Istria and Kvarner: The Highest Prices in the Country
The Istrian County and Kvarner are among the most expensive areas in Croatia. In Istria, the price per square meter reaches up to 3,517 EUR, which is an increase of 7.1% compared to the previous year. The Primorje-Gorski Kotar County (Kvarner) follows with a price of 3,500 EUR per square meter, representing the largest percentage growth in the country at 12%.In the south of the country, the situation is similar. In the Split-Dalmatia County, the average price is 3,490 EUR per square meter, while in the Zadar County it is 3,390 EUR. The capital city Zagreb is no exception with an average price of 3,071 EUR per square meter.
Housing Affordability for the Average Croat
According to the latest data from the State Statistical Office, the average net salary in Croatia is 1,324 EUR. A person with this salary has a maximum borrowing capacity of approximately 570 EUR per month. With an interest rate of 4% and a repayment period of 30 years, they can obtain a loan of 119,000 EUR, which is enough to purchase an apartment of about 39 m2 in Zagreb."Young people in Croatia face serious financial challenges when buying property, mainly due to high prices per square meter. Banks often require a personal contribution of 10–20%, which represents another obstacle. Moreover, the rising interest rates over the past year and a half have significantly increased loan costs, further reducing housing affordability for the younger generation," says Yetunde Kristina Škorić, head of the credit department at kompare.hr.
Croatia as One of the Least Affordable Countries for Renting
According to the project by the European Spatial Planning Observation Network (ESPON), Croatia is one of the least affordable countries for renting apartments in the EU. To rent a property with an area of 100 m² in the Dubrovnik-Neretva, Split-Dalmatia, and Šibenik-Knin counties, one needs to spend more than two average monthly incomes.In the Istrian, Osijek-Baranja, Krapina-Zagorje, and Zagreb counties, rental costs range between one and two average monthly incomes. In Zagreb and the Primorje-Gorski Kotar County, one needs to spend 70 to 80% of the average monthly income.
What is Behind the Rising Real Estate Prices?
Investments in real estate are perceived in Croatia as a safe form of savings. More than 40% of the housing stock in the country is not used for permanent residence. This is most pronounced in the Lika-Senj County, where 51% of apartments are unoccupied. It is followed by the Zadar County with 43.1% and Istria with 42%. Tourism significantly reduces the available housing stock, as many properties are used for short-term rentals. Foreign buyers, who often pay in cash, also have a significant impact. This is one of the reasons why cash transactions account for 55% of real estate purchases in Croatia.In addition to increased demand, astronomical prices are also influenced by the energy crisis and rising prices of construction materials.
Predictions for Next Year and Tax Increases in 2025
It is expected that in 2024, the growth of real estate prices in Croatia will continue, although perhaps at a slower pace given the already high prices and decreasing affordability for average buyers. A key factor will also be the planned increase in real estate taxes for 2025.The tax increase may have a dual effect. On one hand, it could deter some foreign investors and speculators, potentially leading to stabilization or even a slight decrease in prices. On the other hand, higher taxes may burden current property owners, who might pass these costs onto tenants, further worsening housing affordability.
The situation in the Croatian real estate market is complex and influenced by a number of factors, including domestic and foreign demand, tourism, economic conditions, and upcoming tax changes. For potential buyers and investors, it will be crucial to closely monitor these trends and prepare for possible challenges in 2024 and beyond.
