Assessment of the fundamental value of residential properties in the Macedonian real estate market with a macroprudential approach

In this analysis, an indicator to assess residential property prices in the Macedonian real estate market was developed by applying a macroprudential approach to analysing borrowing capacity. The indicator of household borrowing capacity is calculated as the ratio of the market value to the fundamental value of real estate, whereby a higher actual market price indicates that real estate prices are overvalued and therefore less affordable, while a higher fundamental price indicates that prices are undervalued and therefore more affordable. Тhe analysis of the Macedonian real estate market for the period from Q1 2012 to Q4 2023 concludes that residential property prices, according to both forms of the borrowing capacity (static and dynamic), were overvalued during almost the entire analysed period. The analysis reveals that lowering the regulatory threshold of the DSTI indicator, which central banks use as an instrument to prevent excessive household indebtedness, would reduce the fundamental value of residential properties and thus make them less affordable. Nevertheless, given that this represents only one possible analytical approach, the results should be interpreted with caution and within the context of a broader analysis of the Macedonian real estate market.