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.

During the past couple of years business offices were being built all over the place, with even more of them announced before the crisis. Then the recession came and all plans were put on hold.
All investors should consider themselves very lucky with the fact that most of their office spaces were already rented out when the crisis struck and that companies which now operate in them are bound with long term contracts. This left a rather small number of unused offices on the market and the demand for them also dropped because of the financial crisis. It may seem a little bit weird, but this situation is actually good for the market of commercial real estate in Croatia, which is now stable. If it had not come to this, the offer would eventually be much higher than demand and prices would drastically fall. Something like this already happened in some European markets.
Currently the development of new projects is put on hold because banks announced more strict conditions for getting loans, so now investors have to come up with their own source of financing. Despite all these problems, it is expected than the regional market of commercial real estate will continue to develop in the near future.

Real estate market is by its characteristics same as any other market and as such is subject to all laws of supply and demand.
This year a lot has changed in the Croatian real estate market. Employment in the country fell, there is a great fear of national currency dropping, jobs are uncertain and loans are impossible to obtain at reasonable interest rates. These circumstances have resulted in falling demand for real estate, especially for apartments. At the same time the number of apartments is very high and is expected to grow even more for some time. To make everything a bit more interesting, many ordinary citizens began to rent flats for they simply no longer have enough money to maintain these apartments in a state of “idle” mode waiting for a sale. This creates a very large offer in relation to demand.
All of this would have to result in falling prices of real estate according to economic laws. In the long term prices should begin to grow again, so you can expect that investors will wake up again.

Has this global financial crisis brought us any good to the Croatian property market? What am I talking about now, you are probably wondering, cause how can any crisis be good, especialy when we are talking about real estate investment. Well, this might be true for highly developed markets, but Croatia is still an emerging market with a lot to learn.
For example, the mentality of the people has changed drasticly since the crisis hit the world. Most of the old houses on attractive locations on the Croatian coast are in family ownership. During the last couple of years the tourist and real estate “boom” hit Croatia. A country that was once almost completely isolated was now featured on covers of the most famous travel magazines in the world, which led to a dramatic increase in the number of visitors and real estate investments. People from all over the world were on their way to grab houses on the Adriatic coast! People in Croatia, or better said families who owned the houses, were not quite used to all these new “free market” laws. Some of them saw the chance to earn some money, but they didn’t know how the real estate market worked. These sellers would put a price on their property which not only included the real value determined by the market situation, location, quality, but also their ow subjective value. “My grandfather built this house and I am not about to sell it cheap!”, for example. There were also those who planned to solve their financial situation for the rest of their lives by selling just one house they owned or inherited! These would determine the price based on the amount of apartments they need to buy after selling in order to live of renting these apartments so they could quit their daily jobs… Tha saddest thing about all of this was that the market had no problem with this. The demand was huge and loans were in abundance!
Now, situation is a bit different. There is no more high demand, but there are sellers who kept their prices unrealisticly high for years and have now found themselves in dire need for some cash. If you are the party that happens to have what these people need, and I am talking about money, possibly in a strong foreign currency like €, than you can negotiate a great deal! If you see that the property you set your eyes upon is highly overvalued by the seller, you can be sure that it is for some of the reasons stated above, or at least something close to that. This is your opportunity to do a little bargaining, preferably accompanied by one of the Croatian real estate agents and with a large amount of cash to put as downpayment. If you are skillful, you could lower the price for up to 20%, even more in some cases!

The current situation with the market of apartments in Croatia is highly influenced by fear, which means that the reasons for real estate market weakening this way are not realistic, but rather imaginary.
Although the crisis is on everybody’s mind and fear is ever present, most potential buyers still say that a high quality of an apartment would be more than enough to make them buy it, at a reasonable price of course. Quality is determined by several factors like location, which means close vicinity to kindergardens, schools and hospitals, good traffic connections to the most important parts of the city, quality of life in every individual apartment, green surface around the building… Most of the apartments that meet these criteria have already reached the lowest possible price sellers are ready to give and it is now a very good time to buy them. Any other action could eventualy result in a much higher price in the coming months ahead.

