ZAGREB, 20 March (Hina) – Market conditions suggest that the growth of housing prices will continue this year, although it may be more moderate than in previous years, according to expert assessments presented on Wednesday at the RE:D conference, which focused on trends in the Croatian real estate market.

Vedrana Likan from Colliers said that the latest statistical data indicates a continued upward trend in housing prices, predominantly in new builds, and that market conditions do not suggest any immediate change to this trend.

"It is expected that housing prices will show a tendency towards mild growth," Likan said.

She noted that a correction is visible in the lower number of transactions, indicating that the market has indeed slowed, with unaffordability being a significant issue across the European Union, including Croatia.

Likan believes that the state, as the owner of a large number of properties, particularly land for the development of new housing, should recognise the opportunity and responsibility to play a significant role in addressing the unaffordability and shortage of housing.

She argues that the state should urgently activate its real estate assets, noting that it is not necessary for the state to appear as an investor in the construction or revitalisation of housing, but rather to understand that large plots of land it owns represent a substantial investment opportunity for the market.

"Thus, it can appear as a partner, seller, concessionaire or provider of construction rights… There are truly many modalities," Likan stated.

Historically low levels of available office space

She also reported that in 2024, Croatia saw a significant drop in investment volume in the commercial real estate market, down by 65% compared to the previous year to around €240 million. This refers to commercial properties such as office buildings, hotels, logistics spaces and shopping centres, which are on the market and generate income.

Given the trends in the global and European markets, a decline was expected, though not to such a significant extent, said Likan. On the other hand, she added, "there is hope" because investment volume growth in other Central and Southeastern European countries was around 70% and this trend is expected to "spill over" into Croatia.

She noted that Croatia is currently at a historically low level of available office space, around 2%, which has multiple consequences, including increased rental prices.

Obstacles to the development of new office projects include the high cost of land, unresolved property-law issues, very high taxes, labour shortages, high material costs and high borrowing costs, Likan warned.

She also stated that accumulated demand across all commercial real estate segments is so high that it is questionable whether what has been built and what will enter the market this year and in the coming years will be enough to meet this demand.

Vujović: New Zagreb GUP may affect further price increases

Boro Vujović, director of the Opereta real estate agency, also believes that, given inflation and greater demand than supply, it is unrealistic to expect housing prices to fall, but rather to stay at current levels or slightly higher than last year.

Due to high demand, Vujović noted, there is insufficient new construction on the market, leading to the sale of older apartments at "perhaps undeservedly high prices".

He asserted that the planned changes to the General Urban Plan (GUP) in Zagreb are heading towards stricter buildability, which will result in more expensive square metres. "The new GUP significantly tightens buildability and the number of floors, which could further drive up prices as it will become even harder and more expensive for investors to build," he said.

According to some estimates, there are plots of land in the "inner part" of Zagreb owned by the city and the state where the construction of around 32,000 apartments is possible, but it requires the will of the relevant authorities to put those plots on the market.

Kovač: Positive macroeconomic environment reflected in the real estate market

Alen Kovač, head of economic research at Erste&Steiermärkische Bank, said that Croatia's positive macroeconomic environment has been reflected in trends in the real estate market, continuing the rise in housing prices.

He noted that for existing (older) properties, the price increase is somewhat more pronounced, while the prices of new properties, although still rising, are doing so at somewhat lower rates.

Therefore, this year, a decline in property prices is not expected, although there could be a gradual slowing of price growth for older properties, Kovač believes.

Although there were no subsidies for loans last year, the pace of housing lending has remained stable, with an annual increase of around 10%. Given that measures introduced by the Croatian National Bank to slow down credit growth, including housing loans, will come into effect in April, Kovač said that some slowdown can be expected in the second half of the year.