Second home market
"Buy when prices are low and reap the benefits of price increases." This mantra is often heard. But how do you know if the price is at its lowest? Are we talking about the price of property in general, or specific locations? This is 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 subject to the whims of the global financial crisis. Instability rules and affects thinking, so that people do not know where to invest their money.
The current crisis has hit all the markets, so investors are searching for unique, competitive attractions. A single positive indicator may be enough to lift one market above another. Croatia has two: the slow, yet stable growth of its economy and its imminent accession to the EU. Both factors, along with the characteristics of the Croatian second-home market, form a sound basis for predicting rising prices in the summer of 2012 on the second home real estate market.
Like other emerging markets, Croatia is fairly dependent on 'direct foreign investment' from abroad. The country’s fortunes were just beginning to rise in the years after the Homeland War. The fallout of global investments has affected Croatia’s emerging market more than other economies, hence the slow recovery of the economy. In the first quarter of 2011Croatia continued to show a negative GDP. Leading credit advisors now predict that the last quarter of 2011 will show an increase of 1%.
The official date of accession to the EU has been set for July 2013. This is an important step forward, providing sufficient security for multinationals to expand quickly into the country. Investment funds and banks base most investment decisions on numbers and indicators. Croatia’s accession to the EU will make it easier for any EU citizen to obtain a mortgage with a competitive interest rate. In addition, as national and EU legislation are aligned, it will be easier to purchase (invest in) apartments or houses, even in tourist zones (currently, it is only possible in residential zones). This will have a consistently positive effect on the market (more buyers) and therefore on prices. But there will be a time lapse.
On average, a second home hunter takes one year to find his dream home. Investors from abroad prefer to look only at the core of this second home market, i.e. the type of property that has always moved well - new apartments by the sea and detached houses with sea views in Dalmatia or scenic views in Istria. Croatia's real estate prices have fallen back to where they were at the start of the boom! Now investors of a different kind are being attracted; people who are looking to put their money into a stable investment for their future and their children's future. They are not just hunting for a place in the sun or to escape from Northern Europe's bad weather.
The summer of 2012 is over, and along the entire Croatian coastline, there has been great movement on the market. Most real estate agents are doing good business again. If the market has responded so well to change in one year, what can we expect to happen next?
First of all, by the spring of 2013, it will no longer be easy to negotiate low prices. Discounted properties will not be present on the market anymore. Next, the indicator of average asking prices will move up slowly. We should remember that 90% of the investors in this market are still foreigners, but that the vendors are local people who may have owned a plot of land or property for years, or even built their houses themselves. So unlike Spain, Portugal or Turkey, where the market mainly consists of mass resort developments, Croatia is a country of small transactions on an individual scale. Prices are governed by the market and are also affected by the seasons of the year. The summer is Croatia's economic high season.
No one has a crystal ball, so we cannot predict exactly what will happen. We can only make projections based on hard facts and actual figures. Within Europe, Croatia now holds a unique position, thanks to its imminent its accession to the EU. In recent history, this has proved the strongest catalyst for price increases in the Czech Republic, Hungary and Romania. The opportunities that investors are looking for are now present. They may not be grand, but they give Croatia a competitive edge for investors seeking growth.
