Last year, real estate sales in Croatia fell sharply

In the real estate market in 2022, there were 116,734 transactions, which is a decrease of 12.9% compared to 2021, but at the same time, the total value of sold properties increased by 6.3% to 8.5 billion euros, it was highlighted on Friday at the conference ‘Overview of the Real Estate Market of the Republic of Croatia’.

The professional conference was organized at the Journalists’ House by the Ministry of Physical Planning, Construction and State Property and the Economic Institute, Zagreb (EIZ), and according to the data from the presented publication ‘Overview of the Real Estate Market of the Republic of Croatia in 2022’, the value of sold properties of 8.5 billion euros represents 13% of last year’s gross domestic product (GDP), with apartments accounting for the largest share in the value of contracted transactions, 43%.

This is followed by family houses with 24.3%, and construction land, with a share of 17.4%.

Unlike in 2021, when agricultural land led the number of transactions in the real estate market, in 2022, the highest number of transactions was for apartments, 29,952, which makes up 25.7% of the total number. This is followed by transactions of agricultural land, then construction land and family houses.

For comparison, in 2021, there was a year-on-year increase in the number of transaction transactions of 30%, while in 2020, a year-on-year decrease of 7.7% was recorded.

This is the sixth overview of the Croatian real estate market, and the publication was presented by scientific advisor from EIZ, Ivana Rašić, who is the project leader.

As specific for 2022, Rašić highlighted the decline in transactions of agricultural and construction land, while other types of real estate recorded growth. Prices of all types of real estate rose last year, while prices of construction land remained unchanged compared to 2021, Rašić noted.

As expected, the City of Zagreb leads in the number of transactions last year, with 16,511, followed by urban centers on the coast – Zadar with 2,460 transactions, Split with 2,419 and Rijeka with 2,168 transactions, while in the continental part of the country, Osijek stands out with 2,011 transactions.

Most transactions relate to the sale of apartments, which are more frequent in urban centers, i.e., large cities.

Transactions of construction land dominate in the coastal area outside larger urban settlements, on the islands, and in parts of the hinterland of Istria and central Dalmatia, while in the rest of Croatia, transactions of agricultural land prevail, as stated in the publication.

The most expensive apartments are in Rovinj, Opatija, Dubrovnik, and Split

Tourism has a significant impact on real estate prices in coastal local government units, so the highest median price of an apartment per square meter is recorded in Rovinj, 2,690 euros, followed by Opatija with 2,634 euros, Dubrovnik with 2,558 euros, and Split with 2,547 euros.

A median price in the range of two to 2.5 thousand euros was recorded in 11 local government units, and these are exclusively coastal and island cities and municipalities.

Furthermore, out of 54 local government units where median prices of apartments between 1,501 and 2,000 euros per square meter were achieved, 51 are located in the coastal area and on the islands, and only three are larger cities in the continental part of the country – the City of Zagreb with a median price of 1,929 euros, and Velika Gorica and Stupnik.

In 48 local government units, median prices of apartments ranged from 1,001 to 1,500 euros, and most of them, 33, also relate to the coastal area and islands.

Median prices of apartments up to 500 euros per square meter characterize rural areas and most local government units located in the central and eastern parts of Croatia, 22 of them, as shown by the analysis conducted by the Economic Institute for the relevant ministry.

In the coastal area and on the islands, the most expensive houses and construction and agricultural land

Family houses are multiple times more expensive in Adriatic local government units compared to continental ones, with the highest median prices being Cres (2,897 euros per m2) and Vis (2,450 euros).

On the other hand, median prices of family houses up to 200 euros per square meter were recorded in the largest number of local government units, 239, most of which are located in continental and rural parts of the country.

With the highest median prices of construction land, Bol stands out, 239 euros per square meter, and Cres, with 228 euros. A median price of construction land above 150 euros per square meter is recorded in 11 coastal and island municipalities, a price in the range of 50 to 150 euros is recorded in 97 units, prices of 20 euros and less per square meter were achieved in 129 units, and one euro and less per square meter in 14 units, of which eight are located in the Osijek-Baranja County.

