House prices in Croatia

From the IMF’s latest report on Croatia:

“Housing prices have begun to accelerate, mainly in the capital and coastal areas. Average housing prices grew 8.0 percent, but 12.2 percent in Zagreb (yoy, September 2019). This increase should be seen in context of higher real wages, better employment prospects, growing consumer confidence, as well as declining interest rates. Tourism is the main driver of real estate price developments in Zagreb and the coast. Investment properties for short-term rentals have grown rapidly. This is facilitated by a favorable flat-tax on short-term rentals compared to higher taxation on long-term rentals. Market observers note that some of these purchases are not loan-financed, but they still assume that the majority is financed by bank loans. The market has also been supported by the government’s housing loan subsidy program for young first-time house buyers introduced in 2017 and the reduction of the real estate transfer tax since 2019. According to the CNB’s housing price index, real estate prices are now beginning to reach pre-crisis levels. Staff recommended that housing prices should be monitored with a holistic approach taking into account mortgage lending, general purpose loans that might be diverted to real estate, as well as government housing subsidies on the demand side. Also, the impacts that the current tourism boom and tourism rental taxation policies have on the supply of housing for purchase need to be taken into consideration. The mission welcomed current research efforts of the CNB to better gauge housing affordability.”


Posted by at 10:03 AM

Labels: Global Housing Watch


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