“There will be a certain slowdown in the real estate market; prices cannot rise indefinitely in this way,” said Ranilović.

The economy of the EU, including Germany, is slowing down due to the crisis and heading towards recession, interest rates are rising due to inflation, and given that more than a third of real estate buyers in Croatia are foreigners, this will be reflected in the Croatian market in the next year, he assessed.

Ranilović stressed the importance of differentiating the Croatian market, with the coast largely dependent on foreigners, and the rest mainly on Croatian customers.

Regarding foreign buyers, the data of the Tax Administration show that, since last year, there have been a total of 31,361 sales of houses or apartments, 9,491 of which were sold to foreign buyers.

From July 2021 to June 2022, foreigners bought 12,518 residential properties in Croatia, or 36 percent of the total. With 3,501 purchased properties, Germans are in the lead, followed by Slovenians with 3,090. The number of real estate sales to foreigners is constantly growing, and Ranilović pointed out that in some cities in the coastal counties, it exceeds 90 percent.

The phenomenon of “neighbour’s optimism”

When it comes to the overall state, Ranilović pointed out that the requested prices of real estate are growing at significantly higher rates than realised prices, which means that the prices and demands of owners are not realistic everywhere, which especially applies to used real estate. Moreover, the difference between the requested and realised prices is increasing, and according to some estimates, it already reaches close to 15 percent on average while at the beginning of the year, it was only ten percent, pointed out Ranilović. Some call this phenomenon “neighbour’s optimism,” in the sense that it is difficult for someone to give up an amount that they heard someone else achieved, he added.

When it comes to apartments, for example, data from the real estate market for 2021 show that the requested price per square meter for apartments in Croatia was 2,197 euros, and the achieved price was 1,731 euros. At the same time, the average realised price per square meter for apartments in Zagreb was 1,847 euros last year, an 2,047 euros on the coast.

New build leads in prices, where quality properties in good locations are sold quickly, but what is being built is not enough to satisfy needs. On the other hand, used real estate is not up to standard; therefore the existing housing stock, which is generally poor, that is, insufficiently maintained, should be significantly improved, Ranilović said.

“The aim of the profession is for the market to move within as realistic a framework as possible”

He explained that the asking price is the subjective opinion of the owner about the value of the property, so if the market “goes down”, only those who have to sell will first sell at lower prices, while it takes six months to a year for others to correct their prices. “People will have a hard time accepting reality. That’s just the way it is,” asserted Ranilović.

He told the large number of people gathered from the real estate sector at the Westin Hotel, more than 700 of them, that they should be a “real stabiliser of the real estate price market,” and not “flatter the owners” to further encourage price growth and “inflate the bubble.” “The more that bubble inflates, the more difficult it will be for us later,” said Ranilović.

As some good news, he cited the growth in the number of construction land transactions, which last year was 19.6 thousand, considering that this also assumes future business activity.

The adviser to the president of HGK, Josip Zaher, said that the goal of the profession is for the market to move within as realistic a framework as possible, in order to mitigate the consequences of a possible slowdown and to avoid a repeat of the 2008 crisis. He pointed out that as a result of the present inflation, the prices of construction materials and labor have also increased, so the prices of real estate have also increased significantly.

He reported that in 2021, around 135,000 transactions, worth more than HRK 60 billion, were realised on the real estate market.

State Secretary in the Ministry of Economy and Sustainable Development Nataša Mikuš Žigman pointed out that last year’s value of real estate transactions accounted for 14 percent of GDP, which testifies to how “vibrant and alive” the real estate market is.

Housing affordability is a growing problem

Member of the council of the Real Estate Business Association HGK and owner of the Zagreb West agency Lana Mihaljinac Knežević stated that, in case of continuation of the current macroeconomic trends, in the next year “price stabilisation can definitely be expected”.

Concerning new builds, considering that the offer is not sufficient, there should not be any major changes, while for old buildings, especially in Zagreb and on the coast, owners are expected to change their expectations and lower the asking prices, Mihaljinac Knežević pointed out.

She said that the affordability of housing in Croatia is becoming an increasing problem, and therefore a systematic strategy is needed, and there have been announcements of such projects in Zagreb.

Agricultural land is the most traded real estate product, and further growth of such transactions is expected because the moratorium on the purchase of agricultural land by EU citizens ends next year, said Mihaljinac Knežević.

For more, make sure to check out our dedicated Lifestyle section.

