Thus, the residential real estate price index, which measures the movement of market prices of residential buildings purchased by households, regardless of previous owner or purpose of use (including land value), in the period from October to December 2021 recorded a growth of 2.5% in compared to the third quarter of last year. Compared to the same period in 2020, after growth in the third quarter of 9%, in the fourth quarter of 2021 the annual growth rate accelerated slightly to 9.1%. The annual growth of prices was supported by higher prices of new and existing housing in Zagreb and the Adriatic.
Observed at the level of 2021, the residential real estate price index was on average 7.3% higher than a year earlier (7.7% in 2020 on an annual basis).
Compared to the previous quarter, the prices of new housing in the fourth quarter of 2021 were higher by 3.9%, while those of existing housing increased by 2.3%. On the other hand, observed on an annual basis, after growing by 8.5% in the third quarter, new housing prices accelerated to 15% while existing housing slowed from 9.2% to 8.4%, continuing the trend of positive rates for the twenty-second quarter in a row. This is not surprising given the increased demand for newer and better quality real estate after the earthquake that hit some parts of Croatia in 2020.
In the City of Zagreb, there was a slowdown in annual growth, from 9.6% to 8.8%, while in the Adriatic there was an acceleration in price growth, from 8.9% to 11.7%. In other parts of Croatia, growth slowed from 8.2% to 4.1%.
The growth of residential real estate prices, present since 2016, has slowed down slightly compared to 2020, when it exceeded the level of 2008 for the first time. given the location, quality and age of the property. The rise in prices in 2021 was certainly the result of a long period of extremely high liquidity, low interest rates and unchanged expectations regarding future alternative investments. In addition, the continuation of Government subsidies for housing loans contributes to the growth of demand and prices.
Taking into account the current global geopolitical unrest and heightened fears and uncertainty due to strong inflationary pressures, we expect that in the medium to long term real estate prices will be determined primarily by demographic trends, economic strength and, of course, tourism. The revitalization of the earthquake-affected areas, as well as other parts of Croatia, supports the expectations of continued price growth in the central part of Croatia, while prices on the coast will be determined by trends in tourism. On the other hand, the announcement of tightening monetary policy and raising interest rates by the European Central Bank could direct part of the excess liquidity / savings to some other forms of investment activities and thus partially affect the demand for residential real estate.