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Everything you need to know is included in our Croatia Property Pack
Are you thinking of investing in property in Croatia? Are you unsure if it's better to buy now or wait until next year?
Everyone has their own viewpoint when it comes to market timing. Your Croatian friend might suggest that now is a perfect time to invest in property, but your colleague from Zagreb may have a different view and recommend waiting for more stability.
At Investropa, when we create articles or update our pack of documents related to the real estate market in Croatia, we believe that facts and data are more important than opinions and rumors, so we prioritize them.
We have carefully gathered and analyzed official reports and government website statistics. Using this information, we have created a reliable database. Here's what we found that can help you decide whether it's a good time to buy real estate in Croatia.
We hope you'll find practical value in this article.
How is the property market in Croatia now?
Croatia is, today, a country with a lot of stability
Positive
Stability is a necessary condition when investing in real estate because it minimizes legal, regulatory, and political risks. It is an information you need as a foreigner looking to buy real estate in Croatia.
The good news is that Croatia is a stable country. The last Fragile State Index reported for this country is 49.3, which is an excellent score.
Croatia has been a member of the European Union since 2013, and has been a part of NATO since 2009. This has helped to bring a much needed level of economic and political stability to the country.
There is a strong basis for investment in the country. Now, let's review the economic projections.
Croatia is on track for significant expansion
Positive
Before buying a property, take a look at how well the country's economy is doing.
According to the IMF, Croatia is set to conclude 2023 with a growth rate of 1.7%, which is not bad. Concerning 2024, the experts say 2.3%.
The pace will even accelerate since Croatia's economy is expected to increase by 11% during the next 5 years, resulting in an average GDP growth rate of 2.2%.
The expected sustainable growth rate in Croatia is a good thing for someone who wants to invest in real estate in this country because it indicates that the property market is likely to remain stable and offer potential for long-term capital appreciation. Additionally, it suggests that the country's economy is healthy and continuing to grow, which can lead to increased demand for real estate.
Now, let's delve into other metrics worth exploring.
Croatian business owners still display resolute confidence in the economy
Positive
GDP growth is important for evaluating the Croatian property market, but it may not reflect the sentiments and expectations of the business community. Fortunately, in Croatia there is an established metric that is routinely disclosed. It's not the case for every country, so we're lucky.
The metric, commonly referred to as the Business Consumer Index (BCI), quantifies business leaders' confidence in the current and future economic conditions through surveys and assessments.
The Global Economy's data indicates that the Business Confidence Index is currently 15 for Croatia. For interpretation, this score is satisfactory.
However, examining the data more rigorously, we identify a potential negative development: the trend is downward. The BCI score, 12 months ago, was at 15.
The fact that local businesses in Croatia exhibit confidence brings promising opportunities for property investors. It reflects a positive outlook on the country's economy, resulting in more job openings and higher incomes. This optimistic sentiment drives up the demand for properties, making it an ideal time for investors to generate rental income and potentially benefit from property value appreciation in the long run.
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Croatia is providing a lot more building permits
Positive
The number of permits given for building houses can help you decide if it's a good time to buy property in a country. When more building permits are issued, it implies an encouraging and favorable state of the property market.
We have great news for you: the number of building permits delivered is surging in Croatia.
Throughout the previous 12 months, according to Croatian Bureau of Statistics, the number of building permits issued by the Croatian municipalities rose by 17.1%, from 10,659 to 12,485 units.
Without any doubt, the data shows that many people think it's a favorable time to invest in property.
It's worth mentioning that more real estate will become available in the market. This data suggests a potential future drop in property prices in Croatia in 2024.
The growth of property prices in Croatia remains on an accelerated trajectory
Positive
Croatia's home prices have increased by 56.9% in 5 years according to eurostat.
It means that if you had bought a seaside villa in Dubrovnik for $500,000 five years ago, then it would now be worth around $784,000.
Currently, property prices are experiencing continued and accelerated growth, it has been the case for 5 years now.
It's a promising signal. Croatian property prices are trending up. The trend is even accelerating. However, you might want to pause and wait for a market correction, so you can get a better price.
