According to the latest data from the Croatian National Bank, the movement of the house price index for the last quarter of last year is rounded to whole numbers for the entire previous year, thus confirming its rise for the third year in a row, as highlighted in RBA Research analysis. In the last quarter of last year, the house price index recorded a 1.1% rise compared to the previous quarter, while the annual rate of growth was 4.7%. The growth of house prices was supported by higher prices of new and existing housing units. More pronounced growth rates in the fourth quarter of last year contributed to the overall growth of house prices on an annual basis. As stated in the analysis, after a modest rise in 2016 and 2017 (0.9% and 3.8% respectively), house prices recorded an average annual growth of 6.1% last year. The stated annual growth rate is the highest since 2007, when the annual growth rate was 13.9%. The annual growth was supported by higher prices of new and existing units (3.6% and 6.6% respectively). The growth of house prices, as observed on average, was recorded in the City of Zagreb (10.8%), Jadran (5.4%), and in other areas (0.6%). The rate of growth of house prices in Zagreb has been the highest since 2007. The acceleration of growth rates last year in Croatia saw house prices rise on average by higher rates than in the EU (4.4% annually). Similarly, as stated by RBA analysts, observing the environment, it can be seen that only in Italy did a continuation of the decline in house prices record for the seventh year in a row (-0.6%), while all other countries continue to record stronger growth relative to Croatia. For example, an 8.6% increase was recorded in the Czech Republic, 9.7% in Hungary, 15.1% in Slovenia, and 7.4% in Slovakia. Considering that in the Czech Republic and Hungary the price of housing began to rise earlier (annual growth rates have been present since 2014.), and that a noticeable rise was recorded relative to 2008, they are now at higher levels. In Slovakia, the rise began as early as 2013, but taking into account the relatively strong decline in 2009 (-12.7% annually), and gentler annual growth rates in recent years, the level of 2008 was only surpassed in 2018 (plus 5%). Despite the annual growth rates over the past four years which have intensified with each new year, house prices in Slovenia are at approximately 0.7% lower levels in relation to 2008. When analyzing the movement of house prices, it is essential to note that the real estate market remains highly segmented. Despite cumulative indicators of price on the market, houses remain high-differentiated (significant differences are observed on individual micro-locations). As stated in the analysis, houses in attractive locations, and of high quality construction, are generally not under significant influence of changes on the market (when average house prices recorded such houses, these did not record significant price adjustments to lower levels, mostly stagnating or recording gentler growth). "Despite the growth of house prices in 2018, they are still at around 10% lower levels in relation to 2008. However, the rise in house prices for the third year in a row may be a good indicator suggesting the beginning of recovery in this sector (with positive growth rates, physical indicators in the construction sector are also observed, the number of issued building permits and the volume index of construction works). Considering that a continuation of economic growth is expected with positive impacts on the labor market, we can expect a continuation of house price growth. However, a more pronounced growth of house prices or demand for housing units may be limited by the existing aversion to risk associated with long-term indebtedness (uncertainty about the repayment of liabilities)" emphasize RBA analysts. In comparison to the previous quarter, new housing unit prices continued to grow, the second quarter in a row (0.7%), as well as existing housing units, which recorded a 1.2% rise. On an annual basis, relative to the same quarter in 2017, both new and existing housing units continued with positive annual growth rates (2.8% and 5% respectively, with existing housing units maintaining a positive trend over the past 13 quarters, and new ones seven). A notable rise on an annual basis was recorded in the City of Zagreb (8.5%), and Jadran (4.4%), while in the rest of Croatia a decline was recorded (-0.3%). source: novac.jutarnji.hr

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