Real estate prices increased exponentially between 2021 and 2022 as price increases almost doubled compared to the EU average increase for the same period.

In 2022, real estate prices increased by 14.8% 2022 compared to the previous year – almost double the EU average increase of 7.7% for the same period. And the trend shows no signs of abating yet, as average asking prices increased by 17.3% year-on-year in the last quarter of 2022.

“The boom on the real estate market is mainly fuelled by apartments in Zagreb, and holiday homes on the Adriatic coast,” the head of the Zagreb-based real estate agency Opereta, Boro Vujovic, said in an interview for Euractiv.hr, adding that the average asking price in Zagreb has now reached €2,450 per square metre.

For Zagreb, there was an average 17.9% price increase between 2021 and 2022, while properties along the Adriatic coast – the second most dynamic real estate market in the country after Zagreb – saw a 12.3% increase over the same period.

“But you have to keep in mind that this figure mostly refers to older buildings. If you add newly built apartments, the average would be higher,” said Vujovic.

In places like Rovinj – a picturesque seaside town on the northern Adriatic – asking prices for apartments which are close to the seafront reach up to €5,000 per square metre, he added.

On the southern end of Croatia’s Adriatic coastline, in the traditionally expensive tourist magnet city of Dubrovnik that is best known for its mediaeval walls, new housing costs anywhere between €3,000 and €10,000 per square metre.

With the average net salary for Croatian reaching €1,094 in January, many are now voicing concerns that purchasing a home is quickly becoming unattainable.

The price increases are usually attributed to a long list of factors, some of which are old and have been present on the local market for a number of years.

These include low-interest rates offered for both housing loans and deposits on the local banking market, which incentivised Croatians to invest in property.

State-subsidised housing schemes also buoyed market prices, while tourism – which accounts for about 20% of the country’s GDP – also saw strong growth.

Other factors include the increasing interest among foreign buyers as well as the limited options for investing in other types of assets, as the local capital market is still poorly developed. Last year alone, some 38% of all buyers were foreign nationals, Vujovic added.

Many believe that interest from abroad will only increase as a result of Croatia having recently joined the passport-free travel Schengen Area and adopted the euro in January.

When asked whether prices have peaked and if Croatians can expect real estate to become a little more affordable, Vujovic said that in spite of many uncertainties related to local and global trends, the situation is unlikely to change anytime soon.

“If high inflation rates continue, we can expect real estate prices to continue rising. However, since interest rates are also increasing and the purchasing power drops, the pool of prospective buyers might get smaller, which might lead to lower sales volumes. But generally speaking, I don’t think we’ll see any significant changes in the market going forward,” Vujovic told Euractiv.hr.

(David Spaic-Kovacic, Adriano Milovan | EURACTIV.hr)