Market in Depth

Adjusted inflation shows otherwise

Lalaine C. Delmendo | March 25, 2022

Adjusted inflation shows otherwise During 2022, the nationwide house price index soared by 20.67%, sharply up from y-o-y increases of 11.25% in 2021, 1.77% in 2020, 3.53% in 2019, and 1.62% in 2018, according to the National Bank of the Republic of North Macedonia, the country's central bank. In fact, it was its best showing since 2008.

However when adjusted for inflation, house price growth is much more muted, increasing by just 1.62% in 2022 from a year earlier.

Quarter-on-quarter, nationwide house prices increased 4.78% in Q4 2022 (3.09% inflation-adjusted) – one of the biggest quarterly increase in the past decade.

The government's decision to officially change the country's name from “Macedonia” to “North Macedonia” under the name deal with Greece in 2019 solved the long-standing dispute between the neighboring countries and opened the way for NATO and EU integration. North Macedonia became an official member state of NATO on March 27, 2020 and its EU accession talks have finally began.

The housing market, which has been sluggish since the global financial crisis, is one of the major beneficiaries.

After house price rises of 10.8% (4.9% inflation-adjusted) in 2007 and 25% (18.8% inflation-adjusted) in 2008, Macedonia's housing market has shown unimpressive performance since, mainly due to the global financial meltdown, the problems with neighboring Greece, and its own extended political crisis exacerbating the situation. The housing market showed significant improvements just recently, with house prices rising strongly by 11.25% in 2021 and by another 20.67% in 2022, buoyed by strong property demand both from local and foreign homebuyers.

Foreign individuals can freely buy apartments and buildings, subject to the reciprocity rule and approval from the Ministry of Justice.

Foreign citizens and companies can directly own land for construction in Macedonia, under the Law on Construction Land adopted in 2008. Under the law, the construction land is sold through a public tender procedure. Also, foreign individuals and companies can lease land for up to 99 years through a public bidding process.

Macedonia house price
During 2022, North Macedonia's economy expanded by a modest 2.7% from a year earlier, following annual expansion of 4% in 2021 and a contraction of 6.1% in 2020, based on figures from the International Monetary Fund (IMF). The economy is expected to grow by 3% this year and by another 3.9% in 2024.

Though by European standards North Macedonia is a poor country, with a total population of about 2.1 million people and a GDP per capita of US$ 6,800 in 2022. Corruption is rife. There is much emigration. A large proportion of the population lives in poverty, especially ethnic Albanians who are simultaneously derided as “lazy” and discriminated against.

Analysis of North Macedonia Residential Property Market »

Rental Yields

Macedonia: yields are moderate

Buying prices of apartments in Skopje, Macedonia, remain very reasonably price at around 1,100 Euros per square metre.

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%.

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Taxes and Costs

Income taxes are moderate in North Macedonia

Rental Income: Rental income is taxed at a flat rate of 10%. Income-generating expenses and depreciation costs are deductible when calculating taxable income.

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%.

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Buying Guide

Buying costs are very low in Macedonia

Roundtrip transaction costs, i.e., the total cost of buying and selling a property, are around 4.30% to 7.60% of the property value. The 2% to 4% 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

Landlord and Tenant Law in North Macedonia

Landlord and Tenant Law in North Macedonia is classified by us as moderately pro-landlord, given that Landlord and Tenant have complete freedom of contract and freedom to agree rents. The reason we do not class the North Macedonian situation as "strongly" pro-landlord is the practical difficulty and cost of evicting a tenant.

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Modest economic performance; falling unemployment

During 2022, North Macedonia’s economy expanded by a modest 2.7% from a year earlier, following annual expansion of 4% in 2021 and a contraction of 6.1% in 2020, based on figures from the International Monetary Fund (IMF).

“Just as the economy in North Macedonia started to recover from a pandemic-induced recession, and after a 4-percent growth in 2021, the energy crisis and the war in Ukraine cut the recovery short and amplified inflationary pressures in 2022,” said the World Bank.

Macedonia gdp inflation
The economy is expected to grow by 3% this year and by another 3.9% in 2024, based on the IMF projections.

Inflation stood at 14.2% in December 2022, a sharp slowdown from 19.5% in the previous month and from a record-high of 19.8% in October 2022, according to the State Statistical Office. Yet it remains far higher than the annual average inflation rate of just 1.6% registered from 2011 to 2021.

Unemployment continues to fall, although it remains very high by international standards. In Q3 2022, the nationwide unemployment rate fell to 14.3%, from 14.5% in the previous quarter and 15.7% in the same period last year.

North Macedonia had a total labor force of 808,328 people in Q3 2022, 115,266 of which were unemployed.

The jobless rate averaged 17.5% in 2018-21, a sharp improvement from an annual average of 25.8% in 2013-17 and 33.6% in 2000-12.

North Macedonia now a NATO member state; EU accession talks began
In recent years the country has been in a state of continuous crisis, after then Macedonian opposition leader, Zoran Zaev, released what he has called information “bombs” against the government.

Macedonia unemployment
Zaev accused the former government of 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 2016 to pave the way for early elections, initially scheduled for February before being postponed until June 5, and finally to December 2016. A highly controversial presidential amnesty for 56 of those subject of investigations into the alleged wiretappings was issued by then president Gjorge Ivanov, with the obvious intention of aborting the judicial investigations and hiding any evidence.

Mass protests erupted in Skopje. Zaev and 10 other politicians who have received amnesties have refused them, and foreign institutions have condemned them.

The December 2016 general elections failed to produce an outright winner and months of tension over the formation of a new government ensued. Finally in May 2017, a new government was formed, with Zoran Zaev as the country’s new prime minister. Zaev promised to boost the economy, address political divisions and tense relations between ethnic Macedonians and ethnic Albanians in the country, and finally resolve the country’s dispute with Greece over its name – a vital step for Euro-Atlantic integration.

A dispute with Greece over Macedonia’s name had blocked the country’s accession to European Union (EU) and North Atlantic Treaty Organization (NATO). However the change of government has changed the picture, with Zaev indicating Macedonia’s willingness to compromise to resolve the issue. PM Zaev also announced that Skopje’s airport will no longer bear the name Alexander the Great nor will the motorway leading to Greece, which now be called as Friendship Highway.

Then in June 2018, the government decided to enter into a new agreement with Greece – officially changing its name from “Macedonia” to “North Macedonia” to resolve the decades-long name dispute, paving the way for the country to start accession talks with NATO and the EU. In 2019, the name change came into force after ratifications by Greek and Macedonian parliaments.

During the 2019 presidential election, Stevo Pendarovski of the Social Democratic Union of Macedonia and the Democratic Union for Integration defeated the nationalist candidate Gordana Siljanovska-Davkova.

North Macedonia signed NATO accession agreement in 2019 and on March 27, 2020 became an official member state.

Then July 2022, North Macedonia’s parliament accepted a French proposal aimed at settling its dispute with Bulgaria and clearing the way to long overdue EU membership talks. In the past years, Bulgaria has been blocking North Macedonia’s efforts to join the EU, accusing it of disrespecting historical and cultural ties. To remove Bulgaria’s veto against North Macedonia’s accession talks, it has made a number of demands, including the acceptance that the language of North Macedonia is derived from Bulgarian and the recognition of a Bulgarian minority in the country, which requires an amendment to the Macedonian Constitution.