Croatia property prices dropping heavily
Since the Financial and Economic crises hit the world, I have been wondering when the crises would have an impact on the real estate market in Croatia, which to my personal opinion is way over priced.
What do I based that on? Well although I live here and love to be here in the country, there is also I few things which are not so rosy and they should to some extent influence the real estate prices.
- It is very difficult to run a business in Croatia, according to doingbusiness.org Croatia rank number 103 of 183 countries in the world.
- Unemployment rates are high
- Croatia rank as one of the top two countries in the world in terms of effective income tax.
- Average net salary is modest.
- As a foreigner you can normally not rent out your real state in tourist season
- Etc.
So with these “minor” obstacles I have been wondering how people could justify and afford buying real estate for 2.000, 3.000 and even 4.000 Euro a square meter.
Well I guess situation was, that every body got caught by the sky is no limit stories, from all there the real estate agents and the banks handing out loans, to everybody who could spell the word “loan”, now reality occurs, which means quite a few people will have to settle with prices much less then two ears ago. Obtaining a loan is extremely difficult as more of the banks are bleeding heavily as a result of the crises.
The majority of people offering real estates for sale still think we are in 2006 and 2007 when they put up there real estate for sale, but a few people especially the ones who are in need of cash, have to sell at a realistic prices, here a few examples.
A business partner of mine recently managed to sell an apartment of his in Zagreb, he got 1200 Euro m2. (Few years ago price was 1600-1800 Euro) Another business partner of mine was offered an apparent south of Split with SEA VIEW for 900 Euro m2, all papers 100% clean, the company selling was a construction company having problem with finding money for salaries etc.
Personally I think prices should end up by 1000 -1500 Euro m2, of course depending of Location and type of property
Let us here what you think the price level will be in 2011
Average price of Croatian real estate in 2011
- 1.000 - 1.500 Euro per m2 - for a regular appartment with Sea view (50%, 1 Votes)
- Above 2000 Euro per m2 - for a regular appartment with Sea view (50%, 1 Votes)
- 1.501 - 1.750 Euro per m2 - for a regular appartment with Sea view (0%, 0 Votes)
- 1.751 - 2.000 Euro per m2 - for a regular appartment with Sea view (0%, 0 Votes)
Total Voters: 2
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I hope you continue running posts on Croatian real estate prices as there are a number of people looking to buy there.
For sure we will keep posting about the development on the real estate market here in Croatia, dont forget to sign up for our RSS feed or E-mail news letter, so you can stay up to date with the latest news about real estate in Croatia.
Brgds, The Expat blog team
One of the main problems in Croatia is the table at which Value is set, its calculation and people’s understanding and acceptance that property valuation has several variables. Conversely I have seen several valuation reports by the “larger” international property consultants, who rightly take residual calculation as a norm but base a valuation on hopeless optimistic yield values ( this is specific to commercial properties really). Clearly, the market must be based on actual sale and purchase data, i.e price and period of that sale (how long it takes to sell from start of offer)in Zagreb currently there are reportedly between 10-11 thousand unsold new apartments. On further investigation it’s possible to see that most of these are in a low-quality band and have been in the most part put up for sale at vastly inflated prices. In central Zagreb offering prices range from 3300€ down to 2100€ (per square meter); the lower price being a discounted offer from 2300€. The actual apartments are not really anything special themselves (design wise)and the price is based primarily on geographic location only, with the quality of immediate environment being in most cases ignored by the owners as being relevant. In conclusion one could so there is a confusion, which is encouraged by such developments behind Gradska Kavana which reported offer apartments at around 10,000€ /M2, thus suggesting to many in the immediate area their property may have similar value. Of course the knock on effect on this confused state of valuation of property are the land prices which are often placed way over the scale of possibility simply because the owner thinks a buyer will value the site as they do, i.e. at the highest return rate. Clearly the way forward here is for a much stronger form of Property Association or forum which people could rely on for benchmarking their price range. Of course this is simplistic we all cry!…well yes, at face value it may be but there is a complexity which needs to be harnessed now to provide real-time guidance to the would be developer here and/or property owner.
Hi John
thanks for your insights!
I my selves have limited experience in terms of dealing with real estate, so I generally in looks on the pricing level from perspective of running the property as a business.
Based on that I had huge problems understanding why the property prices exploded like they did, not only here in Croatia but in most of Europe.
If I look at the potential rental income, which you could generate from e.g. a villa at the Adriatic, the current prices level is minimum double if not triple compared to what it should be according to my calculation.
Morten
Croatiablognews´s last blog ..Hotel Medulin
How has this drop in values affected the holiday and second home market. We have seen a huge drop in values for second homes for holiday purposes else where in Europe where owners cannot sell their property.
This has led to a more competitive market but has flooded the market with too many properties, I think where people are panicking trying to sell property that in a few years once the market has stabalised and a more realistic level, that allows locals to purchase and not inflated due to the second home market.
Hi Chris, let hope that the prices stabilize, personally I although think that prices will drop a lot.
Value requires careful assessment. An apartment in a simple block which may have a view of the sea but at ground floor has a poor environment ( this is not unusual in Croatia) could not be compared to a simple stone house ( but deserted) in a un-kept olive grove. It is a question of what we consider, and require, in the term of “quality”. As the saying goes one persons home is another person’s castle ( or such-like!). In the past ten to fifteen years Croatia has sustained a massive shift in the private sector and its impact on the public environment. Sadly this has occurred with inappropriate measures from the State which, if in place, could have enhanced this private spending and perhaps directed in towards beneficial developments which ultimately would have brought “better value”. In other words just maximising the density of your plot which could sit next to a similarly one will not necessary mean you make a profit as it’s quite likely that many people will not want to buy your apartments as they do not offer anything different, special or likable even. This is obviously frustrating for those who have been lead to believe that Big is beautiful ( and therefore valuable). I would therefore council the owners and developers to think a little more outside the box, before either building new homes or trying to sell those that they currently have. Not a simple solution and clearly could not be seen as a one-fix concept of solution, but more of a shift in philosophy.
However, in answer to the point that Chris raised; I would agree with the previous comment, prices will fall further unless all owners can sustain negative equity for ever!
This is a very interesting article as I am in the beginning stages of researching properties in Croatia. Couple of questions…where do most of the ex-pats live? Why do you say that you can’t rent your property when it is high season? Is it because there are so many available properties or because of some sort of residency law? Thank you in advance, Jamais Trujillo