Property prices in Croatia continued to rise at the start of this year. Apartments and houses are more expensive on average by 2 percent compared to the end of 2022, and even 14 percent on an annual basis. The trend is different only in Zagreb, where properties decreased slightly by 0.3 percent at the beginning of the year. Croatia had the highest increase in housing prices per “square metre” in the European Union.
Lana Mihaljinac Knežević, the president of the Professional Group of Real Estate Agents at the Zagreb Chamber of Commerce, told HRT that the real estate market cycle is turning and will move in a different direction.
She mentioned that in addition to other factors in Croatia, there were additional factors that contributed to the rise in property prices.
“The situation on the coast contributes to the average price growth at the national level, especially in those areas,” she added.
Mihaljinac Knežević said that many foreigners have been buying properties on the coast as an investment.
“Averages don’t tell enough about the market; we need to observe the market segmented according to the regions of Croatia,” Mihaljinac Knežević explained.
She emphasised that prices in continental Croatia are lower than in Zagreb and on the coast.
“In Zagreb, you don’t have the highest average prices; those are higher on the coast where foreigners have a significant influence due to increasing percentages of purchases,” she said.
Lack of suitable apartment supply
She also explained that a lack of suitable apartment supply is one of the reasons for the price increase in the real estate market.
“In Croatia, there has been a chronic shortage of new construction for years, not only affordable but even those with average prices,” she told HRT.
Mihaljinac Knežević listed another issue as a shortage of building land in the most sought-after locations in urban centres or tram zones.
“That’s why there’s peripheral construction in Zagreb, but there are also not enough sufficiently large projects to meet market needs,” she says.
Youth and property purchasing
Mihaljinac Knežević mentioned that the inability of young people to afford an average apartment is becoming a pressing problem in Croatia.
“Unfortunately, we don’t have any housing policy, unlike markets where it has existed for a century, for example in Austria, Vienna; there are big problems there, and young people find it very difficult to acquire properties. In Croatia, this becomes truly unattainable for many. One of the reasons is our excessive focus on tourism as an economic activity. That’s why young people, especially on the coast, can’t afford to buy property, and they can’t even rent it because long-term rental properties don’t exist in those markets,” she said.
“There’s a lack of supply in all segments, both for purchasing and renting, in Zagreb,” she added.
Creating housing and tax policies
Mihaljinac Knežević highlighted that the government should create housing and tax policies that stimulate affordable or average properties.
“The government shouldn’t build houses; that has proven to be ineffective. Providing housing for the population is the responsibility of local government authorities,” she added.
Mihaljinac Knežević stated that she doesn’t see a significant drop in property prices coming in the market.
“I don’t see prices dropping significantly in new construction because prices are set based on the market situation at the beginning of construction and have certain costs. There are also relatively few of these properties. In the used property segment, there isn’t enough supply either, especially for apartments that would meet the needs of modern buyers and are correctly valued. In the used property segment, it would be good if owners revised their expectations considering the different macroeconomic environment,” she concluded.