1. Decline in the Number of Transactions
Analyzing the real estate market in the first six months of 2022 compared with the same period in 2023, we observe a notable decline in the number of transactions of 9.1 percent, decreasing from 15,216 transactions to 13,825. This trend reflects increased caution among investors and buyers, who have become highly aware of the unpredictability characterizing the current economic environment in the Eurozone, marked by high but now gradually declining inflation and rising interest rates introduced by the European Central Bank.
Additional perspective can be gained by looking at Germany, the country with the highest number of foreign buyers in Croatia. Germany has experienced a decline in both the number of transactions and property prices, with prices dropping by an impressive 10 percent. This further highlights the cautious sentiment currently present in the market.
2. Regional Market Dynamics
Interestingly, market trends vary significantly by region. The City of Zagreb recorded a decline in transactions of 22 percent when comparing the first two quarters of 2022 and 2023, dropping from 5,731 to 4,457 transactions. Primorje Gorski Kotar County also saw a decrease of 19 percent, from 2,240 to 1,813 transactions. Split Dalmatia County recorded a decline of 9 percent, from 1,482 to 1,352 transactions, while Zadar County experienced a significant drop of 25 percent, from 994 to 745 transactions.
On the other hand, Istria County showed growth of 3.5 percent, increasing from 1,661 to 1,720 transactions. Osijek Baranja County recorded a slight increase of 1 percent, from 692 to 699 transactions. Šibenik Knin County stands out with strong growth of 29 percent, rising from 239 to 308 transactions.
These figures clearly demonstrate that despite an overall slowdown in the market, certain locations in Croatia continue to move in the opposite direction, indicating strong regional differences in real estate market dynamics.
3. Changes Among Foreign Buyers
During the same period, property acquisitions by foreign buyers declined overall by 13.6 percent, with varying changes by country.
More specifically, the number of transactions declined by 26 percent for German buyers, falling from 1,717 to 1,274. Slovenian buyers recorded a smaller decline of 5 percent, from 1,544 to 1,466 transactions. Austrian buyers experienced a decline of 29.5 percent, from 772 to 544 transactions, while Czech buyers declined by 17 percent, from 386 to 321 transactions.
In contrast, buyers from Slovakia recorded an increase of 12 percent, rising from 274 to 307 transactions.
4. Special Focus: Zagreb
Focusing on the capital city, Zagreb represents a key component of the national real estate market. The city records the highest number of apartment transactions in Croatia, and this segment has experienced a notable decline.
Between January 1 and November 30, the number of apartments sold dropped by 28 percent, from 9,379 transactions in 2022 to 6,771 in 2023.
5. Seasonal Effects
Traditionally, December and January are months with lower transaction activity due to holidays and vacation periods. This recurring pattern is important for understanding annual market trends.6. Conclusion and Outlook
Looking at the broader picture, it becomes clear that the Croatian real estate market is currently entering a period of cooling, a trend that is also visible in key source markets, particularly Germany.
Germany, as the leading country in terms of foreign buyers in Croatia, has experienced both a decline in the number of transactions and a significant drop in property prices of around 10 percent. These global developments further increase caution among investors and buyers in the Croatian market.
This cooling of the market is the result of several factors. Mortgage interest rates have increased from around 2 percent to 4 percent. Government housing subsidies for young buyers under the APN program have ended. At the same time, property prices have been rising continuously for the past eight years, with prices increasing by 74 percent between 2015 and 2023.
All of these developments are contributing to a more cautious approach among buyers. For 2024, projections indicate price stagnation, with potential declines in less attractive locations or for lower quality properties. However, in prime locations and within the luxury real estate segment, prices are expected to remain stable due to limited supply.
At this moment, investors and buyers must approach these market changes carefully in order to maximize their investment potential. This period of transition requires thoughtful decision making and strategic planning in order to successfully navigate market volatility.
