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.

New oonstruction or old? New apartments are nice, but often they know to offer poor quality. In any case, it is best to bring a guide who understands the issues during the purchase.

The difference between the quality of the construction of new buildings and old buildings is great. Each new apartment is equipped with separate devices for measuring energy consumption and the difference is even greater when it comes to materials used during construction. If you consider all possible new technologies that are now used in construction, then the new building should be a sure winner. However, everything changes when we know that the apartments are still built by people, people who usually like to invest in something and save some money during the process. This leads to big problems, because not many use quality materials, nor the most modern technologies. In addition, old buildings are usually built to suit needs of people, which means that durin construction builders thought about comfort for the people who will live in an apartment, not just the profit, which is the case today. Besides all stated above, the greatest advantage for old buildings is definitely location. All attractive locations for construction of real estate were occupied a few decades ago, so if the buyer just has to live in the city center or some other attractive location, he/she is ready to give an unrealistic amount of money for an apartment in an older building. This is an emotional component that is difficult to express in money.

New buildings have their advantages and the old have their’s, but the biggest problem is that the difference in prices between the old and new housing is simply too small, which creates an unrealistic picture of the real estate market.

Real estate prices are down 7 percent and after negotiations they can drop up to 20 percent. However, it is expected that even lower prices are possible only for low-quality real estate. Furthermore, crisis and recession have extinguished more than 40 percent of Croatian real estate agencies.

The 60 percent drop of sales was too much for a large number of agencies and the situation is so bad that some are even considering not organizing some traditional gatherings at which many agents regularly came before. However, information coming from the market related to a decrease of 60 percent say it is not a realistic figure and that after the final analysis at the end of the year this figure will be around a more tolerable figure of 25 percent. Apart from the crisis, the problem is in the fact that opening the market for foreigners did not lead to more positive developments as was expected, but this is likely due to the crisis too.

We could find some joy in the fact that big European countries have started to slowly emerge from recession. The owners of agencies that had a smart business plan endured the crisis and hope that the situation in 2010 will significantly improve in realtion to 2009. Tourist season already helped the agencies on the Adriatic to achieve a certain income and announcements say it should be even better in the coming months.

As for the prices, they have fallen in all parts of Croatia, but further large drop is unrealistic to expect, especially when it comes to quality real estate in desirable locations. Agency owners hope that banks will not just stand on the side when it comes to the real estate market in Croatia, but that they will release the brakes in credit market policies to provide the market with enough money for recovery and development.

Despite the fact that the decline in prices is slowing down and the recovery that began slowly in some countries as the end of the year is nearing, the global real estate market continues to feel the effects of recession and the financial crisis.
Unlike the situation at the end of 2008 and early 2009 when prices around the world fell to historically low levels, the recovery of markets and prices in the second half of 2009 started in several countries. However, it should be noted that the world property market is still dealing with a lot of big problems. Data from many countries proves this.
The first signs of recovery can be seen in China, Portugal, Australia, New Zealand, France, Sweden, Hong Kong, Israel, Switzerland, Indonesia and Norway.
In Portugal the prices increased slightly more than 1 percent. Government subsidies, which are announced in Croatia, are the reason for growth in France, which is slightly higher than 3 percent. A similar percentage can be seen in Sweden. Swiss market opposes crisis since the end of 2008 and prices have risen nearly 5 percent in the first half of this year. Similar situation can be seen in Norway, which also shows a constant increase in prices in 2009. In other European countries a further fall in prices was recorded, ranging from small 1.75 percent in Germany to almost 10 percent in Bulgaria. The biggest drop of more than 26 percent was recorded in Riga, the capital of Latvia. Real estate market in this country is one of the hardest hit by the crisis, with a drop of more than 60 percent this year.
In the U.S. market there was a slower decline, which is quite good if we take into consideration that the United States is where the crisis started. In the second quarter decline was about 14 percent, which is about 4 percent less than the decrease of 18 percent from the first quarter. As for the rest of the world, quite a large drop of almost 50 percent was recorded in Dubai, but we also saw a slower decline in the second quarter there too.
Unlike the rest of Europe and the world, the crisis and the price drop in Croatia were not so drastic, but it is a small and rather open economy, so it is important to follow the events on the international markets.

Croatian courts have a difficult task of selling a large number of houses, flats and small apartment buildings whose owners have failed to meet their obligations to banks.
Owners of mosto properties are mostly citizens, while there is much less companies with similar problems. The value of property that will be offered for auction by the end of 2009. is about 250 million kunas (more than 30 million euros), but it is very likely that the sales will be achieved with a much lower prices, even up to 50% cheaper.
According to statistics over 93% of these procedures that were conducted during the last 5 years were conducted over ordinary citizens and sometimes craftsmen. Most requests for starting the proceedings came from the banks and other financial houses, but a good part often comes from other people or state institutions.
In addition to residential real estate, a number of meadows and fields is also found for auction. Many farmers have in recent years raised large loans for improvement of production, and now are in trouble because they are incapable of returning their debt and must sell the agricultural land.

