Sale of apartments in Croatia is almost completely stopped. Last three years the market has fallen by over 30 percent and in some locations over 50 percent. Who’s to blame?

Professor Josip Tica from the Zagreb Faculty of Economics believes that builders who stubbornly hold prices and thus maintain the status quo are most responsible, which will not suit anyone in the end. He believes investors should be reconciled with a certain loss of profits, sell out homes and move into new investments. Otherwise there could be a new escalation of the crisis, which this time woul influence the employment and cause a large loss of jobs in the construction sector. Increase in unemployment would sooner or later impact related activities.

The consequence of lower sales of housing affects the rest of the economy, thus the banks changed their policy of financing, and the role of government has changed, because the focus is not to encourage new construction, but the real estate market itself.

Also, Professor Tica said that the problem of taxation is also important, namely lack of same when it comes to real estate. People are simply accustomed to having a real estate as one form of savings. When a tax-free part of the household would be established, and everything else taxed, then savings would be redirected to other parts of the economy and obtained tax could be invested in other areas, such as health or education.

All this would ultimately strengthen the economy, and thus indirectly the real estate market, that is encourage new projects.

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.

Famous business newspaper Businessweek wrote an interesting article regarding real estate investment in Europe, especially focusing on the situation at different markets.
The prices have slummped over the last two years. It is enough to mention Spain and their price drop of 35%. The situation is even worse if we take a look only at commercial real estate, in which case the prices have hit the bottom after a 72% drop, like France for example. It is fair to say that things were not looking good at all. But what happens after prices drop? It may sound silly, but they rise again and there is a good economic explanation. Lower prices mean more attractive investments and there is no reason for this not to aply for the property market as well as the economy in general.
What this means is that real estate markets which were regarded as “hot” before the crisis are going to get “fired up” again. In the case of Europe this means countries of the east, including Croatia and Montenegro on the Adriatic, but it also may aply to certain western countries that endured large price drops.
One good sign that this is coming is also the fact that market activity in the USA and UK has started to rise. Some real estate agencies in London had a rise in traffic of almost 20% from March to April. We could also take a look at Dubai that became more attractive to average investors after the prices dropped 25% during the crisis. Still, there is no reason to “jump in the fire” because the safest markets are still those that can “back up” their property market with a long term economic growth, which means India or Turkey, but this absence of risk may also mean absence of large profit.
When we talk about Croatia and Montenegro, we have to take some details into account. For example the fact that the prices in Croatia are artificially high even now, which was described in one of our recent articles, and the fact that investments were very high before the crisis, expecially in Montenegro, where they amounted up to 600 million dollars yearly. Another thing to consider is the fact that both Croatia and Montenegro are on a way to being developed tourist countries, which also means they have to attract a lot of foreign investment, so many believe there will be some additional government rules soon that will make the markets even more opened to investment, especially in those areas where tourism activity started to stagnate due to lack of capital.
To conclude, it is now quite safe to say that recovery has already started in most European countries, or it will start soon. What this means for developing countries, like Croatia and Montenegro, is another cycle of investment projects, including property investment.

Legal integrity certificate of a real estate (Cro. CPIN - Certifikat pravne ispravnosti nekretnine) is a legal document signed by an authorized person that verifies the legal status of a real estate. The cost of this document is 1200Kn + tax (about 200$ + tax) and it can be issued by a lawyer who has been authorized by the certificate rights owner. Legal integrity certificate could do a lot for the sleepy real estate market in Ctoatia. It could help with the process of getting loans from banks and it could also help the sellers cause they can guarantee the legal status of their real estate.

One well known English real estate web site had an interesting way of describing the situation on the Croatian real estate market!
Under the title “Croatia open for business”, the article states that the liberalization of the Croatian real estate market is an excellent news for foreigners and all potential investors in real estate. It also states how the new situation was one of the terms for Croatian entry into the European Union, so all buyers from non-EU countries still have to fulfill the reciprocity term, which means their countries have to allow Croatian buyers into their market too. The parliamentary opposition was against these new regulations cause it opens the doors for all foreigners to buy the most valuable properties of all in Croatia, the land and real estate on the Adriatic coast.
Still, this does not mean that you can’t enjoy the benefits of these new laws. Leave the Croatian politics to the polititians, the market is secure and safe and ready for investment.

Trasa real estate agency wishes you all a happy new year! We hope that the crisis that shook the world in 2008 will stay in 2008, and that there will be no more turbulence, bankruptcy and misery in the year 2009, which will hopefully be the year of optimism and financial prosperity.
The real estate market in Croatia has so far not been strongly affected by the crisis, so there are still some good investment opportunities throughout the country. All investors looking for such lucrative opportunities in 2009 should definitely investigate what the market in Croatia has to offer. But, enough talking about business now, there will be enough about all of this in the coming weeks.
Employees of the Trasa real estate agency wish you to have a very happy and successful 2009!

Trasa Real Esta agency is one of the most succesful agencies in Croatia, especially in the Kvarner and Istria region. Property market in Croatia is one of the most dynamic markets in Europe, with constant changes in prices and legislation. That is why we decided to start this blog, to bring the market closer to You, our potential customers and real estate investors. In the modern world of the 21st century, there is a fast tempo of living with which even the most capable “players” can’t keep up with, and that is where our experts step in. If you are looking for a good investment opportunity in Croatia, real estate agents from Trasa are at your disposal 24 hours per day, 7 days of the week. Don’t let the competition run you over!