One of the key factors driving up apartment prices in Sarajevo Canton is the lack of supply, which is partly caused by the growing number of empty apartments.
Within the city of Sarajevo itself, there is hardly a building without a significant percentage of vacant units, a trend particularly noticeable in newly constructed developments.
This directly contributes to rising property prices, as well as higher rental costs. Although there is no official data on who predominantly owns these empty apartments, it is assumed that many belong to members of the diaspora who plan to return to Bosnia and Herzegovina after retirement.
There is also a group of individuals who own multiple apartments, guided by the belief that real estate is the most profitable form of investment. For both groups, rental income is not essential, which is why they are not motivated to lease their properties for a few hundred BAM per month and instead choose to keep them vacant.
This presents an obvious challenge for people attempting to purchase an apartment, as reduced supply inevitably leads to higher prices.
The Government of Sarajevo Canton has been addressing this issue for two years, yet no concrete solution is in sight. Cantonal Prime Minister Nihad Uk has repeatedly spoken about introducing a tax on empty apartments, stating that the government’s aim is to encourage owners to actively participate in the real estate market.
The task of drafting a new real estate taxation law, specifically focused on this issue, has been assigned to the Sarajevo Institute of Economics. The law is still in preparation, and according to Uk in a statement to Klix.ba, it should include an approximate assessment of the number of vacant apartments in Sarajevo Canton.
Which Properties Should Be Taxed?
Earlier, economic analyst Igor Gavran told Klix.ba that properties in which no one resides are contributing to higher real estate prices in the capital of Bosnia and Herzegovina. However, he cautioned that special care must be taken regarding properties abandoned during the war, as taxing them could be interpreted as discouraging displaced persons from returning.
He believes that what should unquestionably be taxed are investment properties and rental properties.
“These are properties that are formally vacant and not used for housing, but instead represent an investment-they are purchased for resale or as a form of savings. Such properties should be taxed because they serve a commercial purpose. Properties that are being rented out without being officially registered as rental properties should also be taxed,” he stated.
Gavran also noted that some properties were once used by their owners but are no longer occupied because the owners emigrated. He considers taxing such properties to be sensitive.
“These citizens were forced to leave due to poor living conditions, so taxing them would amount to additional punishment. It could be perceived as making their connection to their homeland more difficult,” he added.
Speaking about the proposed law, Uk previously stated that the tax would not apply to primary residential properties, but rather to additional properties “where individuals own three, four, five, or even ten apartments and commercial premises that are not in use.”
Arguments For and Against
The Government of Sarajevo Canton has already faced criticism from the opposition regarding the announcement of the new law. The Cantonal Board of the Party for Bosnia and Herzegovina argues that the government’s primary motivation is to balance the budget deficit.
“As a solution to all accumulated budget problems, Prime Minister Uk has presented a miraculous answer – the Government will introduce a new tax, a real estate tax,” previously stated Almir Bečarević, President of the Cantonal Board of the Party for Bosnia and Herzegovina.
Lejla Ramić, Senior Assistant in the field of legal-economic studies at the Faculty of Law of the University of Sarajevo told Istinomjer that the introduction of such a tax has not been a frequent subject of academic research. Nevertheless, she referred to the study titled “Ripple Effects: The Impact of a Tax on Empty Apartments on the Real Estate Market.”
“The findings show that the tax reduced the number of vacant apartments without negatively affecting new construction. However, it did not have an impact on average rents, which indicates that additional measures are necessary to address the broader housing crisis,” she explained.
She also mentioned other studies suggesting that prices may fluctuate in the short term, while the introduction of such a tax could cause market distortions. In the long term, it is projected that supply could decline and prices could rise again.
According to Ramić, the phenomenon of empty apartments is common across many Western countries, which are increasingly adopting similar laws or considering their implementation. Various forms of such taxes exist in local jurisdictions in the United Kingdom, France, Spain, Canada, and Australia.
However, Ramić concludes that such a measure alone is insufficient to produce significant positive effects and must be accompanied by broader housing policy reforms.
“In conclusion, existing research findings indicate that a tax on unused apartments can contribute to reducing long-term vacancy rates and increasing supply. However, on its own it is not sufficient and must be combined with other housing policy measures in order to address issues of housing availability and affordability,” she said.
In summary, empty apartments are one of the factors contributing to rising real estate and rental prices in Sarajevo Canton. The introduction of a similar law could potentially stabilize the market in the short term, but stronger and more sustainable effects would require additional policy tools. It should also be noted that, besides this phenomenon, high property prices are influenced by inflation, a slowdown in new construction, as well as higher labor and construction material costs, Klix.ba writes.