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Vulić believes that citizens tend to buy more because of the low-interest rates for savings in banks, so they think it is more worthwhile to invest in real estate.

When asked whether people should wait to buy real estate or not, Vulić answered: “If this situation continues, what you buy for five today, you will buy for six next year.” Considering the prices of square meters of apartments, if you buy an apartment for 3,000 euros per square meter and calculate that you will pay it off through rent, it is logical that owners will keep raising the rent prices.”

He says we cannot know when and how Split real estate prices will settle.

For more, make sure to check out our dedicated Lifestyle section.

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In the euro area, real estate prices rose by 9.8% in Q1 2022, which is the largest increase since 2005, when Eurostat started publishing data. In Q4 2021, the prices went up by 9.4%.

All EU member states, for which data were available, saw a year-on-year increase in prices in Q1 2022, and 17 of them saw a two-digit growth rate.

Real estate prices increased the most in the Czech Republic (+24.7%), followed by Estonia (+21%) and Hungary (+20.6%).

In Croatia, real estate prices went up by 13.5% y-o-y in Q1 2022. In Q4 2021, they increased by 9.1% y-o-y.

The increase in real estate prices was the smallest in Cyprus (+1.1%), followed by Finland (+4.3%) and Italy (+4.6%).

Eurostat did not have the data on Greece.

Acceleration in Croatia

In the period from January to March, price growth in the EU was stable, 2.1%.

In the euro area, it slightly decelerated, from 1.9% in the last three months of 2021, to 1.7% at the beginning of this year.

All members saw a quarterly increase in real estate prices, with Estonia recording the largest increase (+7.1%), followed by Hungary (+6.7%) and Bulgaria (+5.2%).

In Croatia, real estate prices in Q1 2022 rose by 5% from Q4 2021, when they went up by 2.5%.

The smallest quarterly increase in real estate prices was registered on Malta (+0.4%), followed by Cyprus (+0.5%) and Germany (+0.8%).

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Last year, German citizens bought 2,637 properties in Croatia, which is an increase of 1,089 sales or even 70 percent compared to 2020, Austrians made 1,109 purchases (472 more properties or an increase of 74 percent compared to 2020), while Slovenians last year became the owners of 2309 properties in our country, achieving an increase in purchases compared to the previous year by 32 percent or 550 more properties.

“The data do not show the total purchase and sale of real estate in 2020 and 2021, but only the sale of real estate for which the Tax Administration conducted the procedure of determining the tax base. In addition, data on real estate sales are still being updated “, they note in the Tax Administration and suggest that, in the end, the growth in the number of real estate sales made by foreigners with sellers in Croatia could be even higher.

In any case, the registered growth of foreigners’ demand for domestic real estate confirms the recent allegations of entrepreneurs and real estate market experts who told Jutarnji list that the increased interest of foreigners in domestic real estate is one of the reasons for unprecedented growth in new apartment prices in the last quarter of last year.

Namely, according to the Central Bureau of Statistics, the purchase prices of new dwellings in the last quarter of last year were 15 percent higher than the prices realized in the last quarter of 2020: such growth has not been recorded in the last decade. In addition, the average prices of all residential real estate purchases in 2021 were 7.3 percent higher than in 2020.

For more, check out our business section.

In addition to real estate prices, rental properties have also risen sharply, especially expensive properties such as villas and luxury hotels.

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During the pandemic, prices rose further to slow trade, which is happening now because of the war in Ukraine. Partially disabled business raises the cost of food, energy, building materials, transportation of goods, and real estate prices. The pandemic period was marked by rising prices in construction, which affected the growth of residential squares, especially new construction.

Inflation is rising. At the same time, foreigners are investing heavily in real estate in the Dubrovnik area. Asking prices can be outside the real range, but ultimately the market is affected by the law of supply and demand. Dubrovnik is a small city, a pearl, and it is not unusual for some luxury properties to have a high and unrealistic price. Dubrovnik is among the most desirable cities in Croatia, and for the last twenty years, it is, therefore, one of the most expensive cities.

Will the weakening purchasing power of citizens hurt the real estate market? Is there a decline in traffic or vice versa?

As a rule, customers who have a surplus of funds benefit from changes in the market. Negative interest rates in the banking sector have recently contributed to this, among other factors. Real estate is a desirable form of investing and preserving the value of money. Therefore, interest in buying real estate in Dubrovnik and Zagreb has increased. Indicators of the increased demand of citizens for real estate purchases may be the need to resolve the housing issue due to uncertainty about future prices and interest rates when obtaining a loan.