The financial crisis, constant problems with EU entry, all kinds of different reports by foreign media… it is hard for an ordinary person to catch it all. You might star wondering what is exactly happening with Croatia and it’s property market? Let us give you a brief overview.

The Croatian property market exploded a couple of years ago, somewhere around year 200 after the country started recovering from a devastating war and years of political isolation, and later as people expected EU membership to be just around the corner. Fantastic climate, great beaches and landscapes also made the country a great destination for foreign buyers and investors, as well as travelers. Croatian real estate prices were among the fastest growing in the world, to the point where not much room remained for further growth, which led to some other countries in the region receiving more attention for a short period of time. However, the Croatian property market is expected to experience another boom after EU membership is achieved, probably in 2010-2011.

There is also another reason which makes Croatia attractive: much of the newly built properties are high quality modern developments. Further developments will also boost the area by adding top tourist attractions and making many locations jump to the high tourism category. The advance in development was favored by many in the beginning, but soon the authorities saw what was done with the rest of the Mediterranean, which was turned into a “concrete apartment complex”, so immediate legislation was implemented to protect the landscape and the coast. Tourism plays a major part in Croatia’s economy, so the image of “Mediterranean as it once was!” is quite important to the people. Today, the building standards of real estate in Croatia are really good, with most of the developers having extensive experience in construction from Western Europe.

The Croatian government has also been determined to encourage foreign investment in the property market. The government had done a lot of things during the last couple of years to bring more property investors into the market, which includes promoting the tourism, highlighting natural beauties and culture and removing all legal obstacles to foreigners for buying real estate in Croatia, especially with the new Croatian real estate law.

If we compare the commercial real estate market in Europe in the last three months of 2008 with the first three months of 2009, we can see that the trade value dropped from 22,6 billion € to only 11,5 billion, which is a drop of almost 9 billion, or 44%. Leading analysts believe this is a result of the Lehman Brothers bank collapse that happened 6 months ago and caused several German real estate funds to close, whic in the end led to the entire European market collapsing.
Still, not everything is so gray. The month of March brought us first positive news in some markets in Europe, which even showed rising activity and first signs of recovery. United Kingdom, for example, showed a fall of 22%, half the percentage of Europe total 44%, and it could be a good sign if you take into account that UK was the first European country hit by the crisis, so it could also be the firs to recover completely. Biggest drops in other European countries were the huge 72% in France and 56% in Germany.
Central and eastern Europe, including the real estate market in Croatia, showed a drop of 57%, from 616 million € to 268 million €.
This information may be tricky, but it could be an indication that the market has finally begun to recover. This also means that there will probably not be any more large price drops.

Croatia’s tourism is one of country’s top branches of economy and many politicians are concerned that the crisis will not have a good effect on the tourist income this season.
That is why officials have started discussing some measures that could boost the season and bring in new guests. These measures include scrapping some fees on hoteliers imposed by local communities, but they also include one interesting proposal which could make many Russian and Ukrainian tourists and other foreign investors very happy.
Tourist officials noticed the statistical data that showed an increasing number of travelers visiting Croatia from these two former Soviet countries during the past couple of years, despite the fact that the visa requirements were quite rigid. Everybody knows that guests from Russia and Ukraine are good spenders and that the price isn’t a real problem for them, even during the crisis. This of course does not yet mean the real estate market in Croatia is opened for buyers from the east as it is for European buyers, but the number of Russians dealing with property investment in Croatia has also been growing for the past couple of years, so this information about the new Croatian visa regime can only benefit future business for eastern real estate investors in Croatia, not to mention the benefits for Croatian tourism.
If we take into account that the current situation on the real estate market in Croatia is not so bright, it is not hard to realize that some fresh money could do wonders, especially when we are talking about rich eastern businessmen who mostly buy expensive villas and other exclusive properties in Croatia.