‘Vulture’ funds arrive when real estate prices fall

Investment funds hunting for cheap and affordable real estate are entering the Croatian market at a rapid pace, primarily due to the decline in real estate prices caused by the global financial crisis.

The specificity of these funds is that they always arrive at a time when, for various reasons, real estate prices are falling and they seek to buy when no one else is buying. That Croatia is not the only country in the region where this has happened is shown by a study conducted by the consulting agency Colliers International: in Greece, for example, the price of residential real estate has fallen by 25 to 30 percent, in Poland the situation is also similar – there has also been a 30 percent drop in apartment sales, and in Romania, a decline of as much as 70 to 80 percent is expected.

Although it seems that currently it is not the smartest move to buy an apartment or commercial space, experts from Colliers International argue the opposite. Namely, this consulting agency, despite the fact that there are 13,000 unsold apartments in Zagreb, has its hands full. – A time is coming when one needs to be much more cautious, investors are seeking more analyses and advice, but there are more and more projects, so for now this is the best time to buy residential space – emphasizes Vedrana Likan from the consulting agency Colliers. Supporting this claim is the data that real estate prices in the capital of Croatia are either falling or holding at the levels they were at last year.

Thus, in the center of Zagreb, the average price of apartments last year was 2,533 euros, which is an increase of 2.71 percent compared to 2007, when it was 2,467 euros. The center of Zagreb is the only part of the city where prices have risen, while the largest drop was recorded in Dubrava, where the price fell by 3.45 percent last year, which translated into euros means that it decreased from 1,791 euros, which was the price in 2007, to 1,773 euros last year. Generally speaking, in the entire Zagreb area, the average price of apartments fell by only 0.04 percent, from 2,046 euros in 2007 to 2,045 euros in 2008.

The average price of houses is also falling: last year it was 1,221 euros, which is 3.45 percent lower compared to the year before, when the average was 1,265 euros. Clearly, even such a small decline was sufficient to attract funds seeking favorable prices and investors from foreign countries who are slowly but surely beginning to enter our market – primarily referring to German, American, and British investment funds, emphasizes Tomislav Perović from the consulting agency Colliers.
Apartment prices, of course, depend on several factors: their location, whether they are furnished, and whether someone has lived in them.

Thus, the prices of luxury apartments range from nine to 12 euros per square meter, those of middle class from six to 10 euros, and lower class from three to four euros. When it comes to renting, the average price of a 50 m² apartment was 300 euros – no apartment above that price range was profitable for tenants as they would rather choose to buy their own. Considering this data, it is predicted that rental prices should not rise compared to last year. (Tomislav Vidaković)