Suppose that a Croat with an average salary wants to buy an ordinary one bedroom apartment with a living room for some € 80,000. How to get credit for such purchases? Fairly easy if you are willing to offer a mortgage and are able to find two guarantors with above-average salaries in these economic conditions. Sounds simple enough? You may have another property to offer a mortgage? Then you don’t have to find a guarantor! Of course, it is desirable that the guarantor’s pay is completely unburdened. There are a lot of people like these in Croatia, right?
Croatian newspapers Vecernji List made a survey among banks and customers. Payment of loans is getting worse, so credit conditions toughened. Some banks have a maximum amount of installment in relation to the salary, some have conditions that you need a guarantor or not, some are looking for life insurance, some determine the maximum loan amounts in relation to the value of the property … Each bank has different policies.
Potential buyers are quite disappointed with such a situation and often give up on buying their apartment. All are hoping that government incentives in the housing market in Croatia will bring some changes that could facilitate availability of loans, but the whole situation is not encouraging.
Croatian property market is in great crisis, and neither the banks nor the Government are not ready to make any concrete measures to change it. Of course, the government announced incentives, but their impact is uncertain and it is questionable whether there will be any significant change. Most economic analysts agree with this. The banks also do not help very much. Extremely stringent credit conditions do not lead to anything in the long term. Without money there is no investment, no new buildings, no jobs and without all that there no new cycle of growth.
This situation is not good for anyone in the market. Croatian real estate agencies and construction contractors are facing the future with great interest and uncertainty.

New provisions in the law permit a saving society to be actively involved in the construction by lending to the market the amount limited with the height of liable capital. This amount is currently 500 million for five largest savings societies. This figure is indeed impressive and its release could significantly improve the situation on the property market in Croatia. However, is it a worthwhile job? Would new housing in the current conditions ever find buyers?

Leading personnel from the biggest savings societies, which are mostly already part of large banking groups, believe that there is no sense that they perform work for which their parent companies are already responsible for, that is the banks. This is somewhat understandable because the banks already have a lot of big problems with construction companies, so there is no sense that the same problem gets pushed to the savings societies. On the other hand, there are societies that are not a part of banking groups, but act independently on the market. What will they decide?

Perhaps they are most likely to turn to their existing customers and move them in into “complete” buildings. This would mean that they would first start testing to determine whether it is possible to arrange their own customers to buy entire residential buildings, and if not then other savings companies and their customers would be included. This model could prove successful, especially in larger cities where there are a lot of clients.

The main goal of the whole project would be to effectively close the investment. Thus, the savings banks would credit savers, who would pay to construction entrepreneurs, and these would immediately return loans. Quickly and efficiently! Of course, most projects that could be financed would be smaller residential buildings, while some megalomaniacal projects would be out of the question.

Despite the fact that all together it sounds interesting, we need to wait to see what will happen with the long anticipated government incentives for the purchase of already built flats. It simply does not make sense to move in on any new revolutionary projects while the fate of thousands of unsold buildings is not resolved.

Co-ownership is a situation in which several subjects appear as owners of one thing, in this case a real estate. In such cases the facility is not physically “divided,” but legally speaking “shared” in several parts of the total value. This means that an individual co-owner can not claim to have exclusive rights of management over the property, and no one can usurp a single part of the house/apartment, for example bedroom, kitchen and so forth.

Property can also be distributed differently, for example, by content, which would mean that one co-owner may have the right of disposition, and others for use of the property. Co-ownership creates a special community among individuals, and it can occur by legal affairs, decision of the authorities or by certain laws. The way in which they co-manage the property is agreed between them or by voting. Such situations often lead to disputes and because specific actions are necessary to maintain the property, and some emergency actions to prevent its deterioration or make a sale, the decision may come through the courts. A good idea to facilitate decision making is that all co-owners decide to appoint a joint manager of the property.

