As the year is coming to a close, the activity in the financial markets is subsiding, so the last week brought no surprises in the money market. There was no need for a treasury bills auction of the Ministry of Finance, while interest rates for t-bills with a maturity up to three months had a mild downward tendency.

On the other hand, interest rates on the opposite end of the ZIBOR are still at relatively high levels, thus reflecting lack of trading and caution by investors. The liquidity in the system is still high (close to HRK 5bn), but a clear message by the Central Bank that it will stay committed to the policy of stable kuna does not exclude the possibility of withdrawing a part of the liquidity in case of stronger depreciation pressures.
Author/Source PressCut - (RBA analysts)

Croatia’s tourism industry welcomes the new government and new tourism minister Veljko Ostojic with relatively high expectations, which include a tourism strategy, an adequate VAT rate, smart privatization, and labor rights.

Companies expect next year to be even more demanding. In statements given to the Croatian news agency HINA they said they were willing to work with the new government and minister to solve the issues that burden the sector and make it uncompetitive. The hotel industry has earlier requested the VAT rate to be reduced to 8 percent for all the services in tourism.
Author/Source PressCut - (Poslovni.hr)

The total value of outstanding payment orders of 68,489 businesses in Croatia exceeded HRK 40bn at the end of October (HRK 40.19bn). According to the data provided by the Financial Agency (FINA), 1-year liabilities or older account for more than 83 percent.

This represents a small increase compared with the month before, when total liabilities reached HRK 39.96bn. More than 76 percent of businesses have their accounts frozen for 360 days or more, while the amount of their outstanding liabilities account for 83.4 percent of the total debt (HRK 33.5bn). Among them, 35.7 percent have been frozen for 5 years or more.
Author/Source PressCut (www.liderpress.hr)

Each year the Spring brings blooming of life, and this year it brought bloom to the real estate market in Croatia. Sales in the Adriatic jumped nearly 15 percent!
Economic recovery in the world returned customers to Croatia, and most of them are after luxury villas by the sea. Customers who have such finances were never actually poor, but the crisis impacted their consumer habits. No matter how strange it may sound, psychological blockage is much harder to break than financial.
They are looking for apartments too, but they are also mainly luxury. This is to some extent a problem, because the middle class citizens, who are also the most numerous class, still fear for the future, so decisions for investments in new homes are difficult for them. Although the news of the market recovery are most welcome, it is not good that the property market in Croatia depends exclusively on foreigners.
Prices also influenced this positive move. All prices fell, regardless of the type of property, so flats and houses are automatically accessible to more customers, regardless of whether they are foreign or Croatian citizens.
All this is still quite far from the “golden years” of Croatian real estate agencies and construction companies. A large number of agencies have shut down and smaller construction companies have endured severe strokes. However, the cyclical movements of the economy is normal in capitalism, and it can also be expected in Croatia. After each rain, the sun has to come.

Real estate market in Croatia is simply too expensive, but this statement applies only to Croatian citizens, which is correct if viewed from the standpoint of purchasing power of citizens.
Viewed only from the standpoint of property values, Croatia is not that expensive as far as we can tell, especially if one looks only at the market of houses. What does it mean to Croatians? Not much really… And it is not a consolation when the calculations include the economic situation in the country. However, it certainly means a lot to real estate agencies and investors, and ultimately could improve the economic picture of the country, which would probably do some good fix the situation for Croatian citizens as well. It is all a circle.
Not to complicate, the houses in Croatia are among the cheapest in Europe, and in the neighborhood as well. In Slovenia, they cost a lot more, and in Montenegro too, mainly thanks to a huge breakthrough that the country has had on the tourist map of Europe. When all is taken into account, it is not unrealistic to expect foreign buyers, with a dose of optimism caused by the economic recovery in their countries, will soon be able to begin their return to the Croatian property market in large numbers, especially to the traditionally popular Adriatic.
As usual, the banks were among the first to recognize this trend, and Erste Bank has already introduced housing loans for foreigners. Conditions are extremely favorable and offer various benefits, and loans are granted with a currency clause and mortgage insurance.
Good news for all who are engaged in the business with real estate in Croatia!

Sale of apartments in Croatia is almost completely stopped. Last three years the market has fallen by over 30 percent and in some locations over 50 percent. Who’s to blame?

Professor Josip Tica from the Zagreb Faculty of Economics believes that builders who stubbornly hold prices and thus maintain the status quo are most responsible, which will not suit anyone in the end. He believes investors should be reconciled with a certain loss of profits, sell out homes and move into new investments. Otherwise there could be a new escalation of the crisis, which this time woul influence the employment and cause a large loss of jobs in the construction sector. Increase in unemployment would sooner or later impact related activities.

The consequence of lower sales of housing affects the rest of the economy, thus the banks changed their policy of financing, and the role of government has changed, because the focus is not to encourage new construction, but the real estate market itself.

Also, Professor Tica said that the problem of taxation is also important, namely lack of same when it comes to real estate. People are simply accustomed to having a real estate as one form of savings. When a tax-free part of the household would be established, and everything else taxed, then savings would be redirected to other parts of the economy and obtained tax could be invested in other areas, such as health or education.

