The Croatian real estate market continued its expansion in 2022, with property prices reaching record levels. The market remained strongly seller-driven, characterised by demand exceeding supply. As a result, sellers were able to dictate prices and conditions, while buyers often found themselves in a more challenging position.
According to data from the Crozilla portal, average asking prices for apartments in 2021 were 6.2 percent higher than in 2020, 11.5 percent higher than in 2019 and 17.1 percent higher than in 2018. This surge in demand and rising residential property prices was not unique to Croatia. Similar trends were visible globally, with strong price growth in markets such as China, Hong Kong, Israel, Singapore, Canada and Norway.
When comparing Croatia with international markets, it was clear that price growth locally remained relatively moderate. However, the question naturally emerged: are we witnessing a real estate bubble and could it eventually burst?
Key Drivers Behind Rising Demand
The strong demand for residential property in Croatia was the result of several factors.
Six years of recession between 2009 and 2015 significantly reduced construction activity, creating a structural shortage of supply. When the economy began recovering in 2015, supply could not keep pace with growing demand. This demand was further supported by:
- historically low mortgage interest rates- government housing loan subsidies for young buyers
- ncreased demand for newer and safer buildings following the earthquakes
- inflation and low savings interest rates encouraging capital to move into property
- broader economic growth and improving living standards
Real estate demand is also influenced by life events such as family growth, relocation, inheritance and lifestyle changes, all of which contribute to ongoing market activity.
GDP Growth and Interest Rates
The Croatian National Bank projected strong GDP growth following the pandemic recovery. With interest rates expected to remain low, financing conditions continued to support demand for residential property.
Low returns on savings accounts also encouraged many households to move capital into real estate as a more stable and tangible asset class. With inflation rising, property remained an attractive hedge against the erosion of cash value.
Euro Adoption and Schengen Entry
The planned introduction of the euro and Croatia’s entry into the Schengen area were expected to simplify transactions, travel and business operations. These developments were widely seen as positive for the overall economy and for real estate activity, particularly along the coast and in key lifestyle destinations.
Government Housing Subsidies
State-subsidised housing loan programmes for younger buyers continued to influence demand. While these programmes initially helped stimulate the market, they also contributed to price growth in certain segments, particularly in areas where eligible buyers concentrated their search.
Construction Costs
The construction sector faced rising material and energy costs, which increased development costs and ultimately affected property prices. Supply chain disruptions and labour shortages also created additional pressure on new development timelines.
At the same time, large-scale reconstruction projects and EU-funded infrastructure initiatives placed further demand on construction capacity.
Price Levels Across Croatia
In 2021, the highest average property prices were recorded in Dubrovnik, followed by Opatija, Split and Zagreb. Coastal cities and established tourism destinations continued to lead price growth, while demand in Zagreb remained strong, particularly for new developments.
Following the earthquakes, demand for newer buildings in Zagreb increased significantly. New construction often sold before completion, reflecting strong underlying demand.
While new developments attracted the most attention, pricing varied significantly by micro-location, building quality and developer reputation. Careful due diligence remained essential for buyers.
Is There a Real Estate Bubble?
The possibility of a property bubble was widely discussed. A real estate bubble refers to rapid and unsustainable price growth not supported by underlying economic fundamentals, followed by a sharp correction.
While some indicators suggested strong upward pressure on prices, a sudden collapse was not widely expected in the short term. More likely scenarios included a gradual stabilisation as supply increased and interest rates eventually adjusted.
Based on available data at the time, 2022 was expected to remain a year of continued activity and expansion, albeit at a more moderate pace than the peak growth of previous years.
Long Term Investment Perspective
In Croatia, property has traditionally been seen as a stable store of value. High home ownership rates reflect a long-standing cultural preference for investing in physical assets.
With low savings yields and rising inflation, many investors continued to view real estate as a reliable long-term investment. However, the key advice remained consistent: focus on quality, liquidity and strong locations. Well-positioned properties with long-term value are more resilient across market cycles.
Real estate can be a sound investment when approached strategically, with careful consideration of location, quality and long-term demand.
