Croatia experiences highest real estate price growth in the EU

The steady rise of real estate prices in Croatia is a wellknown trend that has been ongoing for years.

However, the latest data from Eurostat reveals that in the last quarter of 2022, the prices of houses and apartments purchased in Croatia grew by 17.3%, the highest in the European Union.

This marks a signi�icant acceleration in the already robust growth of the Croatian real estate market, which had grown by 14.8% in the previous quarter.

This trend is in contrast to the rest of Europe, where a downward trend was seen in the last quarter, with growth rates dropping from 7.3% in the third quarter to 3.6% in the last three months.

Apart from Croatia, seven other countries continued to see double-digit growth in real estate pri- ces, with Estonia (16.9%) and Hungary (16.5%) recording the highest increases. In contrast, Denmark, Sweden, Germany, and Finland experienced declines in prices.

Factors contributing to the increase in prices in Croatia include favourable lending conditions, APN measures (government housing loan subsides), and increased income from tourism.

Moreover, the period before Croatia’s entry into the euro area and Schengen was encouraging for foreigners, who bought houses and apartments in Croatia in even greater numbers.

Despite the positive trend, market changes are expected as loans become more expensive, interest rate risks increase, and the government ends subsidising loans that have been in place since 2017.

Analysts expect that there will be changes in the market soon, and the signi�icant drop in traf�ic observed at the end of last year is a sign of this. ‘We have not yet seen any negative trends thanks to the new round of APN (government housing loan subside) and the slow growth of interest rates, but already at the end of last year we saw a signi�icant drop in traf�ic,’ one analyst announced.

From record levels, prices have already fallen 14% in Sweden and New Zealand, 9% in Australia, and Goldman Sachs predicts they will reach 19% in New Zealand, 17% in Sweden and 15% in Australia.

In the USA, a 10% drop from the record level is expected, whereby 5% has already been achieved, the cycle is not over in Britain either, where prices also fell by 5%, in France a 4% drop is predicted.

In the last quarter of 2022, the prices of houses and apartments in Croatia grew by 17.3%, while at the quarterly level, they increased by 4.7%. Zagreb led the way with a 22.5% increase in residential properties, followed by the Adriatic at 12.9%.

In other areas of Croatia, prices rose by 17.5%. On an annual level, the prices of residential buildings rose by 14.8%, with new construction being 17.5% more expensive on average, and existing residential buildings 14.5% more expensive. While the Croatian real estate market continues to perform well, there are risks associated with the sustained growth in prices.

Measures are being recommended to avoid further acceleration of house and apartment prices, including state subsidies for housing loans and measures to prevent an increase in household indebtedness.