Each co-owner of can dispose of his part and that means he can sell it. In such cases other co-owners usually have a right of first-buy, but it is not an obligation.

Indications of economic recovery in Europe, the fall in property prices on the Adriatic and the strengthening of the pound has again awakened the interest of foreigners to buy property in Croatia. Many Croatian real estate agencies say that they have some realized and announced contracts for 2010, but they also pointed out that customers are still more interested in cheaper properties, such as small vacation houses, while luxury properties remain unsold.

The crisis almost destroyed the housing market last year, but it also significantly affected the attractive real estate market on the Adriatic. Now, the things are moving towards a little recovery and it all starts in the North Adriatic and Istria. The main reasons for this are the recovery of economies and the strengthening of consumption in Western Europe. Foreigners are again up on their feet and they have returned to the Adriatic, which was always an attractive location, but, as mentioned in the beginning, they want only property that can be obtained cheaply. Some experts claim that it was the the fact that sellers are willing to significantly lower the prices that caused the apparent “recovery” of the market, and that the real situation will show in the coming months.

Otherwise, as far as the preference of customers is focus, except the price it is important that the real estate be close to the sea, and buyers are mostly looking for small vacation houses and apartments, agricultural land and olive farms and vineyards. What gives us even more reason for optimism is the fact that there are many investors who frequently contact agents and are interested in new projects.

However, some old problems are still there, although it was expected that the crisis will encourage their resolution. Primarily we mean the catastrophic situation in the land registry, unresolved ownership relations and the low quality of real estate. In combination with overestimated prices, this is the problem that repulses foreign customers. Foreigners just know exactly what they need, and they know and how much it is really worth. On the other hand, Croatian sellers often make unrealistic prices determined on the basis of totally subjective factors, which has already been mentioned in a lot of words in some previous articles. This situation leads to the creation of a balloon on the market, as there are more and more real estate buyers who are looking for property, but they are certainly not buying because of the huge price. This is an unsustainable situation to which, unfortunately, there is no end in sight.

We have already mentioned in one article that the new government measures on encouraging the purchase with a 200 euro loan could potentially mine the housing market, but the fact is that the markets of Southeast Europe are exaggerated and we were all warned several years ago by a famous doctor of economics from American University of Ohio, Bulgarian Krasimir Petrov.
This expert estimates property values by the two basic indicators used in the West, namely the ratio of rental and property prices and the ratio of prices to average income households.
The first indicator is generated in a way that the annual rent is divided by sale prices, and thus you get the return on investment. The American practice of normal return is 10-12%. Return of 15-20% means that the property is probably undervalued, while 6-8% or lower means that a property is overvalued and the entire market bubble could burst. If we take into account the fact that in recent years we have have reported figures of 3-4% throughout the region, it is quite clear in which position we are in. Average square meter for apartments in Croatia is 1818 euros, and rent has been the same for years, so the indicator is 3,5.
Another indicator (the ratio of prices and household income) shows how many annual gross earnings are required to purchase a property. If you need one, it’s an undervalued property, two show a normal price, and three indicate an overestimated value. In Croatia, the average gross salary is 1070 euros, and if we consider that we have two working adults per household, for a flat of 65 square meters with the earlier mentioned price of 1818 euros, a household needs to set aside 118,170 euros. This means that for such an apartment five years of savings are needed, and if we consider already three years mean that the property is overvalued, the conclusion about the property prices in Croatia imposes itself. To conclude, according to Petrov and his formula, the price of a square meter in Croatia should be approximately 600 euros.

