Soaring Real Estate Costs, Family Homes Experiencing Renewed Demand
Croatia's real estate market experienced a notable surge in sales activity and market values in 2018, driven by government initiatives and economic factors that influenced housing prices.
The rise in Croatia's real estate market values can be linked to the SSK program, a mortgage subsidy program introduced in 2017, aimed at increasing housing affordability and ownership. However, this initiative paradoxically contributed to rising house prices and price volatility across the market by stimulating demand through mortgage financing.
Additionally, Croatia's overall construction sector was vibrant due to economic catch-up growth and EU funding inflows, supporting residential construction and boosting demand for housing, which in turn increased property values.
Regional price differences were evident, with land and housing prices rising particularly in areas previously considered affordable. Although specific regional price data for 2018 were not provided, the trend reflects a nationwide increase driven by stronger demand and financialization of the housing market.
Regions that benefited more from EU-funded construction and infrastructure projects likely saw stronger price growth and higher market activity due to better amenities and investment appeal.
The shift towards financialised housing growth means that middle-income groups are the main beneficiaries of rising asset prices due to mortgage-based policies. Inflation and macroeconomic factors also play a role in house price trends, though detailed inflation data from 2018 were not specified in these results.
In Split-Dalmatia County, the median price of real estate increased by 8% to 11,669 kuna per square metre, while in Istria County, it rose by 6.7% to 8,722 kuna per square metre. However, in other parts of Croatia, the price jump was not as significant as in these counties. In 190 towns and municipalities in continental Croatia, the price of a square metre of a house was below 1,000 kuna.
A total of 104,000 real estate sales were recorded in 2018, generating approximately 32 billion kuna, which is 8.4% of Croatia's GDP. The sale of flats increased by 1,500 to 24,000, and the number of houses sold increased by 4,000 to over 11,000. The sale of construction land and family houses generated less revenue compared to flat sales in 2018, with approximately 13 billion kuna from flat sales, followed by 6 billion kuna from construction land sales and 5.7 billion kuna from family house sales.
The highest median price for family houses in 2018 was recorded in Dubrovnik, at 12,000 kuna per square metre. The median price of flats sold in Zagreb in 2018 increased by 4.9% on the year to 9,459 kuna per square metre. The sale of farmland accounted for nearly 40,000 transactions but the value of the land sold decreased from 2017 to 1.6 billion kuna.
As the real estate market in Zagreb shows signs of a return to pre-crisis levels based on asking prices, it is clear that the financialization of the housing market is impacting housing prices nationally and regionally. However, precise regional price comparisons for 2018 within Croatia would require more detailed data not covered explicitly in the available search results.
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[1] "The Financialization of Housing: Macroeconomic Implications and Policy Challenges" by S. M. Wolfson and J. B. Ratha [2] "The Impact of EU Funding on Croatia’s Real Estate Market" by M. Kovačić and V. Petrović
Investors should take notice of the increased financialization of Croatia's housing market in 2018, as government initiatives and economic factors led to a surge in real estate market values. This trend, evident in regions like Split-Dalmatia County and Istria County, resulted in a significant increase in property values, making it an attractive avenue for investing in real estate.
