Uncertainty in the Global Real Estate Market, Changes in Croatia Slower

The American real estate market, which all economists and financiers love to monitor, is still under the impression of the real estate bubble burst from 2008, having grown a respectable fifteen percent in the last 12 months. However, predictions for the near future are heading in the opposite direction, as rising interest rates and more expensive mortgage loans are expected to calm real estate prices and halt growth.

We are witnessing a similar process in the European Union, where an interesting process has been unfolding over the past decade. According to a study by the European Commission published in July, house and apartment prices have steadily increased since 2010, by as much as 45 percent. On the other hand, rental prices have risen by a significantly lower average of 17 percent.

After 2015, the market began to change trends, with a significantly faster growth in rental prices, particularly over the past four years. During the Covid-19 pandemic, interest in larger properties, especially houses, increased. This was facilitated by very low interest rates, as well as the fact that people were forced to spend more time indoors.

Then, in May of this year, the European Central Bank warned that real estate prices could start to decline if interest rates rise faster than inflation. The Croatian National Bank also decided to raise interest rates on housing loans, leading Croatians to increasingly take out housing loans in fear of a significant rise in interest rates in 2023.

– Demand for real estate continues to exceed supply. This primarily applies to quality properties, and there is a particular shortage of new constructions. Additionally, the situation varies significantly when comparing different parts of Croatia. Zagreb and satellite cities such as Samobor, Zaprešić, and Velika Gorica remain the most sought after, as well as the attractive Adriatic due to tourism. We are monitoring the global situation, which shows slight signs of slowing price growth, but I believe we cannot expect a sharp decline in real estate prices, possibly just a mild stagnation.

In our case, the situation is uncertain, which is not unusual as we are an underdeveloped and small market, and as a nation accustomed to crises and upheavals. Moreover, we are introducing the euro, which has caused some mild fear and uncertainty among some. We also expect an even greater influx of foreign buyers with better purchasing power than Croatians and a strong interest in purchasing properties on the Adriatic and in Zagreb. Personally, I believe that changes do not happen quickly here, and I do not expect major upheavals or reasons for concern – says Martina Naletilić, a licensed real estate agent, lawyer, and co-owner of the agency Sky Nekretnine.

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Martina Naletilić, Sky Nekretnine

photo Vuri Matija Photography

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Although real estate prices in the United States and in the European leader, Germany, have begun to decline, we cannot yet expect that scenario in Croatia. There are more and more people searching for properties around Zagreb and on the Adriatic, while the construction industry is still recovering from the changes brought about by the coronavirus crisis and the war in Ukraine, so new properties are still lacking in our market. As long as supply is so much lower than demand, it will be difficult to see a drop in square meter prices in Croatia.