OVERPRICED REAL ESTATE TRUTH OR MYTH?
Real estate buyers are of the opinion that prices go wild and easily shift the blame to the investor, to the real estate agencies, to the state, to the workforce... Yet much more goes into the price of a square meter than what they think. With this article we want to bring buyers closer to what everything goes into the price of 1 m2 of a newly built apartment. First a little statistics, more precisely what it looks like at the time of writing this text, so the spring of 2024..
In most EU Member States, prices fall by around 5-10%, while in Croatia the average increase is around 10% per year. There are several reasons, the most significant being inflation, which this year is at around 5%, while that in construction is even higher due to the price of materials that continue to rise. Furthermore, due to the lack of labor, the cost of performing works is also growing rapidly. Land prices have risen dramatically, justifiably or unjustifiably. Justified because there are fewer and fewer quality lands in attractive locations, and unjustified because all other lands are governed by the policy “mine is worth more than neighbor's” and this situation has led us to the fact that land prices have doubled in 4 years. Example land in Zagreb in the tram zone in 2020 was paid about €500 per m2, while today in a similar position, we do not offer the same below €900 per m2.
Furthermore, the price of m2 is defined by whether the property is functionally attractive, whether it is in an attractive location, what is the configuration of the land, who is the investor and how much profit he expects. When we take all of the above into account, the market is more or less realistic, since if no one were to buy at such prices, they would decrease.
But to be more precise in the figures what exactly goes into the price of m2, we attach a graph, noting that real estate prices are not the same in Zagreb, at sea or in Slavonia, because the prices of materials are not the same in all parts of Croatia, and the price of land should not be particularly emphasized. The high prices of real estate in Zagreb or on the coast are most influenced by the location, the price of the service and the materials.
Often buyers ask themselves if they should buy a property now or wait for prices to fall, our answer would be; market cycles exist, sometimes properties are more expensive, sometimes cheaper, but if viewed in the long term, then there is no better time to buy than today. If inflation is standard 2-2.5%, in 40 years this property will be worth at least 2-3 times more. If inflation is also higher, then it may be worth 5-10 times compared to today, but if you plan to get rich quickly, then real estate is certainly not the best choice for investment, whatever the weather and whatever the cycles.
And finally the answer to the question that all customers ask themselves.. When and when will real estate prices fall?
No, prices will not drop drastically. If even some correction occurs, it will be local at the level of 2 to 5%. We are a very interesting market for Europe, attractive land is less and less, and there are customers who are willing to pay for a quality product.