High share of new apartment purchases launched prices by 11 percent

The gradual cooling of the real estate market is not yet reflected in the statistical data on apartment prices, quite the opposite. However, market experts assess that this is expected due to the Croatian specifics that prices react with a delay to the onset of a market decline. According to data from the Croatian Bureau of Statistics (DZS) published on Wednesday, the prices of residential properties in the third quarter of last year increased by 0.3 percent compared to the previous quarter, while compared to the third quarter of 2022, they jumped by 10.9 percent. Furthermore, Eurostat data shows that this Croatian year-on-year growth is the highest in the entire European Union.

New residential properties have, on average, become 2.5 percent more expensive compared to the previous quarter, and 12.3 percent compared to the third quarter of 2022. Prices of existing residential properties were 0.1 percent lower on a quarterly basis, but 10.6 percent higher on an annual basis. In the third quarter of 2023, compared to the second quarter of the same year, prices of residential properties in the City of Zagreb were, on average, 2.4 percent higher, while they were 1.4 percent lower for the Adriatic and 1.9 percent lower for other areas.

On an annual basis, prices of residential properties in Zagreb increased by 12.1 percent, in the Adriatic the growth was 8.2 percent, while in other areas prices were, on average, 16.5 percent higher, according to DZS data.

Significant slowdown

Dubravko Ranilović, director of the Kastel-Zagreb agency and president of the Real Estate Business Association of the Croatian Chamber of Economy (HGK), commenting on the data for the third quarter, says he expected the growth to be single-digit.

– However, as the turnover in the third and fourth quarters of last year significantly slowed down compared to 2022, I believe this will certainly be reflected in the upcoming statistical data – says Ranilović.

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Dubravko Ranilović

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Lana Mihaljinac Knežević, director of the Zagreb West agency and member of the presidency of the Real Estate Business Association, points out as one of the reasons for the double-digit growth in real estate prices in the third quarter the decline in the number of transactions, which then had a stronger impact on the sample.

– Only in Zagreb, the number of transactions decreased by 22 percent on an annual basis in the first half of last year. The share of new construction sales, which had a higher price in total transactions, was significantly higher, which ultimately affected the overall price increase. For Croatia, it is a specificity that when the cycle changes, the number of transactions first decreases, and only then do prices fall – claims Mihaljinac Knežević.

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Lana Mihaljinac Knežević

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Eurostat data shows that the Croatian year-on-year price growth of residential properties in last year’s third quarter (July, August, September) is the highest in the European Union. Following Croatia in year-on-year price growth are Poland with 9.3 and Bulgaria with 9.2 percent. Overall, prices of residential properties in the EU in last year’s third quarter fell by one percent on an annual basis, and in the eurozone by 2.1 percent.

Given the market slowdown, we will see how prices will move throughout this year, emphasizes Dubravko Ranilović.

– In new construction, price growth will significantly slow down, while for used apartments I expect a possible price correction – believes the Leader’s interlocutor. Lana Mihaljinac Knežević states that we no longer have several variables that significantly influenced the price increase in Croatia – the introduction of the euro, rising inflation, and APN.

– On the other hand, there is a lack of supply in all segments, tourism revenues are flowing into real estate, and we have a traditional approach to investing in real estate, so there will certainly not be a significant downward price correction, but only a slowdown in growth – believes Mihaljinac Knežević.