Developments in the Croatian market in summer 2013

While most European countries have already overcome the crisis and the related recession, prices of Croatian properties continued to fall in 2013.   The gradual drop in prices is attracting foreign buyers more and more. The vast majority of those interested in buying are looking for reasonably priced properties and is not willing to pay unnecessarily high prices.     

On the other hand, property tax still does not apply in Croatia. Many owners therefore maintain high offer prices for properties because owning empty properties costs them nothing. But not even that not particularly favourable situation for buyers has managed to halt a steady drop in prices. For instance, the most expensive area in Croatia – Dubrovnik – has recorded the biggest fall for the past few years. 

Not even the great demand for property acquisition in Croatia has not brought the hoped for results.  A reduction in sales has occurred since 2012 and the market still has not managed to start up again. It is interesting to note that over 92 % of Croats own some property (of EU countries, only Romania and Lithuania have higher figures). In contrast to this, the richest EU countries have a typically lower proportion of property owners (Austria 57 %, Germany 53 % and Switzerland only 44 %).  

Increased interest of foreign investors have set prices of properties lying on the Croatian coast artificially high over the past years, reaching several times the average price of properties elsewhere in Croatia. For example, at the beginning of 2013, the price of an ordinary residential house in Zagreb was hovering just below EUR 1 500 per m2, while a similar property was priced by its owners at more than EUR 3 500 EUR per m2. At present it is clear that the volume of property deals in the Zagreb area is much higher than that for Dubrovnik. Without the introduction of a universal property owner tax, the owners of houses and apartments in attractive areas are under no pressure to reduce the sale prices to an acceptable level that might revitalise the market.

Another significant influence on the prices of Croatian properties is the local banks. In view of the fact that, due to a combination of large investments and relatively accessible loans immediately before the economic crisis, banks have a considerable amount of funds tied up in property, they are unwilling to consider lowering prices because that would involve the necessity of writing off a considerable part of these investments.  

The most attractive localities of course maintained their prices even during the course of the crisis – properties fronting onto the sea represent a stable investment even at times when the market is fluctuating. The interest of foreign investors however is slowly moving away from Croatian islands to towns and cities in coastal areas – i.e. Split, Trogir, Kaštela, Čiova, Rogoznica and Makarska. Island favourites such as Korčula, Brač and Hvar remain in the centre of attention, although sales of properties located there have fallen similarly year on year as in the rest of the country. 

A welcome impulse for the Croatian market may be their accession to the European Union. It will be easier for foreign buyers to use financing options for their purchase, such as mortgages than it has been until now.  

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