New apartment construction will stop, and prices will remain high

Unlike the cheerful atmosphere in which the Prime Minister promised to lend buyers of apartments 200 euros per square meter, experts have received the announcement of a new state intervention with many reservations, writes Večernji list.

From this, it can be concluded that the Government has decided to spend 100 million kuna by the end of this year to stimulate apartment sales, and it remains to be seen whether the subsidies will be carried over later. Since the first 30 million kuna is already in the account of HBOR, it can be easily concluded that the agreement on subsidized apartment sales was shaped in parallel with the intervention funds and that banks had the main say in their creation. It is believed that there is at least one billion euros of frozen banking capital in 15,000 unsold apartments, which is clearly no longer just a problem for banks and builders but for the wider community as well. Money for the buyers of the first apartments would be approved in the form of a loan (with a 20-year grace period), and all conditions should be known by the end of the month. Dr. Josip Tica, an assistant professor at the Faculty of Economics in Zagreb and an expert in housing construction, says that the announced subsidy will not solve the builders’ problem.

– The announced measures will only sell off the stocks of unsold apartments, but unfortunately, they will preserve the prices at which, without subsidies, construction and employment cannot be maintained at a level close to the level of construction and employment in the construction industry before the crisis – says Dr. Tica.

Until last year, approximately 25,000 apartments were built annually in Croatia, which engaged about 160,000 workers.

– Now both numbers are falling, and to return them to previous levels, either prices must fall or GDP must rise significantly – says Dr. Tica.

Since neither has happened, the announced state subsidy will temporarily “simulate” an increase in GDP, or wages and purchasing power, but it will last until the stocks are sold out. Dr. Tica warns that investors will not be motivated to build until they sell off their stocks, and even when they do sell them, they will not build again because the state subsidy will not last forever.

– Subsidies will not stimulate new construction nor will they prevent layoffs in construction; the only effect will be the rescue of those who cannot sell apartments, and we all know that any product can be sold at any time if you are willing to let the market determine the price. However, the question is whether the mentioned lower prices can ensure the repayment of loans that banks have provided to developers, and that is probably the only positive effect of these measures – says Dr. Tica.

– Even under the best conditions, there were unsold apartments, which says something about the relationship between quality and price. Construction must not be stopped – warns Dubravko Ranilović on behalf of HGK. (Večernji list)