Real estate remains a desirable investment, construction safety becomes criterion no. 1 when choosing a property, and the fastest recovery awaits those associated with the tourism industry, of course when the Covid pandemic wins.

However, according to Dubravko Ranilović, president of the Real Estate Association of the Croatian Chamber of Commerce and owner and director of Kastel Zagreb, the damage suffered by a good part of the economy, combined with the weakening purchasing power of citizens, in the medium term may negatively affect the real estate market.

This would actually mean a further decline in turnover, ie liquidity measured by the number of transactions.

As for the price, things are not at all unambiguous. Namely, from the previously present large price deviations, and thus increasingly drastic differences between regions and cities, but also within urban units and microlocations themselves (in Zagreb today the range ranges from 800 to 6000 euros per square meter), to that extent are important determinants for future movements, that any generalization is wrong, and the main parameter follows an individualized approach to each property.

Nevertheless, the first forecasts point to the continuation of a slight increase in average residential real estate prices in 2021, while in the medium to long term the entire market will be 'shaped' by three factors, namely demographic trends, economic strength and tourism, especially in the Adriatic and Zagreb. , because real estate is perceived as an attractive investment alternative, so demand for them is expected in these areas.

According to RBA Director of Economic and Financial Research Zrinka Zivkovic Matijevic, in the basic scenario, which includes the beginning of recovery this year, the corona crisis is not expected to have a significant adverse impact on the construction sector and real estate market.

“We expect residential property prices to rise at a rate of 6% per year,” she says.

This is supported by the continuation of a period of very low interest rates on savings, which for some investors, taking into account the relatively high propensity to rent, makes the purchase of real estate a desirable investment, says Zivkovic Matijevic

The outbreak of the pandemic did not strongly affect the real estate market - prices continued to rise, and according to Ranilović last year were on average 6% higher than in 2019. The Zagreb earthquake, as things stand, will not affect price movements, only the existing market segmentation will be more pronounced, says Živković Matijević, where new and higher quality real estate will come into focus and will probably record an additional increase in prices.

According to her, although the earthquake in Zagreb reduced the value of the housing stock, it is not expected to have a direct impact on price movements; moreover, due to the decline in the number of useful housing units, ie the reduction in the supply of housing facilities, it is possible that the earthquake increased the growth of housing unit prices in Zagreb and the surrounding area.

According to the Croatian Chamber of Commerce, the situation around the pandemic caused a drop in total real estate turnover in Croatia in 2020 of 11.6% compared to 2019. The number of transactions fell from about 26,000 slaughtered to 23,000 last year, while the total figures for the entire real estate market decreased from about 74,300 in 2019 to just over 69,000 transactions in 2020.

In the city center of Zagreb, for example, traffic fell by 43%. All counties recorded a decline, with the exceptions of Lika-Senj (from 462 to 470), Osijek-Baranja (from 1377 to 1513), Vukovar-Srijem (from 533 to 654), Požega-Slavonia (from 152 to 170) and Brod -posavska (from 335 to 408).

It is obvious that these are smaller numbers, which is influenced by economic activity in these areas, which is not large, while the exception in terms of number is the City of Osijek. On the other hand, where activity is high, there has been a decline that spills over into the market result.

The flagship of price growth is newly built apartments, especially those in Zagreb, the prices of used real estate are stagnating and in some parts of Croatia they are even falling.

“For two years now, the turnover in the Republic of Croatia has been falling, and the average price is still growing, and the asking price is growing more (+ 9%) than the realized ones (+ 6%), which means that the owners have a very unrealistic view. The market recognizes and distinguishes projects by quality, and the realized price is within realistic limits, but often owners do not have a realistic approach in perceiving the asking price, so in its formation it is unrealistic to refer to those of high quality, which the market corrects.

The problem remains on an annual basis due to state subsidies that affect price growth, because they are periodic, with deadlines, and increased demand is created in a short period, which certainly affects price growth and increases the appetites of owners, "says Ranilović.

Such increased prices rarely return to realistic terms, he says, and therefore argues that state measures - subsidies or other incentives, should be permanent, on an annual basis and without a time limit for users.

According to the RBA director, continued demand for support to young families through subsidized housing loans (APNs) has spurred the expected continued growth in construction activity, providing additional impetus to construction.

Data that real estate prices are pore

sle by about 16% from 2017 to 2019 confirm the increased demand, and according to CNB analyzes, he points out, subsidies have raised prices by about four percentage points.

Furthermore, the government subsidy program (extended until 2023) could result in further growth in demand and pressure on a slight rise in prices in the coming months.

Since the second half of 2016, when the recovery began after the long-running crisis that started in 2008, the rise in residential property prices has been primarily driven by strong demand. According to her analysis, in addition to the state subsidy program, the ‘generators’ are historically low interest rates on housing loans, favorable trends in the labor market and positive consumer expectations about the profitability of real estate investments, which marked the period until early 2020.

Prices on the Adriatic and in Zagreb were strongly influenced by tourist trends expressed through daily and weekly rentals.

"In conditions of low interest rates on deposits and after the negative experiences of investors in the capital market, the surplus money was often directed to the real estate market instead of deposits or the stock market.

In addition, the amendment to the Real Estate Sales Tax Act, which reduced the rate from 4% to 3% for all contracts concluded after the beginning of 2019, gave a positive impetus to rising prices. In addition, increased demand and rising prices are supported by a high level of liquidity, as well as the natural convergence of residential property prices against the EU average.

Moreover, due to global changes in the pandemic, our coast has become even more popular, because the Republic of Croatia is a car destination for many EU citizens ", says Živković Matijević.