December 8, 2022 - The Croatian real estate market is behaving in interesting ways. The difference between the requested and realised real estate prices is increasing, and is currently reaching around 15 percent, which means that the owners' demands are not always realistic, especially when it comes to used real estate, it was pointed out on Wednesday at the 34^th Real Estate Business Forum.

As Index writes, the forum was organised by the Real Estate Association of the Croatian Chamber of Commerce (HGK). As the president of that association, Dubravko Ranilović, said, it is not yet possible to say with certainty what the next year will look like, but he believes there will be a change in trends.

"There will be a certain slowdown in the real estate market; prices cannot rise indefinitely in this way," said Ranilović.

The economy of the EU, including Germany, is slowing down due to the crisis and heading towards recession, interest rates are rising due to inflation, and given that more than a third of real estate buyers in Croatia are foreigners, this will be reflected in the Croatian market in the next year, he assessed.

Ranilović stressed the importance of differentiating the Croatian market, with the coast largely dependent on foreigners, and the rest mainly on Croatian customers.

Regarding foreign buyers, the data of the Tax Administration show that, since last year, there have been a total of 31,361 sales of houses or apartments, 9,491 of which were sold to foreign buyers.

From July 2021 to June 2022, foreigners bought 12,518 residential properties in Croatia, or 36 percent of the total. With 3,501 purchased properties, Germans are in the lead, followed by Slovenians with 3,090. The number of real estate sales to foreigners is constantly growing, and Ranilović pointed out that in some cities in the coastal counties, it exceeds 90 percent.

The phenomenon of "neighbour's optimism"

When it comes to the overall state, Ranilović pointed out that the requested prices of real estate are growing at significantly higher rates than realised prices, which means that the prices and demands of owners are not realistic everywhere, which especially applies to used real estate. Moreover, the difference between the requested and realised prices is increasing, and according to some estimates, it already reaches close to 15 percent on average while at the beginning of the year, it was only ten percent, pointed out Ranilović. Some call this phenomenon "neighbour's optimism," in the sense that it is difficult for someone to give up an amount that they heard someone else achieved, he added.

When it comes to apartments, for example, data from the real estate market for 2021 show that the requested price per square meter for apartments in Croatia was 2,197 euros, and the achieved price was 1,731 euros. At the same time, the average realised price per square meter for apartments in Zagreb was 1,847 euros last year, an 2,047 euros on the coast.

New build leads in prices, where quality properties in good locations are sold quickly, but what is being built is not enough to satisfy needs. On the other hand, used real estate is not up to standard; therefore the existing housing stock, which is generally poor, that is, insufficiently maintained, should be significantly improved, Ranilović said.

"The aim of the profession is for the market to move within as realistic a framework as possible"

He explained that the asking price is the subjective opinion of the owner about the value of the property, so if the market "goes down", only those who have to sell will first sell at lower prices, while it takes six months to a year for others to correct their prices. "People will have a hard time accepting reality. That's just the way it is," asserted Ranilović.

He told the large number of people gathered from the real estate sector at the Westin Hotel, more than 700 of them, that they should be a "real stabiliser of the real estate price market," and not "flatter the owners" to further encourage price growth and "inflate the bubble." "The more that bubble inflates, the more difficult it will be for us later," said Ranilović.

As some good news, he cited the growth in the number of construction land transactions, which last year was 19.6 thousand, considering that this also assumes future business activity.

The adviser to the president of HGK, Josip Zaher, said that the goal of the profession is for the market to move within as realistic a framework as possible, in order to mitigate the consequences of a possible slowdown and to avoid a repeat of the 2008 crisis. He pointed out that as a result of the present inflation, the prices of construction materials and labor have also increased, so the prices of real estate have also increased significantly.

He reported that in 2021, around 135,000 transactions, worth more than HRK 60 billion, were realised on the real estate market.

State Secretary in the Ministry of Economy and Sustainable Development Nataša Mikuš Žigman pointed out that last year's value of real estate transactions accounted for 14 percent of GDP, which testifies to how "vibrant and alive" the real estate market is.

Housing affordability is a growing problem

Member of the council of the Real Estate Business Association HGK and owner of the Zagreb West agency Lana Mihaljinac Knežević stated that, in case of continuation of the current macroeconomic trends, in the next year "price stabilisation can definitely be expected".

