Real Estate Prices in 2009 Will Not Significantly Decrease

Everyone expecting a decline in real estate prices in Croatia of 30 percent or more in 2009 will be disappointed, assess analysts from CentarNekretnina.net, who expect a continuation of a slight correction in real estate prices both in Zagreb and along the Adriatic in the first quarter of this year.

Real estate prices in the largest and most dynamic market, Zagreb, did not record any significant change in December 2008, either on a monthly or yearly basis. According to data published today by CentarNekretnina, the average asking price for an apartment in Zagreb in December was 2,006 euros per square meter, which means it recorded a decrease of 0.7 percent compared to November, and 1.4 percent compared to the same month last year. The average asking price for a square meter of a house in Zagreb and its surroundings in December was 1,317 euros, which is 1.6 percent higher compared to the previous month, while on a yearly basis, asking prices for houses increased by 8.5 percent.

Real estate prices along the Adriatic in December did not record any significant change compared to November, while on a yearly basis, they recorded an increase of 4.6 percent. The average price per square meter for a weekend house and apartments by the sea is 2,042 euros. At the national level, asking prices for real estate increased by 2.2 percent year-on-year. CentarNekretnina, one of the most visited Croatian real estate listing sites, took into account more than 137,000 asking prices for its calculations.

"In 2009, buyers expect a significant drop in real estate prices, guided by experiences from the capital market, which underwent a significant correction in 2008. In the short term, such a development is not possible in the real estate market, and everyone expecting a decline in real estate prices of 30 percent or more in 2009 will be disappointed," says Domenico Devescovi, head of CentarNekretnina.net. He adds that smaller investors, who entered the apartment construction market to quickly exit after selling the last apartment, will likely have to significantly lower prices, but ‘big players’ will not be able to do so.

He expects that in 2009, asking prices for used apartments will record a slight correction. According to his explanation, the reasons for the inability to lower real estate prices (the emphasis is on new apartments from large investors) are the high entry costs that investors have already factored into the prices of real estate they will offer this year. Investors will not be able to bear a price reduction greater than 10 percent for real estate they will place on the market this year, believes Devescovi.

With existing real estate prices, which cannot withstand significant corrections, and banks that do not intend to lower interest rates on housing loans, CentarNekretnina does not expect any special shifts in the volume of new apartment sales in 2009. As for the liberalization of the real estate market for citizens of EU countries, they believe that there will not be an increase in demand in the short term for two reasons. The first is the financial crisis present in EU countries, due to which potential buyers will postpone their purchasing decisions until the crisis stabilizes. The second reason is that real estate prices along the Adriatic, expressed in euros, are relatively high compared to our competing Mediterranean countries, making it more profitable to buy ‘tourist properties’ in countries where real estate is priced in those currencies under conditions of a relatively weak dollar and an extremely weak pound. (H)