February the 17th, 2021 - The Zagreb property market will find it difficult to return to any form of old glory until the damage from the earthquake which struck the country back in March 2020 is fully repaired.
As Poslovni Dnevnik/Marija Crnjak writes, the drop in tourist traffic due to the pandemic and the Zagreb earthquake is a terrible combination that brought down the turnover on the market of buying and selling residential properties in Zagreb by as much as 43 percent. Although at the same time the supply of apartments for long-term rent increased, by about 20 percent in December compared to January 2020, according to advertisement data.
Even if these apartments are filled up, this can't compensate for the losses caused by the fall in demand for short-term rent, and the Zagreb property market will not recover until serious reconstruction work is undertaken in Zagreb.
"There's been a clear increase in the supply of apartments for long-term rent, but this isn't accompanied by demand, which is almost exclusively related to new apartments, because security is the first criterion for tenants following the earthquake. So, we can conclude that rentals generally suffer, and because of this demand, long-term rent can in no way compensate for the losses, especially in Donji grad.. There's very little trade, only with new apartments, the prices of which are therefore rising, and our analyses have shown that the traffic in Zagreb has almost halved,'' pointed out Dubravko Ranilovic of the Croatian Chamber of Commerce.
According to Njuskalo's data, in January 2020, before the pandemic and earthquake struck the country, there were 10,819 active advertisements for long-term apartment rentals in Zagreb, and in March that number was just under 10,000. In December 2020, there were 13,449 apartments for rent in the advertisement, and in January this year there were about two hundred fewer apartments.
It was predicted that some of the apartments from tourist rentals to the long-term rentals would be transferred last summer. At the end of January, 3,626 apartments were registered by the eVisitor system in Zagreb, which is eight percent less than a year earlier.
However, traffic did take place in a smaller capacities, so it has been considered that the decline in the apartment business in the city is significantly higher than this which can be read from the central information system. In addition to lower demand due to the pandemic, many apartments were damaged during the earthquake, mostly in the city centre, which was also the most active in tourism.
A company named Irundo, which before the pandemic was in full swing doing business with its serviced apartments, had a 95 percent drop in traffic in Zagreb due to these dire circumstances. From the portfolio of about eighty units in Zagreb, they have now fallen to a mere 12, revealed the company's co-founder, Igor Kordic.
After the earthquake, many apartments were damaged and awaiting rehabilitation, which led to the termination of contracts with the owners, some owners decided on long-term leases, and with some, cooperation stopped because there was simply no demand at all.
While the Zagreb property market is suffering, there's been a better situation in the Istrian city of Rovinj, which had a decent turnover last summer, unlike Dubrovnik, but the forecasts for this season are promising, and with a lot of effort the company survived. The Zagreb property market, however, remains very much "on hold" for them.
"We have traffic in these apartments, but the profile of guests has changed significantly, they're mostly business people who stay longer, for a month or two. A clean start awaits us in Zagreb, we have slightly changed the conditions of cooperation with apartment owners, reduced our own risk, and we expect growth,'' pointed out Igor Kordic.
Ranilovic warned that real estate transactions will not return to the ''old way'' before the serious restoration of the Croatian capital, as the buildings has been neglected for a long time, since way before the March 2020 earthquake hit.
"The main issue for buyers and tenants has become safety, and that will remain a priority even when this all subsides, and there will be no serious traffic before serious action is taken. Both property owners and those in charge of the city's restoration should know that,'' concluded Ranilovic.
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