Text: Ivo Barun, mag. oec.
For the seventh consecutive year, we are witnessing a continuous policy of the European Central Bank (ECB) to cut interest rates in order to stimulate economic growth and development processes. This ECB policy had positive short term effects on the economy as a whole, and also on the real estate trade that has become more accessible to the vast majority of investors, as the cost of money is quite low compared to the pre-2012 period.
On the other hand, the yields on Kuna and foreign currency deposits become negligible. If we add on that the cost of inflation we simply see that the real interest rate is actually negative.
Our citizens may not have great financial knowledge, but on the other hand, they have vast and unmistakable experience because they live in an area where several countries and as many (perhaps even more) currencies have changed in the last 50 years. Most of our citizens, taught by their own experience, do not have too much confidence in the banking system and their financial instruments, which are continuously offered to them as a substitute for the loss of interest on their deposits, in terms of investing in stocks, funds, bonds, etc.
Citizens and investors and are more and more having trust in the real estate investing, rather than keeping the money in the bank, because in the long run properties hold value, and when it comes to quality locations, there is no mistake. From my modest 11 year experience of working in the real estate industry, I have realized that buying a property in a good location means success in both – economic crisis and growth.
Every serious real estate buyer before purchase must consult with a licensed real estate agent who has in-depth knowledge of the property market for at least 5-8 years, in order to get a realistic picture of the past and present market situation and the potential of the property the one wants to purchase. In the current situation of low interest rates, real estate vs. banking products – savings, investments in stocks, bonds, funds, etc., real estate investment are certainly winning.
The prices of residential real estate in the City of Zagreb have not yet reached the levels of year 2008, but at some locations are not far from these prices or are higher. The one should also keep in mind the criteria in which certain price indexes are observed. Until 2012, there was no VAT on newly built apartments as it is today, also the cost of construction materials and labour costs have increased by at least 20% and land prices increased by approx. 200-250 € / m2.
Whether you are a beginner in the real estate world or an experienced marketer, in order to preserve and increase the value of your property, you must always make sure that your property is as complete as possible, has a “head and tail” and of course the golden rule of “Location, location and location!”