August the 18th, 2023 – Croatian property prices are a subject on many lips, but why haven’t they fallen yet? One expert weighs in.
As Poslovni Dnevnik writes, Croatian property prices continued to rise over the first three months of this year. Apartments and houses are more expensive on average by 2 percent compared to what they were on sale for back at the end of 2022, and by as much as 14 percent more expensive on an annual basis. This particular trend is different only in the City of Zagreb, where at the beginning of this year, property prices fell by a negligible 0.3 percent. That said, Croatian property prices have experienced the biggest jump when it comes to price per square metre in the entire EU.
There additional factors contributing to Croatian property prices
Lana Mihaljinac Knežević, the president of the professional group of real estate brokers of the Zagreb Chamber of Commerce, told HRT that the cycle the real estate market is going through is altering and will soon veer off in a rather different direction. She also explained that in addition to other factors across Croatia, numerous things have contributed to the current Croatian property prices.
“The situation along the coast contributes to the average increase in prices at the national level, and especially in those more coastal areas,” she added, explaining that property located down on the coast was bought in large numbers by foreigners who see it as an investment rather than a home in which to actually live.
“The averages don’t reveal enough about the actual market, so we need to observe it all segmented according to the regions of Croatia”, Mihaljinac Knežević continue, before pointing out that prices in continental Croatia are lower than they are in the City of Zagreb and in most places down by the coast.
“The average prices aren’t the highest in Zagreb, those really high ones refer primarily to properties down on the coast where foreigners have a strong influence as an increasing amount of purchases are made by them,” she said.
Supply issues
She also explained that the lack of supply of adequate apartments is one of the reasons for the rise in prices on the real estate market.
“There has been a chronic lack of new buildings in Croatia for years now, not only affordable ones but even those selling at very average prices,” she added, citing the lack of construction land in the most sought-after locations in city centres or close to tram zones as another pressing problem.
“Because of this, there’s been marginal construction going on in Zagreb, but there are also not enough large projects to meet the needs of the market as it is,” she explained.
Problems faced by the young and the property ladder
Mihaljinac Knežević stated that the inability of young people to afford a typically very average apartment is becoming a pressing problem all over the Republic of Croatia.
“Unfortunately, we don’t have a housing policy, but even on markets where such policies have existed for a whole century, for example in Austria, there are still big problems and young people find it very difficult to get on the property ladder at all. Here in Croatia, it is becoming truly unattainable for many people. One of the reasons is our excessive focus on tourism as an economic activity. That’s why young people, especially those living on the coast, can not only not purchase property, but they can’t even rent it because properties intended for long-term rent barely even exists there. Whereas in the City of Zagreb, there’s a distinct lack of offers in all segments, both for purchase and for rent,” she added.
The creation of a proper housing and tax policy
Mihaljinac Knežević pointed out that the state should create a housing policy and a tax policy that would properly stimulate the property market and lead to affordable or average housing options.
“The state shouldn’t be building more apartments, this has proven to be inefficient. Housing care for the population is the sole concern of local self-government units,” she added, noting that she personally does not see that a significant drop in Croatian property prices occurring anytime soon.
“I don’t Croatian property prices dropping with all of this new construction because the prices are set in relation to the market situation at the time of construction and as such, they come with certain costs. In the segment of properties which aren’t new, there also isn’t enough supply. This is especially the case with those apartments that would meet the needs of a modern buyer and that are being correctly evaluated. In the segment of older properties, it would be good for the owners to revise their expectations in view of the different macroeconomic environment,” she concluded.