What about the prices of residential square meters? The Covid crisis did not significantly impact prices; they even grew. Have they recently been corrected for more since we are witnessing price increases for almost everything?

The rise in prices for construction materials caused a big jump in the price of residential square meters in new construction in a short time. We recorded in the office in Dubrovnik at the end of 2021 and the beginning of 2022, i.e., in a very short period, an increase in prices of apartments in new construction between ten and fifteen percent. This is a reflection of market instability.

What are the prices in Gruž, Grad, and Lapad?

Gruz ranges from about 3,000 to 3,800 euros per square meter, and the price can be higher for better apartments. Lapad ranges from about 3,500 to now 5,000 euros per sqm, and exceptionally in Lapad, there are properties around 7,000 euros per sqm due to certain higher parameters. The city and Ploče range between 5,000 – 8,000 euros per sqm, but much more if it is a luxury property. Suburban locations are priced lower. Despite the stated prices, apartments with a sea view, especially if there are few of them on the market, are selling quickly.

In the Dubrovnik area, buying a property is more often seen as a good investment for tourist purposes that will pay off over time. But, since tourism has suffered for the last two years, have tourism-related real estate purchases dropped?

Slight caution was felt at the start of the pandemic, with properties used exclusively for tourism purposes. But it was at that time, some investors reacted and then bought real estate within the city center. With the return of optimism in the tourism sector, interest in investing in real estate of this type has increased.

What about the supply, is there any growth in that? The economic crisis may have forced some to sell apartments, holiday homes, flats …

I am very pleased to say that our citizens were not forced to sell their property during the pandemic. I am a little emotional here when it comes to Dubrovnik, and in general, it is not easy to hear that someone is in crisis, so they will sell their property below its value. Even though I do real estate, I am always for a realistic market price.

What is the interest of foreign buyers and investors in real estate on the coast, which, realistically, has always been attractive to foreigners, especially in the Dubrovnik area? Is the Croatian coast still in their focus?

Foreigners are particularly interested in our sea, the coast, luxury real estate, the realization of such sales is more and more. They appear as larger investors who would develop projects and buyers who recognize Dubrovnik as a “second home.” Investments in the market are needed; it is nice that Croatia is a desirable country and that foreign citizens often find a new home in Croatia. At the same time, it would be desirable to make every effort to ensure that our young people do not leave Croatia due to a lack of prospects in their country or due to the high price of apartments that they cannot afford working in Croatia. Let us hope for change for the benefit of our young people.

Through UTD Ragusa, the city of Dubrovnik became the owner of thousands of square meters of attractive space in Gruž, the former TUP plant, but also in Komolac. How do you comment on this move?.

The City of Dubrovnik has made an excellent move by purchasing this property, i.e., acquiring ownership of 9,800 m2 of land at the strategic location of the former TUP in Gruž, including 14,000 square meters in Komolac. It is a move that represents an excellent perspective for the City by contributing added value and benefiting the citizens. The assets are estimated at 18.6m euros. Through legal and in-depth analysis, the City excluded the risks of the subject of the purchase and concluded the justification for purchasing the joint-stock company. The price of about 10 million euros is realistic. This is a good job for the City of Dubrovnik. The position of the former TUP in Gruž has a high potential for the development of various content, commercial, public, and especially returns through multiple forms of the lease, depending on the strategic projection that the buyer will choose to return and improve the investment.

Several parameters determine the value of the land. One of the most important is calculating or projecting the yield that the property will bring once the project comes to life.

Real estate prices are rising despite changing economic trends. With this project, the city will significantly contribute to the future development of Gruž. Dubrovnik deserves to be enriched with harmonious buildings and preserve the City’s identity.

The TUP area is unique, with excellent connections to the Port of Gruž. Therefore, it is a position that offers a lot of opportunities. In the real estate business, we have been monitoring the value of the particular real estate in Gruž in recent years, especially in the lower part of Gruž, a beautiful pedestrian zone. Their value will continue to grow because there is less supply than demand.

Buying a large building plot is a long-term investment. Some serious investors were interested in buying TUP property and saw a profitable investment in such a desirable location at the western entrance to Dubrovnik.

For more, check out our lifestyle section. 

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The largest increase in real estate prices was reported in Q2 2019, when real estate prices rose by 10.4% from Q2 2018.

According to DZS data for Q3 2021, prices of new flats went up 8.5% from Q3 2020, while prices of resale apartments rose by 9.2%.

