As the pandemic subsides, Nada Burum, vice president of the Professional Group of Realtors in the Dubrovnik County Chamber of Commerce, comments on how the past and current crises impacted the real estate market in the Dubrovnik area, reports Dubrovacki Vjesnik.
During the pandemic, prices rose further to slow trade, which is happening now because of the war in Ukraine. Partially disabled business raises the cost of food, energy, building materials, transportation of goods, and real estate prices. The pandemic period was marked by rising prices in construction, which affected the growth of residential squares, especially new construction.
Inflation is rising. At the same time, foreigners are investing heavily in real estate in the Dubrovnik area. Asking prices can be outside the real range, but ultimately the market is affected by the law of supply and demand. Dubrovnik is a small city, a pearl, and it is not unusual for some luxury properties to have a high and unrealistic price. Dubrovnik is among the most desirable cities in Croatia, and for the last twenty years, it is, therefore, one of the most expensive cities.
Will the weakening purchasing power of citizens hurt the real estate market? Is there a decline in traffic or vice versa?
As a rule, customers who have a surplus of funds benefit from changes in the market. Negative interest rates in the banking sector have recently contributed to this, among other factors. Real estate is a desirable form of investing and preserving the value of money. Therefore, interest in buying real estate in Dubrovnik and Zagreb has increased. Indicators of the increased demand of citizens for real estate purchases may be the need to resolve the housing issue due to uncertainty about future prices and interest rates when obtaining a loan.
What about the prices of residential square meters? The Covid crisis did not significantly impact prices; they even grew. Have they recently been corrected for more since we are witnessing price increases for almost everything?
The rise in prices for construction materials caused a big jump in the price of residential square meters in new construction in a short time. We recorded in the office in Dubrovnik at the end of 2021 and the beginning of 2022, i.e., in a very short period, an increase in prices of apartments in new construction between ten and fifteen percent. This is a reflection of market instability.
What are the prices in Gruž, Grad, and Lapad?
Gruz ranges from about 3,000 to 3,800 euros per square meter, and the price can be higher for better apartments. Lapad ranges from about 3,500 to now 5,000 euros per sqm, and exceptionally in Lapad, there are properties around 7,000 euros per sqm due to certain higher parameters. The city and Ploče range between 5,000 – 8,000 euros per sqm, but much more if it is a luxury property. Suburban locations are priced lower. Despite the stated prices, apartments with a sea view, especially if there are few of them on the market, are selling quickly.
In the Dubrovnik area, buying a property is more often seen as a good investment for tourist purposes that will pay off over time. But, since tourism has suffered for the last two years, have tourism-related real estate purchases dropped?
Slight caution was felt at the start of the pandemic, with properties used exclusively for tourism purposes. But it was at that time, some investors reacted and then bought real estate within the city center. With the return of optimism in the tourism sector, interest in investing in real estate of this type has increased.
What about the supply, is there any growth in that? The economic crisis may have forced some to sell apartments, holiday homes, flats …
I am very pleased to say that our citizens were not forced to sell their property during the pandemic. I am a little emotional here when it comes to Dubrovnik, and in general, it is not easy to hear that someone is in crisis, so they will sell their property below its value. Even though I do real estate, I am always for a realistic market price.
What is the interest of foreign buyers and investors in real estate on the coast, which, realistically, has always been attractive to foreigners, especially in the Dubrovnik area? Is the Croatian coast still in their focus?
Foreigners are particularly interested in our sea, the coast, luxury real estate, the realization of such sales is more and more. They appear as larger investors who would develop projects and buyers who recognize Dubrovnik as a “second home.” Investments in the market are needed; it is nice that Croatia is a desirable country and that foreign citizens often find a new home in Croatia. At the same time, it would be desirable to make every effort to ensure that our young people do not leave Croatia due to a lack of prospects in their country or due to the high price of apartments that they cannot afford working in Croatia. Let us hope for change for the benefit of our young people.
Through UTD Ragusa, the city of Dubrovnik became the owner of thousands of square meters of attractive space in Gruž, the former TUP plant, but also in Komolac. How do you comment on this move?.
The City of Dubrovnik has made an excellent move by purchasing this property, i.e., acquiring ownership of 9,800 m2 of land at the strategic location of the former TUP in Gruž, including 14,000 square meters in Komolac. It is a move that represents an excellent perspective for the City by contributing added value and benefiting the citizens. The assets are estimated at 18.6m euros. Through legal and in-depth analysis, the City excluded the risks of the subject of the purchase and concluded the justification for purchasing the joint-stock company. The price of about 10 million euros is realistic. This is a good job for the City of Dubrovnik. The position of the former TUP in Gruž has a high potential for the development of various content, commercial, public, and especially returns through multiple forms of the lease, depending on the strategic projection that the buyer will choose to return and improve the investment.
Several parameters determine the value of the land. One of the most important is calculating or projecting the yield that the property will bring once the project comes to life.
Real estate prices are rising despite changing economic trends. With this project, the city will significantly contribute to the future development of Gruž. Dubrovnik deserves to be enriched with harmonious buildings and preserve the City’s identity.
The TUP area is unique, with excellent connections to the Port of Gruž. Therefore, it is a position that offers a lot of opportunities. In the real estate business, we have been monitoring the value of the particular real estate in Gruž in recent years, especially in the lower part of Gruž, a beautiful pedestrian zone. Their value will continue to grow because there is less supply than demand.
Buying a large building plot is a long-term investment. Some serious investors were interested in buying TUP property and saw a profitable investment in such a desirable location at the western entrance to Dubrovnik.
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