Concerning new builds, considering that the offer is not sufficient, there should not be any major changes, while for old buildings, especially in Zagreb and on the coast, owners are expected to change their expectations and lower the asking prices, Mihaljinac Knežević pointed out.

She said that the affordability of housing in Croatia is becoming an increasing problem, and therefore a systematic strategy is needed, and there have been announcements of such projects in Zagreb.

Agricultural land is the most traded real estate product, and further growth of such transactions is expected because the moratorium on the purchase of agricultural land by EU citizens ends next year, said Mihaljinac Knežević.

For more, make sure to check out our dedicated Lifestyle section.

ZAGREB, 11 Nov, 2021 - The average monthly housing loan installment for people who took out the loan between November 2020 and June 2021 ranges from 41 to 44% of their monthly income, according to a Croatian National Bank survey, Večernji List daily said on Thursday.

Housing loans total HRK 67 billion, up by over 10% year on year.

The high demand for real estate is accompanied by a constant rise in prices, which are up by six to seven percent. At this rate, the price of a square metre of a flat could double in ten years' time.

"Croatia is a country with too many motives for the high demand for properties, from the tax treatment, tourism and low interest rates to the moving of the capital of the extra rich from banks, the APN (Croatian Real Estate Agency), the fact that some indeed need a place to live, that some buy properties in companies' names to pay less taxes, and the presence of foreigners," Maruška Vizek of the Zagreb Institute of Economics told the daily.

"The market can't offer enough properties for so many motives for there to be a drop in prices. The only solution is an adequate tax treatment, which won't happen," she added.

The central bank is worried about potential risks and that the crisis might spill over to the banking sector. Governor Boris Vujčić said recently the prices of housing properties were increasing more than incomes but not construction costs. All of that increases the risks of their corrections in future.

Most of the new housing loans (28% of the principal) are paid out with debt-to-income ratios of 30 to 40%. For another 26% of debtors, the ratio is 40 to 50%. For as much as 23% of the new housing loans, the monthly payment is more than half the debtor's income, Večernji List said.

For more on lifestyle, follow TCN's dedicated page.

For more about Croatia, CLICK HERE.

June 5, 2021 – The Croatian real estate market is very interesting and full of good investment opportunities. Many potential buyers were expecting prices to go down significantly during 2021, but is this really happening? A look at real estate in Croatia. 

Croatian economy has been going through turmoil in the last year. While the pandemic is wreaking havoc on the travel and tourism industry, devastating earthquakes in Zagreb and Central Croatia caused even more problems and shifts in the local economy. Incredibly, the traditionally volatile real estate market in the country doesn’t seem to be going through a serious disruption, at least when it comes to prices.

Zagreb, the country’s largest city, is experiencing a turbulent period. The real estate market of the city has been rattled both literally and figuratively by a series of earthquakes. The damage from the earthquakes exposed a poor state of many buildings within the city’s centre. At the same time, much of the Croatian coast has had a rise in property prices due to the region becoming a global travel hotspot in the last 5-10 years. Many of the most attractive areas like Dubrovnik or Split centres seem overpriced to anyone looking to buy. With all this in mind, it would seem logical the crisis Croatia is facing at the moment would force the prices to drop. Still, according to an article by Dnevnik.hr, the prices generally seem to be stable or are even rising.

Regional Differences

The real estate situation in Zagreb is dynamic. The aftermath of the earthquakes left many searching exclusively for new buildings outside of the city centre. Consequently, there is a rise in prices for such properties. At the same time, there is a drop in prices for some centrally located apartments, but the buyers are rare, especially in buildings that are awaiting renovation. On the coast, Dubrovnik, the country’s most expensive real estate market, is seeing a drop in sales. Reduced demand doesn’t seem to be having a direct impact on the average price. It seems most property owners believe in a quick recuperation of this popular travel hotspot. This is also true for the rest of the popular Dalmatian areas. In Istria, the market seems stable and attracts plenty of foreign buyers, especially from Slovenia, Italy, and Austria. Around half of the properties sold in Istria are bought by foreigners.

For more, follow our dedicated business section.