Broken down by region, real estate prices in Zagreb grew the most, by 9.6% on average, while on the Adriatic coast they went up by 8.9% up, and in other regions by 8.2%.

Compared to Q2 2021, prices of real estate in Q3 2021 went up 1.7%, with prices of new flats going up by 1.3% on average and those of resale flats by 1.8%.

Compared to Q2 2021, prices of real estate In Q3 2021 were 1.3% up in Zagreb, 2.9% up on the Adriatic coast, and 0.4% up in other regions.

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As they explained, the Croatian Real Estate Records project is a project of establishing GIS real estate/property records in order to increase revenues from the collection of utility fees based on aerial surveys and field work. By implementing this project, the actual condition of the areas and the purpose of the facilities is determined, and a fair and transparent collection of utility fees can be achieved. The result of joint work with various cities and municipalities is done digitally and is relatively easily maintained in the form of structured real estate records, which is why more and more local government units across Croatia are asking for help from Prehnit in conducting their own spatial analyses, they point out.

”The completion of the Croatian Real Estate Records project is expected to increase revenues from utility fees for housing and garage space by 20 to 50 percent, which shows the extent to which innovative technological tools, IT solutions and geographic information systems can contribute to much better asset management. As such, we provide insight into the real situation with the help of digital and interactive maps, and we’re primarily focused on local government units and private companies which are seeking to effectively manage their portfolios,” they stated from Prehnit.

The preparation of real estate records for the Municipality of Zminj is one of Prehnit’s most significant ENA projects to date. The main goal was to improve the collection of utility fees at the level of local self-government and offer a proper insight into the real situation through digitised data, and ultimately the Municipality of Zminj achieved an increase in recorded living space and garage space of 50 percent throughout the entire municipality.

“By implementing the Croatian Real Estate Records project, we gained insight into up-to-date data for quality digital asset management. Based on the conducted measurements and insights into the actual state of the data, we’ve qualitatively considered all aspects and obtained a quality basis for making a decision to calculate the collection of utility fees.

The increase in registered space within the project resulted in an increase in earmarked revenues from utility fees for housing and garages of as much as 60 percent, and the value of the entire project was paid off within months of a permanent increase in revenues from utility fees,” said Zeljko Plavcic of the Municipality of Zminj.

Prehnit was founded back in 2009, and in the last few years it has developed into a respectable GIS and IT company that provides support services in digital business transformation through IT solutions based on data science, taking into account the geographical component of that data. It advises clients on how they can create the architecture of the entire system including business processes, data collection, processing and the analysis and automation of business processes through specific IT solutions tailored to user needs through the visualisation of spatial data using an interactive smart digital map.

For more, check out our dedicated business section.

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The ministry’s state secretary, Željko Uhlir, said the residential real estate segment had the largest share in the market in terms of value of transactions, however most transfers were on the market of farmland and construction land and plots.

Every one in three transactions (33.3 %) were on the farmland market, and 16% of all transactions were sales of construction land.

Commenting on price rises, Ivana Rašić of the EIZ said that in 2020, the biggest increase in prices when it came to the real estate market were registered in the Adriatic counties of Croatia and in the capital city of Zagreb.

“The median flat price per square metre for the whole of Croatia was approximately HRK 9,600 in 2020,” she said.

In Dubrovnik, for instance, the median flat price was HRK 19,000 per square metre and in Zagreb about HRK 11,000, she added.

Demand for new residential properties rose across the country, however houses in Zagreb, Split Rijeka, Pula and in their environs were also in high demand, Rašić said.

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Zagreb, the country’s largest city, is experiencing a turbulent period. The real estate market of the city has been rattled both literally and figuratively by a series of earthquakes. The damage from the earthquakes exposed a poor state of many buildings within the city’s centre. At the same time, much of the Croatian coast has had a rise in property prices due to the region becoming a global travel hotspot in the last 5-10 years. Many of the most attractive areas like Dubrovnik or Split centres seem overpriced to anyone looking to buy. With all this in mind, it would seem logical the crisis Croatia is facing at the moment would force the prices to drop. Still, according to an article by Dnevnik.hr, the prices generally seem to be stable or are even rising.

