Real estate in Dubrovnik is the least affordable in all of Europe, and Split ranks very high on that ‘affordability’ scale – in thirteenth place. This is shown by data from the Numbeo website regarding the relationship between the income of the population of individual European cities and real estate prices in them. In terms of affordability, Dubrovnik ranks among the most expensive cities in Europe, ahead of Moscow, St. Petersburg, Paris, Minsk, Belgrade, Lisbon, Prague, Munich, and Milan, which occupy the top 10 places on the aforementioned infamous list.
According to Numbeo’s calculations, a household earning an average of one and a half average salaries can buy a 90 square meter apartment in Dubrovnik in 24.2 years. Residents of Split with the same income will need 17.2 years, Zagreb residents only 14, and Rijeka residents 12.8 years. The most affordable real estate in Croatia is in Osijek, where residents of that Slavonian city need to work only 9.3 years to buy a 90 square meter apartment. Interestingly, residents of Amsterdam need to work just 0.8 years more than Osijek residents to afford an apartment of the same size.
Other Dutch cities on the list also have quite affordable real estate compared to Croatia. The easiest place to get an apartment is in the Irish city of Limerick, where a household needs only 3.4 years to acquire an apartment.
Other previous studies, such as those from the Economic Institute, have shown that real estate is becoming increasingly inaccessible for Dubrovnik residents, but interestingly, this Croatian tourist gem has found itself at the top of the European affordability rankings.
How many average salaries would be needed to purchase real estate to be considered affordable was explained by Ivan Laljak, a senior consultant at Colliers.
Foreigners are driving up prices
– There are multiple definitions of real estate affordability as well as ratios through which affordability can be observed (depending on different countries, markets, etc.). For example, affordability can be defined as the share of housing costs (whether through rent payments or loan installments) in the monthly income of households. According to this indicator, up to 30-35 percent of monthly income should go towards housing (including all costs such as maintenance, repairs, etc.) depending on whether gross or net household income is considered. There are also indicators that calculate affordability through the number of annual salaries needed to set aside for purchasing real estate; in that case, a desirable ratio would be around 3-5 annual salaries – explained Laljak.
In Croatia, it is difficult to buy even a studio apartment for five annual salaries, let alone an apartment for a larger family. The problem is particularly pronounced in all coastal cities, where more and more foreigners are buying real estate, leading to further price increases and greater unaffordability.
– Affordability in Croatia is quite low, especially along the coast where every third property is purchased by foreigners. The situation is further exacerbated by the low tax on tourist rentals, which has become a sort of tax oasis, so today more and more foreigners are building apartments for this purpose along the Croatian coast. This tax definitely needs to be increased as it has lost its original purpose, which was to encourage family tourism, given that today more and more investors are building 50 or more apartments intended for tourist rentals – concluded Dubravko Ranilović, president of the Association for Real Estate Business at the Croatian Chamber of Economy.