Little things such as installation of efficient light bulbs, computer shutdown, new windows and insulation can help to achieve monthly saving of significant amount of money.

The first thing you must do if you want to reduce energy consumption, and therefore save money, is that all appliances should be completely off when not in operation. This is especially true for computers and monitors, chargers for mobile phones and cameras.

The second step is to purchase efficient light bulbs. They spend five times less energy and lasts 8 times longer than ordinary light bulbs. Of course, shut down the lights when not in the room. You will feel this on your annual cost.

Every appliance in the apartment should be an energy class A or A +. These devices consume up to 45% less energy than energy grade D. This means that on every appliance you can save 100 to 200 kuna annually, so now calculate depending on the number of devices you have in the apartment.

We arrive to the heating and cooling. Do not exaggerate with air conditioning because it is not good for health, but note that the cooling of only one degree spends 3-5% of the total energy. When buying make sure that the climate device is of the class A and consider buying a device with inverter because it achieves savings of 20 to 40%. When we talk about heating obtain thermostats for radiators. This way you can save up to 20% and if you decrease the temperature for only 1 degree you can save about 5% of energy.

A little bit more expensive investment is to change the windows. Windows you want have double or triple glazing. It would be good that windows also have Low-e coating on the inner side, as well as a quality framework that does not lose heat. These windows are 20% more expensive, but they have 50% lower heat losses.

The next more expensive step is good insulation, especially in private homes without the facade of old flats. With good insulation and windows you can cut your energy costs in half. Listen to the architects and engineers when they give you advice for insulation.

If you want to go all the way then install solar panels. With them you can completely remove the cost of heating water in the summer and reduce energy consumption 30-60% during the winter.

What will be necessary to make the Croatian real estate market finally free of this crisis? It appears that all the efforts of local banks and the state have so far not led to a significant shift for the better and to make matters worse there has been no significant fall in prices. In such circumstances it is difficult to sell a property, as evidenced by the increasing number of cancellation of agencies and many agency employees losing their job.
It seems that the only effective solution is increased investment on the market. The Croatian market can not independently initiate a significant investment cycle because there are not enough investors and it is also a small market compared to others. What we are waiting for in this situation is the stronger growth of the largest European markets, which should lead to a new investment cycle in Croatia.
Continuation of negotiations for accession to EU will send a message to investors about stabilization and potential benefits of investment in Croatia. The fact that Croatia is closer to entry into the Union combined with a defined strategy and investment incentives could create a new interest among investors and encourage foreign investment.
What is now hindering new investments across Europe are low rates of return, so investments of most countries are lower as much as 60% compared to the first half of last year. However, as 2009 is getting closer to the end increased investments are expected in most countries, and it is also expected that the next few years will bring more stability regarding the rate of return. Currently the banks are also not helping a lot with their limited offer of loans, and if they even give credits then they do it by much more stringent conditions. All this has a bad effect on the real estate market and it is a part of the reason for current slow pace of recovery.
Fortunately, good news are coming from the United States of America, Canada and Asia, so next year we expect more investors from these countries, especially from China, whose investors could start up the sleepy commercial real estate market.

It is difficult to determine which is the right time to move into such a serious investment like buying a new apartment or house. There are lots of obstacles and it is important to pay attention to some of the most common mistakes.

Do not think too much about the situation on the market. It is useless to wait for the market to touch the bottom because then you will never make a decision. Real estate market in Croatia is at the moment, unfortunately, faced with this problem. When choosing to buy you should always have the market situation in mind, but above all consider whether you are able to financially sustain a purchase. Too much thinking can sometimes take you in the wrong direction.

You always leave yourself room for financial maneuvering. In addition to costs such as loan and arranging, some unexpected expenses can always come up, so be smart enough to take such problems into account in advance and create a fund to handle these kinds of crises.

When you buy property in Croatia you should always have a qualified lawyer and an agent from a professional Croatian real estate agency. Despite the fact that they will check all the legal details and put together a favorable contract, always be sure to check all items of the contract yourself in the end.

Thoroughly check the property you intend to buy! Every day we read in newspapers about the various stories related to the problems after the purchase. Today you simply can not be sure whether the property you are buying is all right, even if it is a completely new building. Take some experts who understand construction with you to review and the real estate objectively assess the situation. Do not take risks and buy at the first sight only because you have fallen in love with your new house or apartment after the first inspection. This is a one way street towards the purchase of a bad property or failure to catch better opportunities. In addition to checking the property, check the neighborhood too. It makes no sense to live in hell with noisy and problematic neighbors.

Finally, always bear in mind that your finances are not limitless and have a cost plan before you purchase. You may think you can afford a loan for a house or apartment of your dreams regardless of the loan amount, but is there any sense to go into too much debt and later barely survive the month. Be humble and rational, do not you let your life in a new home lead you into a financial collapse.