Regional Differences

The real estate situation in Zagreb is dynamic. The aftermath of the earthquakes left many searching exclusively for new buildings outside of the city centre. Consequently, there is a rise in prices for such properties. At the same time, there is a drop in prices for some centrally located apartments, but the buyers are rare, especially in buildings that are awaiting renovation. On the coast, Dubrovnik, the country’s most expensive real estate market, is seeing a drop in sales. Reduced demand doesn’t seem to be having a direct impact on the average price. It seems most property owners believe in a quick recuperation of this popular travel hotspot. This is also true for the rest of the popular Dalmatian areas. In Istria, the market seems stable and attracts plenty of foreign buyers, especially from Slovenia, Italy, and Austria. Around half of the properties sold in Istria are bought by foreigners.

For more, follow our dedicated business section.

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As Novac/Korana Sutlic writes on the 31st of May, 2020, the Croatian real estate market has come to life in the area of ​​Kvarner and Istria, despite the ongoing coronavirus pandemic and the shallowness of people’s pockets.

Among those who are particularly active are foreign buyers, who have clearly recognised Croatia’s advantage in times of crisis and owning a house on the coast. This isn’t surprising, because last weekend and last week in Kvarner, visits from wealthy foreign tourists were already going on in some places.

”We’re witnessing a rapid adjustment of people to this new situation. A couple of weeks of weeks ago, when compared to the same period last year, we’ve had far more inquiries from foreign clients wanting to purchase Croatian real estate on the coast. Accordingly, we expect a daily increase in the number of realisations of those purchases,” said Branko Papes, the director of Dogma real estate, stated.

It is interesting that currently there is an increase in the number of inquiries for exclusive Croatian real estate and villas with large gardens being taken by the aforementioned company, and often the first row to the sea is sought. This increase is significant when compared to previous periods.

”We’d like to invite the owners of such real estate to contact us if they want to sell their properties, because now there is really no shortage of more exclusive buyers,” Papes pointed out.

Unlike the situation during the coronavirus-induced lockdown, when customer inquiries were purely informative, he added, now visits to apartments and houses have started again, offers are being made and an increase in the number of real estate purchases being realised is being felt.

”We can say that the Croatian real estate market has recently become quite active, what went on in the last two months were probably the biggest changes that our industry has ever felt. Namely, real estate brokerage is a standardised and traditional activity where changes happen slowly, which makes sense if we keep in mind that buying and selling real estate in the perspective of buyers and sellers is one of the biggest investments made in life,” noted Branko Papes.

However, buyers have noticed, he added, a kind of shift in the way of thinking, and Croatian real estate that until recently remained unattractive, such as secluded cottages or ground floors in buildings, is now in higher demand.

”The pandemic is certainly one of the most stressful events we’ve lived through recent times and we’ll only feel the real consequences through the changes that will follow, but except in parts of Zagreb due to the earthquake, the prices still haven’t undergone their expected correction,” explained Papes.

People have become more aware than ever of what kind of properties they live in, but what in terms of our attitude towards real estate has changed the most after the last, tumultuous period?

”We’re witnessing hectic and busy lifestyles that leave many people with little time to spend at home, but now a significant turnaround has taken place – when you’re not allowed outside and have to be home for a long time, it isn’t the same if you are in an apartment spanning 30 square metres or in a house with a garden. Clients have now, more than ever before, set up some priorities and realised that it’s more important to have a property that provides them with a quality life than it is to own an expensive car, not to mention real estate as a form of investment at a time when stock prices are rising and falling, and interest rates being provided by the banks are at historically low levels. More than ever, we have inquiries for apartments with yards, houses with gardens, apartments with terraces and sea views,” explained Papes.

Simply put, real estate is no longer perceived only and exclusively as a place to sleep, but as a place where quality time is spent. What of the forthcoming period? Will attitudes towards Croatian real estate and property in general continue to alter as the situation unfolds?

”We expect the situation to normalise, which is exactly what is happening now,” he stated.

”The demand for the purchase of houses in Istria, on the islands, and even in Gorski Kotar has increased. What’s important to understand is the fact that real estate, although it is a big decision, is actually the place where the family gathers and where the most beautiful moments are spent with loved ones, and often, preoccupied with many obligations, we forget that it’s precisely such situations as the ones we’ve experienced recently that make us aware of that,” Papes added.

Just what exactly is happening with Croatian real estate prices, especially in the area of ​​Rijeka, Kvarner and Istria, however?

”Unlike other parts of Croatia where the prices before this situation were already ‘wild’, in our area, this wasn’t the case, but as a rule they were certain limits. The market, ie the relation between supply and demand, is such a mechanism that regulates possible deviations,” he concluded.

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