Text: Jasna Biliskov Barun
Last spring, the crisis caused by the COVID-19 virus significantly affected all branches of the economy, including the residential real estate market. The proclamation of a pandemic, the closure of borders, and lockdown in all economic and social spheres led to very few buyers looking for real estate, but there were also fewer sellers who were willing to put their real estate on the market and allow strangers to enter their homes.
Fears of the consequences of the 2009 economic crisis are still fresh in the minds of many. Because of the pandemic, many are reconsidering their housing needs, and homes have become a substitute for offices, schools, restaurants and gyms.
Despite a sharp drop during the spring, real estate sales rose in the summer and almost returned to last year’s figures. At the same time, the health crisis generated an economic situation in the form of fear, uncertainty and insecurity, while in Zagreb, an even greater impact on the real estate market had an earthquake that changed the picture of supply and demand.
What happened and why?
Real estate sales in April and May fell to their lowest level ever. Many property owners have been reluctant to put a property on the market even with the end of lockdown. The supply of good real estate in the market was quite scarce before, and due to the lack of new supply it has now fallen to a really low level.
Buyers have also reduced the activity of buying real estate. They reconsider a lot more and find it harder to decide to take out a loan, which terms have already been tightened by banks and thus made it more difficult to access.
It would be expected that the decline in demand for real estate would be accompanied by a fall in prices, however that did not happen. The combination of low and limited supply, historically low interest rates on mortgage loans, but also subsidized APN loans have enabled prices to remain stable.
The real estate market in Zagreb was far more affected by the earthquake than the health crisis. Customer inquiries and demands have changed, so the city center, which until a few months ago was considered the most attractive for buying real estate, is now almost dead. Despite very little buyers’ interest, prices did not fall comprehensively, which was to be expected. Owners who were forced to sell for one reason or another, certainly lowered the price, by some 15-30%, but such are rare. The vast majority of our clients withdrew real estate in the center of Zagreb from sale until further notice.
In Zagreb, after the earthquake, the direction of demand changed, and now more and more new and solid reinforced concrete buildings are in demand, and there is a greater demand for family houses with garden, as well as land suitable for building a family house.
In Dalmatia, the summer was mostly marked by a struggle for every tourist, and as far as the sale of real estate is concerned, they were significantly less than in previous years. Some domestic buyers who solve the housing issue, mainly on the outskirts of Split – in Kastela, Solin, Podstrana, Omis… where the prices per square meter are significantly cheaper than in the city, while foreign buyers this year were almost non-existent.
The health crisis is having a major impact on the entire tourism sector in the world, so it will also affect the real estate market used for tourism purposes. When, how and to what extent is difficult to predict… depends on how long this will all take.
Demand is recovering, supply remains low
The period after the lockdown and the arrival of summer somehow seemed more optimistic and better, people relaxed, the pandemic in Europe seemed under control. Despite a sharp drop in property sales in April and May, sales activity began to improve in late spring, approaching pre-pandemic levels.
However, with the arrival of winter, as well as a significant increase in the number of patients, and strong restrictions and recommendations, there is less interest from customers. However, the number of new real estate in the market has not developed and recovered at the same pace as demand. New ads, despite improving from the lowest April and May figures, remain low. The overall economic uncertainty and the difficult possibility of buying other real estate also keep real estate owners and sellers passive.
Despite some improvement in the economy, increased unemployment and economic uncertainty could continue to affect the housing market in 2021.
A longer-term look at the real estate market
Although the current recession is not caused by the real estate crisis and bad loans, the situation in the residential real estate market is uncertain due to the sudden economic recession and large job losses. However, there are some signs of a return to normal. Although the conditions have been tightened, mortgage loans at favorable interest rates are still available, and APN subsidies have been announced for 2021.
There is a lot of talk and thinking about how the pandemic will reshape the nature of work and housing. It is not yet clear to what extent these changes will be permanent or reversible. During the lockdown, our homes became offices, classrooms, gyms… Buying real estate is a long-term investment and very often the biggest life investment of many, so the immediate economic uncertainty can keep potential buyers aside for a while.
A certain number of buyers have appeared who find it attractive to buy an agricultural property with a house in Zagorje, Lika or Gorski Kotar. In the past, these buyers invested their savings in smaller apartments in the center of Zagreb or Split for daily or long-term rent, and today more and more of them are thinking in the direction of the village as an oasis of peace in case of new lockdowns.