HGK Expert: Chronic Housing Shortage
Lana Mihaljinec Knežević warns that market averages don't tell the full story, as construction has lagged for years despite active demand stimulation.
Lana Mihaljinec Knežević warns that market averages don't tell the full story, as construction has lagged for years despite active demand stimulation.
Croatia's real estate market is facing a chronic supply shortage, especially in new construction, while prices remain high in tourist hubs and Zagreb, and the number of transactions is declining. Lana Mihaljinec Knežević, a member of the Presidency of the Real Estate Association at the Croatian Chamber of Economy (HGK), highlighted these concerns during the 'Studio 4' show.
Although average prices have continued to rise, she noted that averages don't tell the full story and are almost irrelevant for buyers. The main reason is the significant price disparity between Zagreb, coastal tourist destinations, and the rest of Croatia, as well as differences based on property type-whether new builds, older apartments, houses, or land.
The downward trend in completed transactions has persisted for the past few years, indicating insufficient supply in the market. Mihaljinec Knežević points out that the decline is significant in coastal counties, and the percentage is also relatively high in Zagreb. In Split-Dalmatia, Šibenik-Knin, and Primorje-Gorski Kotar counties, a noticeable drop in transaction numbers has been observed.
She attributes this primarily to conditions in source markets, which have a major impact on Croatian coastal towns. The main buyers are foreigners who are no longer just purchasing vacation homes but are also building properties for tourist rentals. "Primarily, it's foreigners buying-they no longer just look for holiday homes but also construct properties for tourist rental," added Mihaljinec Knežević.
The expert warns that the stock of used properties has been virtually exhausted. These are properties that haven't seen investment for years, especially in areas without significant economic activity. A large portion of this existing stock has been sold in recent years, leading to a major supply availability problem.
"This is a chronic issue in Croatia's real estate market. We don't have enough newly built, average-priced apartments, let alone affordable ones," said Mihaljinec Knežević. "The stock of used properties is literally depleted. These are properties that haven't been invested in for years, which is especially pronounced in areas without stronger economic activity. A lot has been sold from this stock in recent years, so we have a big problem with supply availability," she explained.
The fundamental driver of the entire real estate market on the Croatian coast is tourism. In some places, there's almost no other economic sector besides tourism, and towns are liveliest during the summer months. The rest of the year, there's a lack of both economic activity and social amenities, as everything is geared toward tourism. "In some places, there's barely any economic activity other than tourism. That's a big problem because these towns mainly come alive in summer, while the rest of the year there aren't enough economic or social offerings. Everything is focused on tourism," she explained.
Looking at prices, the highest are in coastal tourist centers like Dubrovnik, Rovinj, and Opatija. Next comes Zagreb, followed by the continental part, where average prices are much lower compared to the first two areas.
Mihaljinec Knežević describes the reason prices remain high or even continue to rise despite fewer transactions as a structural and highly complex issue. Starting with spatial planning, Croatia simply lacks sufficiently large plots, developed infrastructure, and the economic activity and amenities needed for young people's daily lives outside Zagreb and coastal tourist hubs. "If we start with spatial planning, we simply don't have large enough plots. We're missing developed infrastructure, economic activity, and amenities for young people's daily lives outside Zagreb and tourist centers," she assessed.
"Tourism, especially along the coast, impacts the real estate market, and for years we haven't been building enough, yet demand exists. In fact, it's been actively stimulated through certain government programs. Simply put, someone always needs to move out of a shared household and relocate, and there are numerous real estate investments aimed at preserving money's value against inflation," she concluded. "Demand has also been encouraged through some state programs. There's always a need for housing, and at the same time, there are many investments in real estate to protect value from inflation," she added.