All this would ultimately strengthen the economy, and thus indirectly the real estate market, that is encourage new projects.

World analysts expect that this year the market will finally touch the bottom, but this is not that bad … Why? Cause this means that next year the recovery starts!
The growth of the real estate market in whole of Europe is expected to start next year, everywhere except in Eastern Europe. Does this mean that Croatia will continue the negative trend in the market? Yes and no. Although Croatia is among the critical countries, our market is still on a some sort of border between East and West from an economic point of view. This means that, depending on the sector of the market, recovery can be expected during the 2011 and 2012.
Investors in Croatia will have to be reconciled with lower rates of return on investments, and banks can expect to have to finance projects through some other models. Large residential projects can be expected in 2012, and the same goes for new shopping centers and office buildings. Further stabilization of prices will also help the recovery of real estate market in Croatia, but that does not mean that all existing apartments will automatically be sold. Regarding industrial property, the situation is quite uncertain and new investments can not be predicted. Tourism should be successful as usually, but here there are also various, mostly legal issues.
In the end, optimism comes from neighboring Slovenia. Apartments market in the first three months grew by over 70 percent! Unfortunately, this trend is not followed by houses.

Awareness of the environment is one of the most important themes of modern society, but equally important is the one about saving, that is the rational consumption of energy.
Croatia is also engaged in this area and so it created an energy certification for each building on the property market. Everything must have an energy certificate and a clearly defined energy consumption for heating, cooling and ventilation, and this document will become a part of any sales contract. The buildings will be divided into classes A +, A, B, C, D, E, F and G.
Energy consumption will surely become an important criterion when buying a home and business premises.
Energy card will also be given to hotels, restaurants, sports venues and all public buildings. Exceptions are only buildings smaller than 50 squares, churches, monuments and industrial buildings.
In Croatia, there are a million buildings that will have to get an energy certificate, and the deadline for the adjustment is entry to the European Union. Certification will be given by qualified personnel, and so far about 50 people passed the “school” to be qualified certification experts. For now, no building in Croatia has a certificate. The investor who builds a new building shall have to provide an energy certificate before usage of the building.
What does the certificate bring to the market?
- It contributes to order on the property market
- Gives a clear picture of energy consumption
- Proof of quality
- Improvement of marketing

New Act encourages state loans of 100-300 euros per square meter to purchase a flat. The amount of the loan depends on the price, the longest repayment term is 30 years and the longest grace period 20 years, the annual interest rate is 2% for the grace period and 5% for repayment period. The interest will not be taxed. The user may at any time terminate a grace period or repayment and pay the balance as a whole.

During 2009 there has been a stagnation in the real estate market in Croatia, and similar continued in 2010. One of the main reasons for stagnation is the decline in the purchasing power of citizens. This Law regulates the granting of loans from state funds when purchasing a flat. State funding was secured from the State budget and the final amount will be determined by the Croatian Government. The loan, of course, is repayed in the favor of the State budget. Enactment of the Act should enable the builders to use funds obtained from the sale to start a new cycle of building and give favorable credit terms to customers with state help.

The loan is approved by the Agency for Transactions and Mediation in Real Estate, which performs all other duties related to Loan Agreement. An applicant for a loan must submit a copy of the identification card, purchase agreement for the flat, proof that he has secured funding, a copy of the document for the use of buildings and public notary certified statement that he owns no flat or has only one apartment that is for sale, and if you are married a statement that the spouse has no flat. Complete application for a loan is one that from the time of submission contains all the contributions required by law. Users of the loan that do not respond to the invitation to contract loses the right to contract. The Loan Agreement shall contain a statement which allows registration of a mortgage on the property.

The amount of loan that is granted in any particular case depends on the price per square meter:
€ 300 to € 1000
€ 250 from € 1,001 to € 1,150
€ 200 from € 1,151 to € 1,300
€ 150 from € 1,301 to € 1,450
€ 100 from € 1,451 to € 1,600

Rate of housing loans from banks in Croatia is higher than the one payed for renting. This is a problem for most Croats …
Because of the difficult financial situation, Croatian citizens often opt for subtenantship, that is they life in other people’s homes for a fee. In developed Western countries this is not so strange, as the majority of people spend a lifetime as tenants, but here the ownership of a property has always been placed high on the priority list, especially since the subtenantship binds a number of problems.
One problem is the disproportion in the price and size of the apartment, so going to a small flat has the same cost as an apartment twice as big. Quality and equipment of the flats are also not consistent with the high prices. In student centers such as Zagreb and Rijeka these problems are more prominent. A large number of tenants are living in unregistered homes and most of them tolerate it cause otherwise prices would rise. In such cases they do not enter into a legal contract, so it often happens that the owner does not fulfill his obligations to tenants or does not give them back their refundable deposit.
Since there are almost no legal applications from landlord, official figures say that there are almost no subtenants in Croatia and the last data says it is a little more than 40,000 households. However, it is estimated that the actual figure is three times higher.
Now we go back to the beginning… The Croats want their own apartment and subtenantship is considered only as a temporary situation, so they are rarely paying attention the problems.