The impact of the euro on real estate prices and transactions

One of the most topical topics today is certainly the recent transition of the official currency from the previous kuna to the already well-known euro. That topic in itself raises a lot of questions, but in this blog we will look at the impact of currency changes on the possible rise or fall of real estate prices, and on the possible rise or fall of the percentage of sold real estate in the season. It is still impossible to say whether new price increases will follow as a result of the arrival of the euro, but by all accounts, the answer is yes. Does this also apply to real estate prices?

When we talk about change, the country's adaptation to the new currency, we usually take as an example neighboring countries, or countries that have recently "switched to the euro". An example can be found in Slovenia, which changed to the euro in 2007. The transition from the Slovenian tolar to the euro was relatively painless for Slovenians. Although in their case, prices and inflation have increased by 15%-20%, while incomes have also increased by 30%. It is certainly not a process that happens overnight and it will certainly take a long time before we switch from Croatian to European salaries. According to experts, real estate prices cannot be shaken by the euro. For some time, real estate prices have been expressed in euros, so the price shown will not change due to currency changes. But there are certain factors that can affect the price of new buildings, namely the increase in the prices of construction materials and services. An increase in the prices of new buildings can also occur due to an increase in the wages of construction workers. Investors and contractors can be forced to increase the wages of construction workers by the fact that no one will work in Croatia for the wages they offer. Now the question arises, who will buy real estate in 2023? Even before the arrival of the euro, on average every fourth real estate buyer in Croatia is a foreigner. The fewer the obstacles to buying and selling, the more the number of buying and selling will increase. In the past, we recorded the largest number of purchases and sales during the season, when the euro was understandably weaker, so that part of the money would go to banks and exchange offices. Now that has come to an end, and that part of the money that went to banks and exchange offices remains in the pockets of foreigners. This also applies to accommodation services, which could grow by 1.7% according to CNB projections. As for domestic buyers, the question arises whether Croats will be able to afford to buy real estate despite price increases? For those who do not have enough funds to buy real estate, housing loans are available, which will be somewhat more favorable with the transition from kuna to euros. Loans are expected to become cheaper, which will be postponed due to the fact that there will be no currency conversion costs. Accordingly, the credit rating of Croats will certainly increase.

From all of the above, we can summarize how changing the official currency in the Republic of Croatia will bring numerous changes. Starting from the increase in the price of long-term and short-term rent, to the prices of food and certain services. But one of the items that should not be changed is the already existing price of the property being sold. For some time, due to the foreign market, real estate prices have been shown in kuna and euros, so as time goes on, the price in kuna will simply disappear.

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Added: 15.01.2023.

Category: CROATIAN REAL ESTATE INFO

ABOUT AUTHOR

Tino Ostojić is an extremely cheerful and communicative person for whom no task is a problem. Serious and organized in everything he does, yet relaxed and adaptable. Area of activity: the surroundings of Split and nearby islands.

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