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.

One of the last ideas was that the state offers financial help to jobless buyers of flats to facilitate the situation by paying their loan rates for a couple of months. The idea was dismissed from the government.

Banks have announced lower interest rates on housing loans and more flexible conditions when approving them. The government has also jumped into the market with incentives that should boost sales. Unfortunately, this leads sellers to believe that a new building can hold unrealistically high prices of flats. It is not constructive and sellers who have demonstrated good will as far as prices are concerned have no problems with sales. Customers are most confused. They are hearing about incentives and favorable conditions for purchase from all sides, but all this has no effect if prices do not fall at least a little.

What about second-hand flats? The situation is colorful. You can get a rather good price, but still there are sellers who sell by all kinds of “strange” criteria because of which their price is unrealistically high. They are convinced that they live in the best location in town, how they are experts for real estate in Croatia, who know exactly how the prices will move in the future, that their furniture is worth more than double the real amount and that the prices on the internet portals are realistic. It is simply not so! If you get a realistic and good offer for an apartment, then accept it, because the market will not have customers packed full of money as it was before the crisis for a long time.

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.

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.

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.

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.

In Central and Eastern Europe, crisis has significantly changed the way of doing business when it comes to residential real estate, but many people are still planning to purchase new property. In fact, research shows that quality housing is still missing.
During the past few years construction of new apartment buildings and houses was in constant growth, but despite this demand was always much greater than supply. Economic growth and wage increases led to a situation that most people, although some were already property owners, sought to improve their housing standards. Given this market situation, there is great potential for further development. In fact, most of the apartments in Croatia and the region was built during socialism so their quality is not nearly at the level of those in European countries. This situation also encourages many to sell their old apartments and buy new ones, which especially applies to some areas on the Adriatic coast and outside the big cities, where new investments in the construction of apartments and houses are expected the most. Unmet demand and weaker quality of housing are the best guarantee that property market in Croatia will not break.
But one should bear in mind that the current macroeconomic situation in the region is favorable as before. Potential for growth still exists, but banks have set new criteria for loans due to high risk, so capital is now unavailable to both citizens and investors. However it is the opinion of most experts that there will be only short-term slowing of the market, while in the long term we can expect stable growth with perhaps a somewhat different price policy.

There are no buyers in the Croatian real estate market and prices have fallen significantly during the past year. Some of the agents feel that the prices will decrease even more in the next year, but most analysts agree, however, that now is the optimal time to buy.
Prices on the most attractive locations such as Istria or Dubrovnik are now a lot more realistic than before, while at the same time the influence of the financial crisis resulted in significant changes in demand for real estate from abroad, especially when it comes to buyers from the UK, which are now much less numerous than before. Beginning of this year brought a very bad situation and soon there was more than 10,000 unsold flats. Even the law of equalization of foreign buyers with residents of Croatia didn’t bring significant progress. Despite all the problems Croatia is still a very attractive tourist destination, which has so far this year recorded better results than other well known destinations such as France, Spain or Italy, even with the crisis raging all over the world, which makes it extremely interesting to all real estate investors. The beauty of the Croatian coast and small towns charms all visitors, but be warned on the necessity to employ a good lawyer and real estate agency. Many proprietary relations are still unsettled from the time of socialism, so one must be careful that the investment in a nice new home does not turn into a legal hell in Croatian courts, which are among the least efficient in the world.