Many countries in Eastern Europe currently live through a bonanza in real estate, as it the most sought-after commodity for many reasons.
Inflation is one of them. The eastern EU countries are above the union’s inflation average and the people there are looking for investments to protect their savings.
Many choose to do that by investing in new property. But increased demand brought other challenges, evident in the Croatian capital, Zagreb.
CGTN visited one newly built, modern apartment building in an uninspiring street, narrow, with heavy traffic, few amenities around, and not too close to the city center. But the prices of the apartments in the new building tell a different story.
A square meter in an apartment complex like that can exceed a whopping $8,000 – an extremely high sum in a country with an average monthly salary of around $1,000.
According to Croatia’s real estate agencies association, apartment prices in Zagreb rose over 20 percent in the past year, partly due to foreign investors.
Over 30 percent of all newly-built real estate in Croatia is purchased by foreigners, mainly along the Adriatic coast. Foreign and domestic investors are searching for a haven during economic instability.
Borislav Vujović, the owner of Opereta Real Estates agency, told CGTN:
“There is inflation, and many people are purchasing real estate only to protect the value of their money. Interest rates on bank savings are, in fact, negative, loans are very cheap, which results in demand higher than supply at the real estate market, and the prices are going up.”
Faced with increased demand, developers scramble to build as much as possible to capitalise on the moment.
But there are a lot of hurdles making their lives not so easy. First, it is hard to find good locations for the new buildings. And also a shortage of construction materials also pushing prices up.
“It is far more difficult now to find the construction material.” Igor Glavaš, Director of the “Palace” Construction Company, said.
“Since the war in Ukraine started, the prices have gone wild and are higher and higher. We have to plan way in advance. The prices are like at the stock markets. Construction has become a stock market. Prices are fluctuating up and down every day, and we must buy material in advance and when the price is right.”
Yet with all these price pressures, the appetite for new build projects continues. It seems that the fear of losing money in the case of a global crash is stronger than the fear of losing out in an overpriced real estate market.