April 3rd 2021 - (Un)expected Construction Boom in Croatia

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(source:croatianconstruction.com)

A year after COVID-19 arriving in Croatia, it is easy to notice how the pandemic, together with lockdowns and other measures brought in (mostly futile) attempts to stop it, as wrecked the national economy. It was hardly unexpected and in line what happened with most other countries, yet there is one interesting exception. Construction appears to be the only sector defying the negative trends.

Croatian companies are the only major businesses that ended 2020 in the black, and the amount of housing loans came close to 2011 record. Even more interesting is the continuos rise of house and apartment prices in Zagreb, and the similar trend made Split, tourism-oriented centre of Dalmatia region, into the city with 3rd real estate prices in entire Europe.

There are various explanations for these trends. Some of them are traditional – namely, Croatian desire to have something of their own – while others are more practical. Those few Croatians who gained great wealth (and not always through legal means) love to “park” such wealth in real estate. Also, real estate is seen as relatively safe sort of investment in time of crisis.

But, generally, greatest boost to those trends came through policies of Andrej Plenković’s designed to stimulate home ownership, especially among younger people, and thus stop or slow down mass exodus of young Croatians to other EU countries, most notably Germany and Ireland. Housing loans are generously subsidised and most Croatian economists point to that as the most likely explanation for the rise in real estate prices. Furthermore, construction boom is further fuelled by devastating 2020 earthquakes in Zagreb and Petrinja, which forced many home owners to seek new homes or rebuild existing ones in line with modern safety standards.

How long this construction boom will continue and when it is going to burst, remains to be seen.

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