period of real panic about over-building in 2013. Demand dropped by around 30% according to estimates, with around 4,000-5,000 new unsold flats in Skopje. Vacancy at delivery stood at 43% in 2013, according to Forton.
In an effort to help the housing market, the government has increased its subsidies for homebuyers to 75% of the monthly bank mortgage (from an initial 50%) for new flats and houses costing under €900 per sq. m. for the first five years. This means that for a flat with an average price of MKD 3.12 million (USD 60,000), the government will pay a total of MKD 937,331 (USD 17,050) through subsidies.
This has somewhat helped the housing market recover, with building permits rising in 2014 and 2015 from 2013's low, especially in Skopje.
However, the road to recovery has not been smooth as the country continues to struggle from its extended political crisis and the impact from problems in neighboring Greece.
Analysis of Macedonia Residential Property Market »
Due to moderate price rises since 2005 (all our figures are stated in Euro terms), there have been slight declines in yields. It seems to us that another reason is that rents have been falling, though we don't have official statistics to confirm this. Gross rental yields in Skopje are now moderate, with most apartments yielding around 5.0% to 5.5%.
Capital Gains: Capital gains are taxed as ordinary income at 10%, levied on 70% of computed gains after expenses are deducted.
Inheritance: Spouses and first degree relatives, or direct ascendants and descendants, are not liable to pay inheritance tax on their inheritance.
Residents: Residents are taxed on their worldwide income at a flat rate of 10%.
Tenant Security: Lease agreements automatically terminate at expiration of the lease contract.
Over the past year, the country has been in a state of continuous crisis. The Macedonian opposition leader, Zoran Zaev, has been releasing what he has called information “bombs” against the government. Zaev claimed that the government was systematically wiretapping all important people in the country, and released a series of allegedly wiretapped conversations of the then-prime minister, Nikola Gruevski, the head of the secret service and other senior officials, in which they apparently discussed interference in the judiciary, media and urban-planning process.
Zaev claimed that the elections of April 2014, in which the ruling conservative VMRO-DPMNE party of Gruevski defeated Zaev’s ex-communist Social Democrats (SDSM) were fraudulent and has accused Gruevski of operating a dictatorship. Zaev's party tends to represent ethnic Albanians.
Gruevski, who had been prime minister since 2006, resigned in January to pave the way for early elections, initially scheduled for February before being postponed until June 5. A highly controversial presidential amnesty for 56 of those subject of investigations into the alleged wiretappings was issued by president Gjorge Ivanov, with the obvious intention of aborting the judicial investigations and hiding any evidence.
Mass protests have erupted in Skopje. Zaev and 10 other politicians who have received amnesties have refused them, and foreign institutions have condemned them. Russia, however, supports the government.
Few expect the elections on June 5 to resolve the problem, as Zaev's party has boycotted them. Meanwhile Macedonia has sealed the border with Greece.
"Domestic political uncertainties and the crisis in Greece are likely to slow momentum as confidence weakens and some investors hold off investment decisions," noted the IMF.
The fiscal deficit was 4% of GDP in 2015, up from the 3.4% target. This, according to IMF, likely stems from the underperformance of Value Added Tax and non-tax revenues, as well as increased security spending entailed by the worsened security situation.
A dispute with Greece over Macedonia’s name continues to block the country’s accession to European Union (EU) and North Atlantic Treaty Organization (NATO). The National Bank of the Republic of Macedonia announced late in June the imposition of temporary limits on the outflow of capital to Greece and ordered its banks to withdraw deposits and loans from Greek banks.There are two Greek-owned banks in Macedonia which together hold 22% of banking assets.