With all the economic problems, year 2010 also led to a drop in credit and debt. Something like this last time happened in early 2000 and analysts estimate that a significant increase in demand could come only in one year.
National Bank of Croatia reported that at the end of February total loans of commercial banks amounted to more than 250 billion, which is something fewer than 1% less than same time last year. A decline in loans to financial institutions and individuals contributed to this decline.
In February, decline of credit to households continued for the fifth month in a row, and they were eventually totaled to about 120 billion, 3.5% lower than at the end of the same month in 2009. Analysts believe that the reason behind this is the growth of unemployment and reduction of income due to falling wages. Housing loans, which account for about 40% of total loans to households, still recorded an annual growth, but only 0.2%.
The annual growth rate of loans to enterprises fell to just over 1%, and their amount at the end of February is about 100 billion.
Lending to the government in early 2009. reached almost record amounts of growth. Towards the end of the year the need to fund reduced and so did the loans from domestic banks, so the growth rate became less and less. Thus, at the end of February loans to the state totaled about 30 billion, which is almost 4% more than in February 2009.
Analysts believe that government incentives for buying a first property could only slightly improve the demand for housing loans, but without an increase in employment there will not be a true recovery in loans market. The growth of seasonal employment during the summer could increase demand for short-term loans, but this is questionable because of the pessimism that prevails among Croatian citizens.
Since the situation is worse in domestic firms because of the crisis, rapid financial recovery and increased demand for loans in the economic sector is not realistic. However, measures of financial assistance by the Government might improve the situation a bit.

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.

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.

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.

Everything must end where it is started and the crisis will also probably end in America, most probably on the real estate market, which is where the breakdown began and triggered the avalanche of problems that we encountered during the last year or two. This is why every good data from the United States makes us all especially happy.
For starters, the number of houses that went to construction in August grew by 1.5 percent to almost 600 thousand, 598 thousand more accurately, which is the largest increase in the nine months of 2009. Also, work has begun on 25 percent more family housing units and soon government incentives to build first houses will start too. This all had a positive impact on the labor market, which is slowly showing signs of recovery as the number of applicants at the Department of Employment fell by 12 thousand.
Besides all mentioned above, the fact that the U.S. central bank, the Federal Reserve, has plans to insert further 1.25 billion U.S. dollars to the mortgage market echoed all over the place. The goal is to revive the stumbled U.S. economy through the recovery of the financial system and reduce the various requests for FED’s assistance from banks. Several support programs were also approved aimed at combating the credit crisis that started two years ago, in August 2007. Since the start of 2009, FED invested almost $ 700 billion in mortgage insurance, and by April 2010 there are plans to spend another 556 billion in order to maintain low interest rates.
It seems that the crisis in the banking system of the United States finally ended and now is the time for programs that will strengthen the economy again. Besides the obvious reasons why this is good news for the citizens of the United States, it is also very good news for the rest of the world because it signals the recovery of financial and real estate markets in other countries that were hardest hit by recession, especially in Europe. Such developments should also positively affect the recovery of the economy in Croatia, while the increase in purchasing power could return foreign customers to the Croatian property market.