Guests on Today's show were Borislav Vujović (HGK) and Velibor Mačkić (EFZG) who discussed the state of the real estate market in Croatia.

Velibor Mačkić explained the real estate bubble at the beginning. "A real estate bubble is a periodic fluctuation on the market that occurs in this case on the real estate market. What differentiates this bubble from those on the capital and stock markets is the fact that it appears less often due to a lack of liquidity. However, once it appears, it lasts longer and when it bursts, its effects on economic aggregates are much more pronounced, as it affects a wider circle of people."

"The question is also how we observe the market - regionally it is evident that we can see a real estate bubble on the coast, in Zagreb... Certainly, prices are rising a lot more than what other macroeconomic aggregates could support. That is actually the first indicator that there is a bubble. If speculative investments appear, you have more demand than supply and the 'herd effect' which was a big indicator during the first crisis."

Borislav Vujović commented on the demand on the market. "The fact is that the market is really very lively, even unexpectedly lively, and prices are such as in 2016, for example, we couldn't predict at all. That year was the last year of the crisis when stabilization occurred and nothing indicated what happened over the past three years, except for subsidies, for which we predicted they would be one of the triggers for price growth." "What is actually happening on the market is that people buy, maybe they don't think too much, but there is a large number of buyers. The demand is much greater than the supply at this moment." Regarding claims that have been heard in the media that every sixth apartment is being sold, he pointed out: "It is difficult to say exactly, but in any case, there are apartments that are not being sold and are on the market because prices are unrealistic. We need to take into account that even in Zagreb it's not the same situation everywhere - there are very popular areas, and there are also those where it is still not easy to sell a large apartment and the question is what price."

60% of apartment buyers pay in cash

He added that the situation is due to many factors significantly different from the situation in 2009, and therefore he would not talk about a real estate bubble. "I wouldn't talk about a bubble because it immediately creates an association of bursting and takes people back to 2009 when there was a total crisis. The fact is that prices are rising and there were more factors at that time. We do not expect a bubble in the sense of bursting and everything falling for 30% as it was during the last crisis." "In 2009, there was a global crisis, we had high unemployment, the 'Swiss franc' case, which was a significant deterrent for people. Back then, customers were getting mortgage loans for up to 120% of the apartment's price. Today, nothing like that is happening." "Today, more than 60% of buyers are cash buyers," Vujović said, adding that "those who take out loans are borrowing maybe up to 60% of the purchase price. There is no risk of a 'Swiss franc' at the moment." "At the time, 2009, the problem was that people who did not have to pay back mortgage loans were forced to sell the apartment. Today, people who bought for cash do not have to sell the apartment. They see it as a form of savings and investment because it is known that Croats save in real estate."

Subsidies are actually measures for the wealthy, they did not succeed in keeping young people in Croatia

Regarding subsidies, Vujović said: "The subsidies are not the only solution. As long as the interest rate on savings is effectively negative and the interest rate on mortgages is at these levels, it is automatically positive for the real estate market, which leads to sales and price growth. The subsidies were a good idea, but unfortunately, they did not work out well in practice." "First, the subsidies do not target the intended group, for example, young people, especially those from outside Zagreb, who are emigrating. So, we did not manage to retain them with this measure. Second, the measure is carried out once a year and lasts for a month (next year it will be two times)." He added that some people had prepared for the subsidized loans, but a large number of buyers had not been prepared. "Some had prepared, and they had already signed pre- mortgage agreements and reserved apartments. But a large number of people thought of it in September when the media campaign started and then they didn't have time to look for an apartment, didn't have time to negotiate. And then we have the situation where in September we had realizations at prices that people believed in or not. And then the psychology is next - if my neighbor got 2,500 euros per square meter, I won't sell below that price." "The problem here is that these measures are for the wealthy. A man buys an apartment for 250,000 euros and takes a subsidy. What are we talking about? Should we have limited the price of the apartment or limited the price per square meter, distributed it equally across counties, so that each county would have a certain budget."

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