Tourist season hasn't even begun and the negative consequences of the coronavirus epidemic are already making their presence felt.

The coronavirus epidemic seems likely to have severe consequences on the global economy. Economic experts say that a recession is inevitable. The question is only how strong the blow will be or if it will be mild. Many countries, including Germany, are introducing measures to reduce the damage and hope that it won't be another 2008 repeat.

One of the sectors that will be most affected was the real estate market, which, in Croatia, has been experiencing a revival in recent years. The demand for apartments is high, and prices are constantly rising, with builders constructing new buildings at full capacity. The cost of a square meter in Croatia increased on average by 10% last year, which has placed our country third in Europe in terms of real estate price growth. The most expensive squares are in Dubrovnik, Split, and Zagreb. The state subsidies have significantly contributed to the large demand, and a new round of APN competitions is due at the end of March.

However, the coronavirus and the new economic crisis could all be disrupted by the epidemic. The virus that first hit one of the world's largest economies, China, is now having a negative impact on the global tourism. And in our country, tourist arrangements, conferences, weekend getaways, concerts, and other events are being canceled. If this situation continues for a longer period, there will be a smaller income from tourism, which Croatia depends on, the income of those dealing with tourism will be lower, the consumption and investments will be smaller, which in turn will affect the real estate market.

The positive side of the coronavirus

Boro Vujović, the owner of the Opereta real estate agency and the vice-president of the Croatia Chamber of Commerce's real estate business association, said in a conversation with us that the impact of the coronavirus on the real estate market could be unexpected.

"It all depends on how long the epidemic lasts. We can't know if this will be a prologue to 2008. If it's not long-lasting, we will feel the effects, but it won't be disastrous. However, it's already looking like we will have fewer tourists, less money, and fewer buyers. But I don't think it's necessarily bad, it will help stabilize the real estate market situation, that prices won't rise so fast. The coronavirus could be a corrective factor and bring normalization to the real estate market," thinks Vujović.

However, changes are already happening on the Adriatic, where buyers are giving up on real estate.

"Hey, just now some colleagues called me and said they had canceled viewings by foreign buyers who said they couldn't come to Croatia. They're postponing their potential purchases until the coronavirus situation is stabilized," said Vujović.

According to Vujović, the average price of a square meter in Zagreb is 2000 euros, while new buildings or apartments in attractive locations can cost up to 3000-4000 euros per square meter.

However, if the crisis deepens and affects the main tourist season, there could soon be more apartments available on the market, especially in Zagreb.

In the metropolis, many owners of apartments decided to opt for daily rentals and sublet their apartments to tourists. They could face significant problems due to the pandemic. According to Alen Čalopek, the president of the Zagreb Family Tourism Association, due to the outbreak, the booking in two days has dropped by up to 70%!

Bookings in Zagreb fall by 70%!

"Every day, bookings are falling. Just the other day, we had cancellations from Asia, including China and South Korea, and recently we have also seen local cancellations because many events have been canceled, followed by cancellations of accommodation bookings. Locals are also canceling, as they often combined their trips with Italy. Over the past two days, we have recorded a 70% drop in bookings," said Čalopek.

If the crisis with the coronavirus continues, the consequences for Zagreb's hosts could be catastrophic.

"The main season has barely started, and it's still. Our fall in bookings is already a significant one," emphasizes Čalopek.

In Zagreb, there are 2500 licensed hosts, while the city has a total of 7500 beds in private accommodation.

According to Čalopek, if the crisis with the coronavirus continues, many will switch back to monthly or long-term rentals, and some might even decide to sell their apartments.

In the Zagreb Tourist Board, they point out that in February, the number of visitors was six percent lower (56,795) and the number of overnight stays was one percent lower (115,956) compared to the same period last year.

Smaller number of visitors and overnight stays

The largest decrease in February was seen in tourists from China, South Korea, other Asian countries, and the United States. The largest number of arrivals came from Serbia, Bosnia and Herzegovina, Germany, Italy, and Slovenia, and the largest number of overnight stays came from Italy, Serbia, Germany, Bosnia and Herzegovina, and the United States," replied the Zagreb Tourist Board.

However, in the first two months of 2020, the metropolis had a positive tourist season thanks to an excellent January, in which records were broken with 61,509 arrivals and 132,180 overnight stays, an increase of 10 percent compared to January 2019.

In the Zagreb Tourist Board, they are following the situation related to the spread of the coronavirus, but it is difficult to predict how much damage will be done. They expect that the negative consequences will first be seen in the first and second quarters of tourism.

Although already now the tourism sector is facing significant losses, there are no calls for panic, and measures are being prepared. The Minister of Tourism, Gari Capelli, announced on Thursday that he will publish his decisions and criteria on how to proceed next week.

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