Hrvatski
English
The property market entered a new cycle at the end of 2023. Lack of stock is an ongoing and ever-present issue. Inflation, which had stimulated buyers in the previous two years to invest in property, as a hedge against the loss of money value, began to dampen their purchasing power in 2023. The increase in interest rates on loans and the introduction of the euro also impacted buyers, the former as a deterrent, and the latter as a stimulus. The government discontinued the Affordable Housing Program (APN), which had been pushing creditworthy buyers to purchase overpriced properties for years. It was a seasonal measure introduced to a market with insufficient supply, contributing property price increases.
The number of property transactions in 2023, compared to 2022, decreased by 9% nationally, and 22% in the city of Zagreb. Unlike many other countries, in Croatia, it is customary for transactions to decline first during market cycle changes, followed by potential price adjustments. Although average property prices continued to rise, it was at a slower pace than in previous years, with an average gap of up to 15% between asking and transactional prices.
In the new-build segment, no price declines are expected, but the absorption of projects at prices currently set by developers will depend on the economic situation at the time of their completion. In the used property segment, many owners need to adjust their asking prices if they intend to sell, as the pool of buyers willing or able to pay for expensive properties has diminished.
Tourism and the focus on tourist activities increasingly negatively impacts the real estate market. In the sales segment, this contributes to price increases, especially on the coast, where a high percentage of foreign buyers, with higher purchasing power than the local population, are gradually displacing it. In the rental segment, the issue of an increasing number of properties converting into apartments for short-term rent, creates significant disorder and demographic problems, primarily on the coast, where young families, students, or those who cannot afford to buy real estate can hardly find properties for long-term rent.
Tax reform that does not overly favor tourist rentals, the introduction of quotas, and, most importantly, investments into infrastructure and various amenities outside of major tourist centers are needed, so that all mentioned groups can start settling on those locations.
A housing policy is desperately needed. Due to all the factors described above, unaffordability is becoming an increasing challenge for a growing number of citizens. The supply of properties at least at average, let alone affordable prices, decreased in 2023, and this trend is expected to continue in 2024. However, a housing policy is in the preparation phase, and there are no programs in place to help citizens address housing issues. Unfortunately, it is expected that the problem of unaffordability will not be resolved in the coming year.
For further comments and predictions from Lana Mihaljinac Knežević and her colleagues, please click here.