A lot of questions arose since government announcements about encouraging the purchase of housing loans with 200 euros per square meter. It is only the average loan amount and each amount in the end will depend on the size of the apartment, while the maximum price for the square meter will be 1600 euros. In this way the State is trying to encourage the reduction of prices, which are unrealistically high according to some experts. The largest amount will be given to the price of 1,200 euros, a whole 300 euros, while for 1,500 the buyer will get only 100 euros. Loan period is 20 years and interest rates should be within the existing POS system, which is 4-5 percent, although the Government is looking for ways to make the amount even more reduced. Except for the fact this is the way to encourage trade, the aim is to inspire new building and stop layoffs. There are many arguments that support the government’s plans, but there are also those who say that it is an inefficient and an interim measure. All generally agree that in the beginning they will be able to sell a certain number of apartments, but also argue that for a more significant shift a lot of decisive action is required, especially regarding the great benefits that need to be payed to the state and local government, of which the largest contribution is the communal cost. The problem could also be that this measure favors small investors who have built flats in cheaper locations, where the land is purchased by a lower price, and to them it is not much of a problem to drop the price. In any event, the fact is that the announcement of these measures has now only even more slowed the real estate market in Croatia, because everybody is hoping for a loan and wait with the purchase of an apartment. This is not good neither for merchants or constructors, which could decide for new investments for now is the most favorable moment due to reduced prices of land and construction materials. In any case, the value of unsold apartments in Croatia is estimated at 8 billion kuna, which is an amount that would much contribute to recovery of the entire economy.

World property market began to slowly recover as the 2009 approached the end, although still showing signs of instability. The report was prepared by the Global Property Guide based on data from 27 countries. The last quarter of 2009 brought growth in real estate prices in 16 countries, while a further 11 recorded a fall, but still yearly price growth was recorded only in 10 countries. This shows that the market is still in crisis.
Although a slight increase in the second half of the year was recorded in many countries, it can not undo a huge drop in the level of the year. Just to mention Latvia (a bit less than 60%), United Arab Emirates (almost 50%), Bulgaria (about 28%), Iceland (a little over 20%), Russia (almost 20%) and Slovakia (approximately 15%).
In relation to the first half of the year, when prices rose in China, Portugal, Australia, New Zealand, France, Sweden and Hong Kong, prices have risen in the United Kingdom, Canada, Germany and South Africa before the end of the year, although it amounts to about 1-3%. Thus, in the U.S. prices rose by 1.2% with the annual decline of 7.5%, but it should be noted that the decline decreased from the beginning to the end of the year, indicating a positive trend of the market. Most successful market is that of Israel, where prices rose at the annual level of over 10%. Recovery and price growth were also achieved in Switzerland, Indonesia and Norway.
The markets in Asia and the Pacific were revived, so Australia recorded a growth of almost 5%, while New Zealand is a little behind with 2%. Hong Kong also recorded an annual growth of 3%, but the other Asian financial giant, Singapore, recorded a significant drop of 11%.
Positive signals for big investors are coming out of Dubai with the growth of 7% in the last three months, although, as already noted, the annual drop is a huge 50%.
The research results clearly indicate that the crisis affected the once fierce developed real estate markets of Western countries and Arab sheiks, while in Asia, where the overall economic growth continued, the growth of the real estate market continued too.

10% of loans to enterprises is not payable and total loans to private companies are falling from month to month. The crisis that hit the economy and property market hit the banks too, which means that in the case of bankruptcy of a company it is difficult to settle the remaining property.
The banking rule is that the bank finances the business project, not a company, that is her name or property, but the instruments of insurance still play a major role in the overall job. So when it comes to issuing new loans, banks are more cautious than before, especially when it comes to real estate offered as collateral, which eventually results in smaller loans.
In Zagreb bank there are different approaches and the bank has various insurance instruments. There are promissory notes and bills, mortgages on property assets of a company or private persons. Most loans are repaid according to contracted terms, but there is a small proportion of loans in which the inability to charge results in implementing execution or bankruptcy, which must be initiated by other creditors because the bank can not legally run bankrupcy claims if there is a mortgage on the property of the client. Even if someone else starts the bankruptcy, the bank is charged separately from the amount obtained by selling the pledged property. Appraisal of the property is based on location, quality, age and current condition of the property.
The Hypo Alpe-Adria-Bank said that despite all the problems payments are still satisfactory. There are some problems with credit entities and entrepreneurship, where the increased number of requests for reprogramming in long-term commitments led to a postponement of repayment. Termination of loan agreements are not increased, but the bank is trying different interventions to help clients more easily pass through this crisis period.
The Raiffeisen Bank in cases of enforced collection charges out of all available collateral until all possibilities have been exhausted. The amount that the bank fails to charge is written off the business books. The mere payment out of the insurance is led in accordance with the Enforcement Law. At this point the bank has no losses due to reduced market prices of real estate.
Revaluations of market value of real estate are regularly conducted. In the event that the value is to diminish so much that insurance becomes unacceptable in relation to exposure, the bank may require amendment of insurance.
Basically, the Croatian banks for now deal well with an adverse situation that prevails in the economy, but are much more cautious when making decisions about entry into new projects and loans.