You can find a more detailed analysis of the real estate prices in our property pack for Croatia.
Everything you need to know is included in our Croatia Property Pack
Croatia's population is getting a lot richer
Positive
When you're looking to buy real estate, population growth and GDP per capita deserve careful consideration because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Croatia, the average GDP per capita has changed by 20.6% over the last 5 years. Very few countries have achieved superior results.
This means that, if you purchase a seaside villa in Dubrovnik and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, there might be a rise in rental demand in Croatian cities like Zagreb, Split, or Dubrovnik in 2024.
Properties promise modest rental yields in Croatia
Neutral
Rental yield is a popular way to estimate the earnings from real estate investments.
It represents the annual rental income generated by a property divided by its purchase price or market value. For instance, if a property in Croatia is purchased for 1,000,000 HRK and generates 60,000 HRK in annual rental income, the rental yield would be 6%.
The website Numbeo indicates that rental properties in Croatia promise gross rental yields from 1.7% and 4.4%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Croatia.
It suggests a satisfactory level of income relative to the property's value.
Also, as we have seen before, there might be a fall in housing prices (because of more available properties) and potential tenants are getting wealthier. Consequently, gross rental yields are very very likely to soar in Croatia in 2024.
Everything you need to know is included in our Croatia Property Pack
In Croatia, inflation is anticipated to be moderate
Neutral
In two words, inflation is when values surge.
It's when your favorite plate of seafood in Dubrovnik costs 150 Croatian kunas instead of 130 Croatian kunas a couple of years ago.
If you're about to invest in a property, high inflation can benefit you:
- property values tend to increase over time, leading to potential capital appreciation
- inflation can result in higher rental rates, increasing cash flow from the property
- inflation reduces the real value of debt, making mortgage payments more affordable
- real estate can act as a hedge against inflation, preserving the value of the investment
- diversifying into real estate provides stability during inflationary periods
- tax advantages, like depreciation deductions, can help offset the impact of inflation
According to the IMF, over the next 5 years, Croatia will have an inflation rate of 13.4%, which gives us an average yearly increase of 2.7%.
It means that Croatia could experience a moderate rate of inflation in the future. Then, prices would rise. It might become more expensive to buy in the future. However, if you buy now, your investment might appreciate and you can sell for a higher value later.
Is it a good time to buy real estate in Croatia then?
Time to conclude !
Without a doubt, 2024 presents a highly opportune moment to invest in property in Croatia, given a multitude of favorable signals. Croatia's remarkable stability in recent years is a key factor, providing a secure foundation for property investments. This stability not only safeguards investments but also fosters a conducive environment for economic growth, assuring potential investors of a safe and profitable venture.
Croatia's trajectory toward significant expansion further cements its appeal as an investment destination. The country's commitment to economic development, coupled with its strategic location and attractive tourism industry, positions it as a hotspot for future growth. Such expansion often fuels demand for real estate, driving up property values and presenting a lucrative prospect for property buyers.
The unwavering confidence of Croatian business owners in the economy underscores the country's potential. This confidence reflects the positive sentiments surrounding the business environment, indicating a robust economic foundation that can potentially translate into increased property demand and appreciation.
In addition to these factors, the increase in building permits indicates a proactive approach by the Croatian government to facilitate property development. This streamlining of regulatory processes can potentially lead to a surge in construction, providing ample opportunities for property investment and growth.
Furthermore, the accelerated trajectory of property price growth in Croatia is a strong indicator of the market's attractiveness. Rising property prices often result from high demand, which can be attributed to both local and international interest in real estate. Combined with the population's increasing wealth, the potential for capital gains in property investment becomes even more promising.
Although rental yields may be modest and inflation is anticipated to be moderate, these neutral signals don't overshadow the overall positive investment landscape in Croatia. The country's stability, growth prospects, confident business environment, building permit initiatives, property price growth, and improving population wealth collectively make 2024 a definitive and opportune year to consider purchasing property in Croatia.
We genuinely hope this article has been helpful and informative to you!. If you need to know more, you can check our our pack of documents related to the real estate market in Croatia.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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