In Adriatic local government units, agricultural land was also the most expensive last year, with the highest median price of 30 euros per square meter recorded in Okrug in the Split-Dalmatia County.

In 12 Adriatic local government units, the median price of sold agricultural land ranged from 15 to 25 euros, in 96 units between 1 and 5 euros, while in 299 units the median price of sold agricultural land per square meter was less than one euro, as stated in the analysis.

Furthermore, coastal units also record the highest median prices of sold commercial spaces per square meter, with Biograd na Moru leading (3,867 euros), followed by Dubrovnik (2,392 euros) and Poreč (2,178 euros).

The City of Zagreb, with a median price of 1,294 euros, records a significantly lower average value of commercial spaces compared to a large number of coastal cities, it was noted.

The City of Zagreb ranks only 96th by the ‘affordability index’

The analysis also found that the lowest affordability of an apartment, as expected, is in the coastal part of the country. Thus, the value of the ‘affordability index’ greater than 30, which indicates that more than 30% of annual income is needed for one square meter of an apartment, is recorded in seven Adriatic units – Gradac, Funtana, Baška, Hvar, Baška Voda, Rovinj, and Dubrovnik.

On the other hand, the most affordable apartments are in Vukovar, where the ‘affordability index’ was 4.6, followed by Obrovac, Konjščina, Đurđenovac, Pakrac, Darda, Slunj, Beli Manastir, Gospić, and Lipik.

Moreover, among the first 82 least affordable local units, there is no settlement that is not coastal, so Velika Gorica is only in 83rd place, with an affordability index of 16.2.

With an index value of 14.8, the City of Zagreb is in 96th place, where residents could buy 6.7 square meters of an apartment for the average annual income.

When it comes to rent, as expected, last year, contracts for renting apartments predominated, and the highest median monthly rental price per square meter was recorded in Zagreb, 8.7 euros per square meter.

Barbić: Data on housing affordability is shocking

The director of EIZ, Tajana Barbić, stated that the data on the decline in the total number of real estate transactions should be viewed with caution, given that 2021 and 2020 were “somewhat specific” years.

Thus, if the number of transactions is compared to the pre-pandemic year of 2019, it was higher last year by 4.5%.

Although a total decline in transactions was recorded, transactions of apartments continue to grow, last year by 1.2%, with the value of transactions in that category increasing by 16.8%, which is significantly higher than the average for all real estate.

In this context, Barbić welcomed the steps taken by the state towards creating a national housing policy.

– We believe that this is the only way to adequately address the issue of affordable housing, especially for young people without resolved housing issues, as well as for low-income households, who need to facilitate either affordable purchase or affordable rental of real estate – Barbić stated, also assessing that the data on the affordability of real estate in certain units is ‘shocking’.

Considering that real estate in Croatia is often viewed as an investment, they are sometimes not even rented out and remain unused, and Barbić agreed that discouraging investment in real estate for the purpose of saving and speculation would certainly be contributed by adequate taxation, i.e., property tax.

Such taxation would, on the other hand, provide an opportunity for tax relief on labor, she added.

The relevant minister, Branko Bačić, announced earlier this year that a new housing strategy should be adopted by the end of this year or the beginning of next year, and the state secretary in the Ministry of Physical Planning, Construction and State Property, Željko Uhlir, said today that an ‘initial framework’ of that policy will be attempted to be made by the end of the year, adding that it cannot be adopted “overnight”.

Uhlir: Evident shortage of apartments

Uhlir also stated that prices in the real estate market are formed freely, so if there is a shortage of products, they become increasingly expensive.

At the same time, there is an evident shortage of apartments, he emphasized, citing the data that before the war in Croatia, about 24,000 apartments were built annually, while now that number is around 12,000.

– This means that we are missing about ten thousand housing units annually – Uhlir stated.

Commenting on the presented overview of the real estate market today, Uhlir emphasized that last year for the first time, the turnover of apartments was greater than the turnover of agricultural land.

– This is a small anomaly, it will need to be studied – he said.