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.

Many Croatian politicians have claimed that Croatia’s entry to NATO is going to boost foreign investment interest and generally contribute to a positive picture about Croatia in the economic world.
Croatia and Albania are two nations that entered into the alliance during the last meeting in Strasbourg, which could eventually pave the way for European Union membership.
Will this also bring a bright future for the economy and the real estate market in Croatia? Can being a member of NATO be beneficial for a country’s economy? Yes it can, but in the end it all depends on many different factors.
NATO membership can be fundamental in inspiring confidence for foreign investors regarding the country’s institutions and political leadership, which is important for economic development. This has been clearly displayed in the case of Romania. Security is also a big issue, and this does not only mean military security guaranteed by the alliance. Big investors like to invest in countries which have satisfied some basic democratic and economic standards, and instead of having to check this themselves, they simply take NATO membership into account. It is therefore likely there could be some increases in foreign investments after the crisis is gone. And there is also tourism, Croatia’s biggest branch of economy. Tourists love to see that the country they visit has sort of an image. NATO and EU membership contribute to this to.
It is safe to say that NATO membership can’t hurt a country or it’s economy, but it also does not guarantee any kind of prosperity or economic benefit, unless if you’re in the arms business. What it does bring is stability, guaranteed stability to be precise, and anyone who has ever dealt with property knows that stability is beneficial for the real estate market in any country. This also applies for Croatia too and it has already made some analysts predict that the Croatian real estate market will recover as soon as this summer.

Change is good, but only if you accept it. This sums up all market analysis for Middle and Eastern Europe. World financial markets will most probably recover by the year 2011.
Withdrawal of credit lines has affected the real estate market and investments were cut up to 50% in some countries of the region. Many buyers will now wait for prices to hit rock bottom, but they may just wait long enough to miss their window of opportunity. For those who are bold and have enough money and courage, this could be an opportunity that presents itself once in a lifetime.
Some investors are already giving up their extra profits just to finish the projects they already started. This news, along with the fact that some more conservative financial institutions like insurance corporations and pension funds are already preparing funds for real estate investment in the region, is very good for buyers.