Housing market in Croatia, according to some estimates, is still not stable. Analysis are many and they come from all sides, and some experts are even pessimistic enough to announce that the year ahead will be worse and anticipate further price drop, though such estimates should be taken with some reservations.

Prices of flats fell in 2009, but it is difficult to determine exactly how much because some of the high quality and good location flats even got more expensive, while for others prices fell drastically. Real data will be known in the next few weeks. Apart from problems with prices, a big problem could be non-return of loans to banks, causing a situation in which a large number of properties could go to banks, which could in turn lead to insolvency because of the inability to sell them. Such a development could have a negative impact on the construction industry, which is already faced with certain problems, and a significant number of construction firms, especially smaller companies, have justified fears of bankruptcy.

Banks have already begun to prepare for 2010 and they launched a write-off of bad projects. Bad credit policy regarding the purchase of real estate will leave a mark on the Croatian banking market, but most experts believe that new investments from banks will get into new cost-effective projects.

Predictions for 2010 also bring significant changes in the policy of investing in property in Croatia. New housing properties will be less built and most money will be earned from investment in office buildings, renovation and reconstruction of old dwellings and construction of energy efficient property that banks will encourage with more favorable loans.

The exact number of unsold flats is not known but it is assumed to be a figure between 10,000 and 15,000 apartments, whose value is estimated at over 8 billion kuna. In this situation all suffer - the state is losing tax revenue, builders will soon be out of work, which will again cause a decline in state revenues. Some politicians have suggested that the state should actively participate on the market by creating a guarantee fund to enable the price of commercial housing to reach the level from the program of encouraged housing.

Financial problems and difficulties in obtaining loans are the biggest problems of young people when it comes to buying real estate. One of the problems are conditions that are required in employment, such as experience, foreign languages and higher education, all for a small salary, or even a minimum wage. With such conditions, the question of how young people can solve their housing problems presents itself.

Demography is also part of the problem, especially in the former socialist countries. A large number of young couples with children live as tenants or with parents, while the situation is even more critical with singles. The impossibility of solving a housing problem is one of the leading reasons why young people rarely enter into marriage and decide to have a family. You could say that this is a vicious circle of demographic problems. A debate on solving the housing strategy should definitely be started around this issue. A large number of young people are tenants and are most disadvantaged. Flats are small, prices high and a fact that they are usually rented out without an application prevents a tax refund.

States should certainly be more actively involved in solving this problem by encouraging both demography and housing. Some European countries, like Holland and France, have even included provisions that people have the right to housing in their constitution and the states took obligation to provide them. In Croatia, the market for new housing so far worked quite liberally with uncontrolled prices. In Europe the situation is somewhat different and the market is controlled, so the larger cities and housing societies are often involved in plans for building housing for citizens, as is the case in Vienna. In such cases the prices and potential buyers of flats are known in advance.

If it wants to avoid further worsening demographic situation and housing problems, the Croatian government should also start thinking about taking a significant role in the real estate market along with the cities.

Five Croatian saving societies concluded over 100,000 new savings contracts worth about six billion kuna in the first 9 months of 2009, which is a growth of almost 10% over the same period last year.

Most new contracts were concluded by Prva stambena stedionica. Also, very good results have enabled savings banks in Croatia to achieve great growth in revenues and profits. Thus, their total gross profit is more than 40 million, an increase of over 250% compared to 17 million from the previous year. The biggest gain was made by Prva stambena stedionica. The only minus was recorded in operations of the Raiffeisen housing savings. Total assets of Croatian saving societies at the end of September amounted to over 6 billion kunas, or about 5% less than in 2008. HPB residential and Wüstenrot are the only ones that recorded growth, while others recorded a decline in value of assets. Banks and savings banks also have a high capital adequacy ratio of 15%.

We have good news in the banking market too! From 1st of December 2009 Zagreb Bank returned the offer of housing loans for young people, designed for customers under 40 years of age for a period of up to 25 years. In relation to the standard offer, the interest rate is lower by 0.5% and it is 7% linked to foreign currency in € with a reduced ratio of loan amount and collateral. So loans can be approved with a minimum participation of 10% without guarantors and without deposits. Insurance instruments such as life insurance, cash or funds deposit may also be paid from the loan. The fee for approving the loan is 1% for purchases and 2% for reconstruction of a property. All beneficiaries of ZABA housing loans in Croatia can get large discounts for equipment and renovation of the property. CEO of Zagreb Bank said that such changes are possible because of the cheaper sources of financing in the international market and we can expect a further decline in interest rates in Croatia. Larger and more favorable credit offers can help sales of new apartments, so more and more investors are realizing that they must adjust their prices to the emerging market conditions.