Although official data from the State Statistical Office show that prices in Q4/22 increased by 4.7%, the real estate market in Croatia in 2023 is marked by a drop in demand, a lower number of transactions and a slight slowdown of the market. After the constant raising of interest rates by the ECB from July 2022 with the aim of extinguishing the fire called inflation, it was logical to expect that the real estate market would also begin to slow down after six years of growth.
Demand for real estate and prices have reached historically high points, demand is equal to supply, i.e. we are moving towards the equilibrium point. After the previous phase of expansion, a new phase of the real estate market follows, the so-called phase of increased supply. In this phase, the market stabilizes, first the prices of older properties or worse locations that have risen unrealistically in the general wave of market expansion begin to slightly correct.
In Croatia, in 2022, 37% of the total number of acquisitions of residential real estate was related to the share of foreigners, and the vast majority of these transactions took place in coastal counties. Most customers come from Germany (27%), Slovenia (25%) and Austria (12%). When we look at the situation in the markets of those countries, we can see that in Germany interest rates on housing loans rose from 1.2% to 3.8% and that prices fell by 3.6% in Q4/22. In Slovenia, interest rates have increased from 2.2% to 4.2% in the last year, and according to the analyzes of GURS (Geodetic Administration of the Republic of Slovenia), the market is cooling down and price stabilization is expected after the high rates of price growth in recent years.
In Austria, the situation is also similar, interest rates rose from 1.5% to 4%, and average prices are falling for the third quarter in a row (Q3/22 -2.5%, Q4/22 -4.6% and Q1/23 -2%). There are interesting data for Vienna, which recorded a price drop of 12.2% compared to June last year and is the record holder in the EU, while Stockholm is in second place with a drop of 6.4%.
Whether these trends and to what extent will spill over to the Croatian market and in what period of time remains to be actively monitored. According to the data and trends, all real estate market participants will adjust their business tactics according to the upcoming changes.
