Is it harder to buy an apartment today than it was 20 years ago? See the comparison

Is it harder to get an apartment today than it was 20 years ago? While many will say it is indeed harder, financial blogger Sandra (Aunt) Ferenčak claims it is equally difficult, although certain conditions have changed. As she states in her blog, although real estate prices have jumped 57 percent in the last five years, interest rates were extremely high 20 years ago, making it difficult for young people to buy.

– It is important to understand some macroeconomic indicators. For example, the unemployment rate about twenty years ago was around 22 to 23 percent, while today it is about seven percent. This basically means that a large number of people were credit unworthy, often paid ‘under the table’, which also affected demand – writes Ferenčak.

The financial blogger bases her analysis on her own experience of buying an apartment, noting that in 2002 she took out a loan with an interest rate of eight percent, which is unimaginable in recent times, at least until a year ago.

– In addition, the down payment was 40 percent, and I needed two guarantors – explains Ferenčak, adding that an important factor in this analysis is certainly the salary, especially when comparing what the average salaries in Croatia were 20 years ago and what they are today.

Many, she says, believe that real estate ‘only grows’, but as she notes in her blog, during the period from 2008 to 2015, during the financial crisis, real estate prices fell by approximately 30 percent, after which there was a significant increase, so it can be inferred that a new price correction will soon occur, although of course, no one can predict that with certainty.

However, regardless of that, Ferenčak presented a comparison from 2002 and 2022, claiming that the price per square meter of an apartment 20 years ago was 2.6 times lower than it is today, while interest rates on housing loans are now half of what they were back in 2002. Also, while last year the average salary was 1016 euros, 20 years ago it was 494 euros. Ferenčak also notes that due to the strong price increase in recent years, in 2022, you can buy fewer square meters for an annual net salary than 20 years ago (4.7 compared to 5.9) and that by taking out a 30-year loan, you would have paid off the apartment 2.7 times 20 years ago, and today ‘only’ 1.7 times.

Additionally, she states that 20 years ago it took as much as 22.5 years, or annual salaries, to pay off real estate, while today it takes 18.6 years.

– The annuity today constitutes 62 percent of the average net salary, compared to 75 percent back then due to high financing costs – writes the financial blogger.

She also provided a comparison of cash purchases of real estate, explaining that such a purchase would avoid the aforementioned high financing costs, so in 2002 it would take 8.4 years to pay off the apartment, while today it takes between 10.7 to 12 years, or annual net salaries.

– Today, it is just as difficult for young people to acquire their property as it was back then. With an average salary, it is practically impossible since the annuity should not exceed one-third of the income. Although it seems today that due to high real estate prices it was easier back then, financing costs in 2002 were such that interest accounted for over 60 percent of the total repaid value of the loan (today around 40 percent). Those who had cash for purchase fared better back then than now, but those who had to borrow to move into their own had to mortgage their own kidneys. Fortunately, interest rates have fallen over time, and salaries have risen, making repayment easier over time. Today, high prices, especially their increase in the last five years, along with the sudden rise in interest rates, make purchasing impossible – concludes Ferenčak.