Building Permits Explode Due to GUP, But No New Boom

Building permits for apartments in Croatia exploded in September 2025 to levels not seen since 2008, but experts warn that this does not mark the beginning of a new investment boom, but rather a short-term anomaly caused by investors racing to catch the last train of the old Zagreb GUP.

The area of apartments for which building permits were issued in September amounted to 303,594 m² (3,807 apartments), which is the third highest recorded value in the last 25 years, according to data from the Croatian Bureau of Statistics. The highest recorded areas of apartments for which building permits were issued in Croatia occurred in December 2008 (382,087 m² for 5,119 apartments) and in December 2006 (308,746 m² for 4,119 apartments). Both values occurred at the peak of the previous cycle, predominantly generated by new supply in Zagreb, but this represents a different type of anomaly, according to Avison Young.

As the number of issued building permits surged to an unusually high level in September, Avison Young expects it to decrease in October and return to the existing trend of around 150,000 m² per month (about 1,600 apartments) in the upcoming period. They believe that the explosion of permits in September largely relates to the submission of semi-prepared projects for approval before September 20, 2025, when the Amendments to the General Urban Plan of the City of Zagreb came into effect.

A similar jump was also visible in April with permits for 2,326 apartments covering 200,730 m², when the adoption of the GUP was previously on the agenda (but did not happen). The ISPU system shows a large number of submitted permits for peripheral locations such as Klara, Blato, Špansko, and Peščenica, which experienced construction restrictions (by 33 percent of the allowed gross developed area) with the new Zagreb GUP.

Avison Young believes that in the next three to four years, Zagreb will likely maintain the volume of new apartment construction at around three to four thousand annually, as in the last few years, which they consider insufficient to meet existing demand.

What does the sudden increase in location permits reveal?

According to data from the City of Zagreb, by September 30, 2025, as many as 979 applications for location permits were received, more than double compared to 2024 when there were 502. Since most of them will be converted into building permits, a key question is how long it will still be possible to build according to the old GUP.

– The application for location permits was preventive to establish construction conditions according to the old GUP because the new amendments have much stricter limitations. Location permits last for two years if a building permit is not obtained in the meantime, and then another two for extending the building permit. Therefore, in the next four years, we can expect this increased volume to continue – explains Filip Dumbović, partner and director at Avison Young, but he believes that this volume is not enough to satisfy demand.

– There is still significantly less apartment construction than during the period of 2007 and 2008 at the peak of the previous cycle. In Zagreb, 61 percent fewer apartments were built in 2023 and 2024 compared to that period. In the same timeframe, 21 percent fewer apartments were built in the rest of Croatia. The lack of supply of about 2,000 to 3,000 newly built apartments annually in Zagreb, combined with high demand, is the main reason for the price increase over the last decade – state Avison Young.

An excess of supply in Istria

However, the intensity of construction ‘like in 2008’, considering demographic changes and the fact that the previous construction boom was partly driven by post-war migrations, is difficult to expect to repeat.

– It is not realistic to expect the construction pace of that period to be repeated, but a balanced level of construction would be around five to six thousand apartments annually in Zagreb. Given that the average has been around 2,500 apartments annually over the last 10 years, we can conclude that about 30,000 apartments less than the demand have been built, at which prices would rise in line with inflation. For certain micro-locations, there could be an excess of supply, such as in Istria, where the number of individual listings for residential and vacation properties significantly exceeds the number of transactions. The population in Croatia and Zagreb changed its trend in 2023, increasing for the first time in the last 20 years. The number of residents per household is also decreasing, which maintains or increases the total number of households needing an apartment. All of this indicates strong demand for housing – said Dumbović.

He continues to explain that the fundamental problem of supply does not relate to the existing housing stock, but primarily to the insufficient amount of new construction.

– When we talk about the lack of supply, we are more referring to the lack of new construction, given that a large number of existing properties have been inactive due to favorable tax policies. On the other hand, the change in tax policy from January 1, 2025, has contributed to the activation of the existing housing stock, but not enough to change the trend of rising prices – explains Dumbović.

If high demand continues, Dumbović expects further price increases. The only possibility for their stabilization he sees is a significant increase in supply, through the activation of more than two million square meters of construction land owned by the City and the state, mostly land with infrastructure along the railway line.

– On these locations, it is possible to build more than 35,000 apartments with accompanying facilities, which would truly have an effect on the market – he concluded.