In a time of crisis housing savings societies are perhaps the best form of savings. The reasons for this are their conservatism, security of operations, stable yields and state incentives.
Every Croatian citizen can be a client even if he is residing abroad and contracts are concluded for a period of 5 years. If he makes a loan before the end of the contract, the entire contract amount will be placed at the client’s disposal. There are a number of tariffs depending on savings time, and interests on deposit of 2-3%, depending on the currency clause.
Signing a new contract after the first 5 years gives the right to progressive interest, that is to an even greater profit. After 5 years the client can also use all special purpose funds and government incentives. Some savings banks offer different interest bonuses, especially if the client contracted savings for a child. These bonuses range from 25 to 100%, which is a great encouragement to all young parents.
Most deposits in housing savings are ensured, and every individual family member has the right to a contract. With interest and government incentives to the annual amount of at least 5,000 kuna, it is clear that this is the most profitable form of investment with great safety. After several years of investing in risky stocks and various investment funds, which was a big hit among many citizens of Croatia, it seems that the financial crisis and recession destroyed all illusions and that people are again returning to conservative forms of investment of their funds. In addition to savings banks and the financial market, this is good news for all entities involved in the real estate market in Croatia, whether it is the construction companies or Croatian real estate agencies, since the large amount of housing savings could easily end up on the market.

Real estate market in Croatia will be resting in 2010 too. Majority of real estate agencies in Croatia will try to forget 2009 as soon as possible.
Prices on the Rijeka market finally stopped on autumn levels at the end of 2009, which is below approximately 20% lower compared to 2008. Any significant progress in the next period is not expected; sales are stagnating, as well as prices and new construction, which was almost completely blocked in 2009, which in turn led to major problems for many engineers. In addition to engineers, the fall in turnover of almost 60% closed many small real estate agencies, of which many were not seriously engaged in this activity.
The fall in sales started as 2008 approached the end and continued in 2009 with an average drop of 50%.
One reason is the global financial crisis and recession, followed by extremely strict new conditions for bank loans, but perhaps the most problematic is the fact that the owners of flats and houses in Croatia are very rarely willing to adjust prices to market conditions, which leads to a small number of sales. The main reason is the emotions that Croats have for their property.
Customers are also much more cautious than during previous years, so even after finding a property that best suits them they decide to wait for a more favorable moment, which is directly linked to the overall recovery of the Croatian economy.
As for Rijeka and surrounding areas, trade takes place only at the suburban positions, where there has been a significant decline in the cost of square meters, while in the city itself it is very difficult to achieve sales. Most analysts believe that it will be so throughout the whole year, while the slow recovery can be expected only in 2011. All in all, those who survive the year in front of us can expect a lot of work and opportunity in the coming period. The Government could also contribute to the recovery with a more active engagement in the market.
The situation is even more difficult for construction companies and engineers. Building land prices fell by almost 50% and even so they are difficult to sell. New projects are still a long way from starting and the situation could go for the better only for 2-3 years.