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Croatia Real Estate Report Q4 2011
Business Monitor International, Sep 2011, Pages: 43
Croatia Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Croatia's Real Estate industry.
The commercial real estate sector in Croatia is essentially in a stable, rather than exciting, phase. It suffered less damage during the global economic downturn than many of its neighbours. Hence the country’s ‘recovery’ is less pronounced. There is more opportunity than risk for developers and investors. While the economic recovery is weak we remain positive, and hold to our forecast that the country will experience 1.7% real GDP growth in 2011 after two full years of contraction. We see the rate of growth increasing slowly but steadily each year, coming in at 2.8% by 2015.
At present, economic growth is dependent on tourism, where we expect to see a marked recovery as the European countries that provide the bulk of inbound tourists experience their own economic recoveries. The domestic consumer segment remains weak, with retail sales growth negligible if not negative and unemployment high at more than 16%. This naturally impacts the demand for retail property.
The key news in recent times has been the decision by the EU to close negotiations on accession. Croatia is now scheduled to join the EU on July 1 2013. EU membership will have a number of positive impacts on both the economy as a whole and the construction/real estate sector in particular.
Key Opportunities In The Real Estate Market:
- Pre-accession funding from the EU for infrastructure development should become available in the coming months. We continue to expect that infrastructure will be a key sector for investment.
- Croatia's business environment has gained exponentially from carrying out reforms required by the EU. As one example, the country has jumped five spots on Transparency International's Corruption Perceptions Index since 2004, from 67th to 62nd out of 178 countries.
- There are clear signs that rents are rising (or, at least, falling less than they otherwise would) for prime retail and office properties.
- Developments for the tourism industry in particular are necessary to support this critical part of the Croatian economy.
Key Risks To The Real Estate Market:
- Economic problems specific to Croatia. Most likely is a delay to (or cancellation of) major public works projects as a result of the government’s rather constrained budget. However, we stress that major projects have been completed over the last two years.
- Economic problems that are general to the eurozone: This could result in a contraction of exports that largely negates the benefits of EU accession. High unemployment and low consumer spending mean economic growth is dependent on an export-led recovery that is narrowly centred on the tourism sector.
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