Housing prices will continue to rise in 2025, but at lower rates

Market conditions indicate that the rise in housing prices will continue this year, but it may be milder than in previous years, according to expert assessments presented on Wednesday at the RE:D conference, dedicated to trends in the real estate market.

Vedrana Likan from Colliers stated that the latest statistical data indicate a continued trend of rising housing prices, predominantly in new construction, and that market conditions do not suggest that this trend could change for now.

– The expectation is that housing prices will have a tendency for slight growth – Likan believes.

She notes that a correction is visible in the smaller number of transactions, which means that the market has indeed slowed down, with the issue of affordability being a significant problem throughout the European Union, including Croatia.

Likan believes that the state, as the owner of a large number of properties, especially land for the development of new housing, should recognize the opportunity and responsibility and take a significant role in addressing the issues of affordability and the lack of housing.

Therefore, she believes that the state should urgently activate its real estate assets, where it is not necessary for it to appear as an investor in the construction or revitalization of housing, but rather to understand that large plots of land in its ownership represent a significant investment opportunity for the market.

– Thus, it can appear as a partner, seller, concessionaire, provider of construction rights… There are indeed many modalities – Likan believes.

Historically low level of available office space

She also reported that in 2024, the investment volume in the Croatian commercial real estate market significantly fell by 65 percent compared to the previous year, to around 240 million euros. This pertains to commercial real estate, such as office buildings, hotels, logistics spaces, and shopping centers, which are on the market and generate income.

Given the trends in the global and European markets, it was to be expected that a decline would occur, but not to such a significant extent, Likan said. On the other hand, she added, ‘there is hope’ that the growth of investment volume in other countries in Central and Southeast Europe was around 70 percent, so it is expected that this trend will ‘spill over’ to Croatia.

She emphasized that Croatia is at a historically low level of office space availability, at around two percent, which carries multiple consequences, including an increase in rental prices.

Barriers to the development of new projects in the office segment continue to be the high cost of land, unresolved property-legal relations, very high levies, unavailability of labor, high material costs, as well as crediting prices, Likan warned.

She stated that the accumulated demand across all segments of commercial real estate is such that it is questionable whether what has been built and what will come to the market in this and the coming years will be sufficient to meet that demand.

Vujović: The new Zagreb GUP could affect further price increases

The director of the real estate agency Opereta, Boro Vujović, also believes that, given the present inflation and higher demand than supply, it is unrealistic to expect that housing prices will fall, but rather that they will remain at current or slightly higher levels than they were last year.

Given the high demand, Vujović notes, there is insufficient new construction on the market, so even old apartments are sold at ‘perhaps undeservedly high prices’.

He also stated that the announced changes to the GUP in Zagreb are moving towards less buildability and thus more expensive square meters. ‘The new GUP significantly tightens buildability and height regulations, which could affect further price increases as it will be even harder and more expensive for investors to build,’ he stated.

According to some estimates, there are plots in the ‘narrow part’ of Zagreb owned by the city and the state on which the construction of around 32,000 apartments is possible, but the willingness of the relevant institutions is needed to put the land on the market.

For example, just activating the Gredelj land would allow for the construction of a large number of apartments in the very center of the city, Vujović points out, emphasizing the advantages of building in the center, given that construction on the periphery raises questions about building roads and leads to traffic congestion.

Kovač: Positive macroeconomic environment reflected in the real estate market

The head of the economic research sector at Erste&Steiermärkische Bank, Alen Kovač, stated that the positive macroeconomic environment in Croatia has also reflected on trends in the real estate market, thus continuing the rise in housing prices.

He notes that for existing, i.e., older properties, this is somewhat more pronounced, while prices for new properties, although still rising, are at somewhat lower rates.

Thus, this year, a decline in property prices is not expected, but there could be a gradual slowdown in the price growth of older properties, Kovač believes.

Although there were no measures for subsidizing loans last year, the pace of housing lending remained stable, with an annual growth of around 10 percent. Given that from April, the measures of the Croatian National Bank aimed at slowing down the growth of lending, including housing loans, will come into effect, Kovač says that a certain slowdown can be expected in the second half of the year.