What's is happening in the real estate market at the coast of Dalmatia and in Istria? Does the announcement of EU entry in 2013 have an effect already. The first signals are there, and the're very clear.
"The best you can do is to buy a house when prices are at their lowest, and subsequently benefit from the price increase". This mantrum is often heard. But how do you know if the price is at its lowest? And then: are we talking about the price of property in general, or just about specific types of locations? How do you actually know if prices reached the bottom? That's valuable knowledge and international congresses and opinion makers remain undecided when it comes to Europe as a whole. Europe's real estate market is still the toy of the global financial crisis. Instability rules and gets in the mind of the people, who, as a result, don't know where to bank.
Considering that the current crisis hits every market, investors search for unique competitive factors. One positive indicator has the potential to lift one market above the other. Croatia has two: the slow yet stable growth of its economy and the accession to the EU. Both factors, and some characteristics of the Croatian second-home market, form the basis for the prediction that the second home real estate market will show rising prices in the summer of 2012.
Like any other emerging market, Croatia is relatively more dependant on 'direct foreign investment': investments from abroad. Croatia's star had just started rising after the war. The fallout of global investments affects an emerging market more than other economies, hence the slow recovery of Croatia's economomy. Croatia showed, in the first quarter of 2011, still a negative GDP (Gross domestic product). Leading credit advisors now predict that the last quarter of 2011 will show an increase again of 1%.
The date of accession to the EU is set at 2013. Officially. This is an important step and sufficient security for multinationals to expand quickly into the country. Investment funds and banks base most investment decisions on numbers and indicators. 'Being in the EU' raises these indicators and one can already see international banks opening their first offices in Croatia. EU accession will make it easier for any EU citizen to obtain a mortgage with a competitive interest rate (currently there are just a few banks who rule this mortgage market, and their rates are high). In addition, a number of laws lining up with EU law, make it easier to purchase (invest in) apartments or houses even in touristic zones (currently this is only possible in assigned residential zones). This will have a consistently positive effect on the market (more buyers), therefor on prices. But with a delay.
The crisis began to show its full extent in 2009. Due to the sudden absence of UK- and Irish buyers (Europe's largest second home buyers) the market came to a stand still. Dutch, Belgians and Scandinavians were still active, which has to do with another investment mentality. On average, a second home hunter takes one year to find his dream home. There were no houses hunters around anymore in 2009, which resulted in estate agents having virtually nothing to do in 2010. As a result, the prices dropped in that year 2010. Burza Nekretnine and Fillipovic Advisory are two domestic bodies that publish price movement of all real estate. Investors from abroad prefer to look at the core of this second home market, only the type of property that has always moved well: new apartments by the sea and single-family-houses with sea view in Dalmatia or scenic view in Istria. Apartmani-buildings are kept out this equation since the demand for this type of property had already decreased before signals of the crisis. So just the good properties, with nothing wrong about them, started dropping their prices in 2010 with, in average, 25%. Properties with a special characteristic: like newly built seaview houses or properties on the first line to the sea, dropped prices with 10%.
These figures are really significant: Croatia's real estate prices fell back to where they were at the start of the market's boom! This attracts investors of a different kind: people who are really looking to put their money in a stable investment: to save it for their future, for their children's future. These are different kind of people then those who were just hunting for a place in the sun: who just wanted to escape from Northern Europe's bad weather.
The summer of 2011 is over now, and along the entire coast of Croatia the market has shown great movement. Most real estate agents did good business again. Taken into consideration the fact that this market responds to changes in one year, the expectancy that prices will rise in 2012 is considerate. What can we expect to happen?
First of all, in the spring of 2012, it will not be easy to negotiate low prices anymore. Then the special discounted properties will not be present on the market anymore. Then the indicator of average asking prices will move up slowly. One should always consider that the investors in this market are still 90% foreigners, and that the sellers are families, people who owned that plot of land or property for many years, some even built that house by themselves. So unlike Spain, Portugal or Turkey where the market mainly consists of mass resort development, Croatia is a country of small interventions on a community scale. Prices respond to the market, and in Croatia they also respond to the seasons of the year. The summer is Croatia's economic high season!
No one has a crystal ball, so no one can predict what will happen. One can only rely on hard facts and on real figures. Croatia has now, within Europe, a unique position through its accession to the EU. This fact was in recent history the strongest catalist for price increases in the Czech Republic, Hungary and Romania. There the opportunity that invstors are looking for presents itself. It's nothing grand, nor is it the next golden investment tip; it's just a unique indicator that gives Croatia a competitive edge for investors seeking growth.
This article was written by Middelland Croatia, an Amsterdam and Split based real estate advisory who have been assisting Dutch and Belgium investors with their entry to Croatia's 'second-home' real estate market since 2005. This article was published before, in Dutch language, in Mondi, Benelux's leading second-home magazine.
