Real Estate Market in the Republic of Croatia, Particularly in Zagreb, Sparks Increasing Interest and Concern Among Citizens

Rise in Real Estate Prices The prices of real estate in the last two years have increased by approximately 30%. The globally present inflation has significantly reflected on our sector, leading to a record rise in the selling prices of real estate, including rental prices. In addition, the entry into the Schengen zone, the introduction of the euro, the war in Ukraine, a large influx of foreign workers, historically low interest rates, and a lack of housing funds have significantly contributed to this dynamic rise in prices. Generally speaking, looking at the current situation, demand is significantly higher than supply. Current State The latest analyses show that this year, compared to the previous one, the number of apartment sales in Zagreb decreases by around 23% (10% in the entire RH) which implies a slowdown in the market. For comparison, in the 2007/2008 period, we had 9,000 new apartments annually in Zagreb, and now that number is only 3,000. At the time, banks financed the purchase of land and construction without rigorous checks. Currently, to have an investment come onto the market with financial support from a bank, the owner must have land, their own share of capital, and 20-30% of sold apartments in pre-sales. The fact that renovation is in full swing and that construction companies have significant challenges in finding employees further reduces the availability of new construction on the market. Perspectives for the Future Despite this, the Croatian mentality tends towards ownership of real estate, and most of our apartment buyers in Zagreb come from other parts of Croatia, as owning an apartment in Zagreb is always a good investment. Foreign investors, on the other hand, have experienced a drop of around 10% compared to the same period last year. Given all this, we do not expect a repeat of the 2008 recession scenario that many wish for, but rather that the market will continue to slow down and that the prices of some particularly used real estate will likely be corrected in the coming period. I believe that there is no reason to fear a catastrophic market collapse, but rather that this is an inevitable step we must take on the path to a more orderly and stable market. The situation on the real estate market in the Republic of Croatia is certainly dynamic, with all the challenges and opportunities.

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