Boro Vujović, a real estate expert, recalls that housing prices were at today's level about 15 years ago, around 2008, while interest rates were much higher and salaries 30-40 percent lower, so one can now earn much more for the same money. "Gdje si bio – nigdje, što si radio – ništa!" This is what all the savings on interest rates for housing loans in the last decade can be summed up to, when placed in the context of the skyrocketing rise in housing prices. Interest rates on housing loans in that period have rapidly fallen: from around five to six percent to an average of 2.5 percent last year. For someone who took out the loan ten years ago, the borrower pays the bank almost 50,000 euros less in total. However, since the price of square meters has skyrocketed in the meantime, for the same amount taken out today in Zagreb, one can buy about 20 square meters less. Exactly the same amount that savings on interest would bring if they were somehow available from the start. Za 80.000 vratiš 160.000 According to a calculation by Sberbank, a housing loan of 80,000 euros that was taken out in 2011 with a 6.30% interest rate had an annuity of 530.21 euros. In the end, the borrower would return 159,063 euros to the bank. If that same loan was taken out last year, the borrower would pay 373.16 euros a month and return 111,948 euros in the end. The difference is huge – 47,115 euros. The discrepancy between interest rates is slightly lower in OTP, where the interest rate in 2011 was 5.63%, the annuity was 498 euros, and the client would pay a total of 149,608 euros, while last year, with an interest rate of 2.59%, the client would pay 363 euros a month and return 108,924 euros to the bank. The savings would be 40,684 euros. How long the repayment period is, the less profitable and more expensive it makes the loan, can be seen from a calculation by RBA. Someone who took out the same loan at a 30-year repayment period ten years ago would pay 492.57 euros a month with an interest rate of 6.25%, and would return 147,771 euros in total. Last year, with an interest rate of 2.5% fixed for five years and then variable, the borrower would pay 358.89 euros a month and return 131,192 euros in the end. The savings would be 15,579 euros, three times less than for the Sberbank loan taken out at a 25-year repayment period. At the same time, the price of housing square meters is rising. For the 80,000 euros before 10 years ago in Zagreb, it was possible to buy a flat of 57 square meters at a price of about 1400 euros per square meter. Today, the average price is about 2200 euros per square meter, and for this amount one can buy 36 square meters. The difference is 21 square meters, exactly the amount that can be bought with the savings of about 47,000 euros from the more favorable repayment due to the fall in interest rates. This means that the rise in housing prices has actually wiped out everything and we are back to the same point. In numerous other Croatian cities, housing prices have also risen, and perhaps not in absolute terms, but proportionally following this calculation. Boro Vujović, an expert in real estate, reminds us that housing prices were around today's levels 15 years ago, around 2008, while interest rates were much higher and salaries 30-40 percent lower, so one can now earn much more for the same money. – I have clients who bought a flat in 2008 and have since invested in it, and today they will sell it for a higher price, but today the interest rates are around 2.5%, while back then they were five, six, and seven percent – he explains. He says that housing prices have been falling from 2009 to 2015, and then stabilization followed. The lowest were in 2013 when the average price of square meters in Zagreb was around 1400 to 1500 euros. Today it's about 2200 euros. And what will happen to housing prices? Will they increase further due to the adoption of the euro? Or will the bubble burst due to the standard drop due to inflation and the consequences of the pandemic? The adoption of the euro should not have an impact since we already account for everything in euros. However, recently prof. Tica had a good analysis related to Schengen. This change could lead to increased interest among buyers, especially in parts bordering Slovenia and Hungary. Istria, Kvarner and Gorski Kotar will also gain in importance – says Vujović, referring to foreigners who buy real estate in Croatia. He says that about 50% of his agency's clients buy a loan, while those who have savings and decide to invest in real estate usually pay in cash. When it comes to the bubble that could burst due to the standard drop, they are not included in this calculation. – These are people who are not forced to sell their properties. If they bought something in 2009, for example, prices have fallen by 30-35%, sometimes even 50%, and have since returned. They have not lost anything. But where could there be a problem? There, where one bought on loan, and the consumer basket is more expensive, so there's less for the mortgage rate. However, based on past practice, people first pay the mortgage rate and then think about what to eat – comments the real estate expert. In the previous crisis, we had a double problem, says he – a global shortage of money and credit problems in Switzerland for which mortgage rates skyrocketed, while many others lost their jobs. Today, we don't have that factor. Stabilization of the market Inflation could raise costs, demand could fall. A significant factor is the increase in interest rates announced, which would decrease the outflow from savings and thus decrease demand, as well as reduce borrowing capacity. These are not reasons for a "bubble", but for slowing down the market and stabilization. Currently, everything is sold on the market, what's available, I wouldn't say entirely uninfluenced by price, but almost – says Vujović, explaining that investment in real estate is expressed in our country and that the capital market is poorly developed, also with, he says, the example of bitcoin and other virtual currencies, which have shown instability and which account for about 30% of all transactions, and on the coast even 60-70% of transactions. For them, our real estate is cheap: Germans, Austrians, even Slovenians. And due to the coronavirus pandemic, self-drive tours have gained importance, making Croatia an attractive market for foreigners. Source: vecernji.hr

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