The real estate market has seen a strong upswing this year, but the question is, is this trend sustainable in 2020?
Text: Jasna Biliskov Barun
The year behind us was marked by a booming construction and prices… whether it is realistic or not, the time will show. Construction of new residential buildings in Zagreb is exploding, and no major coastal cities are lagging behind. The price of new construction in Zagreb ranges from 1.700 EUR / m2 in the outskirts of the city to 4.000 EUR / m2 and more for the most attractive residential locations as Shalata or the city centre. By some rough estimates, more than 2.000 housing units were built or are under construction in Zagreb in 2019.
In the Split region, new residential buildings are being built mostly in the satellite cities, such as Solin, Kastela, Podstrana and Stobrec, because the city of Split itself does not have much space to expand, so new housing projects in the city itself are in short supply. Prices for new buildings are from 1.800 EUR / m2 in Kastla and Solin, and up to 4.000 EUR / m2 or more for attractive residential locations in the city of Split (Bacvice, Meje…).
The “rapid increase” in housing prices was influenced by several factors: subsidized loans by the state, low interest rates on home loans, almost nonexistent savings interest, tourism growth, boosting economy in the country and the EU, higher prices for building land and construction, but also a number of new and/or unprofessional real estate agencies whose agents outflank to sellers, promising to sell at an unrealistically high price, just to get a signature on a brokerage contract.
It sounds unbelievable that the owners to dwell on such stories, but they hear what they want and over time they come to a conclusion that the price does not hold water. This year, as never before, in surprisingly many situations, we met with owners who cancelled brokerage agreements because some agent told them that their real estate was worth 200 and more, and we estimated it at 130 – 150. What do you think if there are interested buyers in such situations? Of course not… and so the time passes, until the owner admits to himself that he made the mistake in selecting an agency and setting an asking price.
In any case, the difference between the initial advertised price and the actual sale price was never higher. Specialized real estate web portals are full of overpriced apartments, which is by no means a realistic picture of prices. These overpriced properties mostly vegetate on portals because there are no interested buyers at such prices.
As sales prices increased, so did the rental price. So now a one or two bedroom apartment in Zagreb for a student, solidly decorated and equipped, in a decent location in the tram zone is very difficult to find under 400 – 500 EUR / month, in Split area even more.
The real estate market in 2019 was good, active and more deals closing. There are many buyers out there, both Croatian and foreigners, which are mostly interested at the coast. For the most part, domestic homebuyers buy residential properties in the price range of 100,000 EUR – 200,000 EUR, although there are also some with deeper pockets looking for holiday homes and / or investments. Foreign buyers come from all over the European Union, but mostly Slovenians and Germans. They are mostly looking for homes and apartments to buy on the coast. Those with a larger budget, above € 400.000 want family homes by the sea, but those who are more “modest” are looking for apartments in tourist places and near the sea, or houses with pool away from the sea, provided they have sea views.
In 2020, I expect price stabilization and slight growth. Such an increase that occurred in 2018 and 2019 is not realistic to expect. Even large investment and construction companies that build apartments in Split and Zagreb do not expect price rises in 2020, but are more concerned about keeping current value.
Tourism is also one of the important factors that will influence price stabilization. Namely, the significant growth in tourism is not realistic to expect, since Greece and Turkey have stabilized and reopened, offering much more favourable tourist arrangements than Croatia does. The fall in the price of accommodation, but also the fall in occupancy, was certainly felt in 2019, and so are expectations in 2020. The consequence is a certain amount of apartments and holiday homes that are in the function of tourism, which the owners have put for sale or long-term rent, because of slower return on investment or lower profit. There will be even more such properties on the market, which will certainly influence price stabilization.
There is a lot of pressure in the media about the new crisis that is set to come in 2020, but I personally do not believe in that. Talking to colleagues who live and work with real estate in Germany, Austria, Slovakia… the economy in Europe is still on the rise, plenty of jobs out there, real estate prices are rising, lot of construction work and investments, interest rates on loans are low… All this is of course a house of cards, which may collapse quickly, but I do not see the collapse of the world economy we experienced 10 years ago any time that soon.
In 2020 Croatia will preside the European Union, therefore the growth of business activities in the market can be expected. Some global brands are interested in opening their representative offices in Croatia, so in 2020 there may be minor adjustments to the rental prices of business and residential squares upwards.