August the 24th, 2023 – The Croatian Government has recently announced plans to construct more new buildings which will be apparently made available to rent in a more affordable and realistic way. Lana Mihaljinac Knežević, an expert, has revealed more about the situation on the property market.
As Poslovni Dnevnik writes, despite continually high prices, new builds across Croatia remain in great demand, with more brand new square metres being snapped up before the concrete is even laid. Lana Mihaljinac Knežević from the Croatian Chamber of Commerce (HGK) recently explained more on this topic to HTV Dnevnik.
“New builds are still in high demand across the City of Zagreb due to the earthquake back in March 2020, and buying these new properties represents a far better investment than purchasing used real estate,” she began, adding that there are several reasons for investing in property, and one of them is ongoing inflation, the wish to preserve the value of the money pumped in and Eurozone accession.
Older, used buildings are less desirable in Zagreb
The price of older buildings is also increasing because there is no publicly available source of realised prices.
“People are comparing new construction projects near existing buildings with the requested prices on real estate search engines,” said Lana Mihaljinac Knežević, adding that APN led people to purchase overpriced properties, but also that this trend is changing because there’s been a general decline in transactions.
“We’ve been seeing a greater divergence between the requested and realised property prices. New construction will probably continue to fetch higher prices,” said Lana Mihaljinac Knežević.
The coast still brings the big bucks
The most expensive properties are of course located down on the coast, every fourth buyer is a foreigner, but inflation has taken its toll on them as well. Lana Mihaljinac Knežević said that the market on the Croatian coast is under the economic influence of the real estate market of the countries from which foreign buyers originate.
“Last year, most buyers came from Germany, we know that the economic situation and the situation on the real estate market is rapidly changing there, so we have to wait for the numbers to come in and see what will happen this year. The coast is also attractive to foreigners in the sense of them purchasing investment properties to rent out to tourists,” she explained.
Lana Mihaljinac Knežević said that the real estate market will begin to eventually slow down as people become more aware of how much money they actually have. “I’m afraid that this year there are fewer and fewer people who can afford unrealistically valued properties,” she added.
What about apartment rental costs?
She pointed out that subsidising rent wasn’t supposed to be a form of creating housing affordability.
“In this country, property is highly valued, it’s considered to be a status symbol and a form of investment. Young people only rent property because they can’t afford to buy it. The lack of supply also prevails in the rental market, and the primary reason for this is tourism,” said Lana Mihaljinac Knežević, adding that a person who plans to buy real estate must very carefully analyse their entire financial situation and inquire about the terms of the loan they ask for.
High prices haven’t dampened interest levels
Real estate prices also rose during the summer, analysis shows. On the market, however, there is a big difference in the prices of properties being sold in Croatian cities, and the range is from 1,350 to an utterly astounding 10,000 euros per square metre. The most expensive of all can be found in Opatija, Dubrovnik, Split, and the City of Zagreb.
Demand is high because almost every fourth property in Croatia is currently being bought by a foreigner. A good tourist season favours the increase in the price of property in general
“People have the chance to earn a lot of income through tourism, they’re taxed on it only lightly, so their profits from these activities are also very high. They have their own funds and very often invest in their properties, which, along with inflation, protects the value of their money,” said Lana Mihaljinac Knežević.
Possible price stagnation?
Across much of the rest of Europe, including in Germany, property prices began to fall recently due to rising interest rates. Here in the Republic of Croatia, according to analysts, price stagnation is now very possible.
“My opinion is that the prices will remain as they are now and that there shouldn’t be any major jumps, there may possibly even be a small downward correction,” said Darko Radelja, a Croatian real estate broker.
