The post-socialist financialization and illegal construction in Serbia: convergent or divergent a new assetization game?

Abstract

This paper explores the post-socialist changes of urban development in Serbia from the perspective of two main trends (galloping neoliberal financialization of real estate and mass illegal construction) and their assetization game, especially after global crisis 2008. The focus of global finance is increasingly diverted from the real sector of the economy to the financialization of commercial properties, especially residential. The financialization of real estate/property has a significant role in the socio-economic development, as well as spatial patterns, especially in the urban redevelopment, i.e. urban built environment. Under the influence of neoliberal doctrine, the financialization is also intensified in the post-socialist countries of Central and Eastern Europe (CEE). Although financialization research is relatively scarce in post-socialist European countries, it is almost completely absent in Serbia. The financialization was activated after the year 2000, intensified until the global financial crisis of 2008, and continued with extreme dynamics until today. The process of mass illegal construction, i.e. illegally constructed buildings (now more than 2.1 million buildings from 4.9 total buildings) continues in parallel with the financialization of properties in Serbia since 1960s. The inability of the socialist framework to provide affordable housing has allowed the large number of illegally constructed buildings to become an alternative method of meeting housing needs. In the post-socialist period, a new wave of illegal constructed buildings intensified, primarily caused by the privatization of the land-use rights andof socially-owned housing. Its large scale was the main driver for the accommodation of immigrants after the breakup of Yugoslavia. The term "illegally constructed building"/ICBs is defined by Serbian legislation: Planning and Construction Act (2009, 2018), the Legalization Act (2013, 2015) and the Legalization of Buildings Act (2018). In empirical analysis, a comprehensive comparative approach was applied, comparing financialization process at the Serbian national level with selected post-socialist countries of CEE.. The research is based on four steps: first, on choosing different financialization domains according to the teachings of neoclassical economics (emphasizing the transition from a bank-based to a market-based financial system; foreign financial inflows; financialization of housing; urban financialization); second, on identifying and measuring financialization indicators for selected domains; third, comparing Serbia with similar CEE countries regarding the financialization indicators; and fourth, a brief overview of ICBs in the post-socialist period. It is estimated that there is a certain correlation and interconnection between the financialization and illegal construction processes in Serbia. While the financialization process works on the formal market, the other process takes place on the informal/"black" market, and it seems likely that both processes could remain as parallel and autonomous forms of urban development in Serbia. However, the analysis of these processes indicates both their convergence and divergence. From the perspective of the theory of urban growth machine, it seems that both processes constitute main levers of the same machine, i.e. two counterweights in urban development that go "hand in hand". The state considers that the financialization of real estate is a stabilizer of the macroeconomic development and monetary policy in Serbia, with the tacit tolerance of ICBs.