Government, construction sector reps discuss affordable housing

Hina - The government's affordable housing plan could be a significant step towards regulating construction, with prices potentially being much lower if apartments were not sold by speculators, it was said at a meeting on Thursday between PM Andrej Plenković and representatives of the construction sector.

The meeting, the first of its kind, was organised to address the issue of rising real estate prices and create conditions for affordable housing, especially for young people.

PM Plenković emphasised that the share of Croatian construction in GDP is 7.7%, which equals around €5.5 billion in GDP.

The sector employs more than 150,000 workers, and there are about 22,000 businesses in the sector. There is a shortage of 8,000 to 9,000 workers and 12,000 work permits for the sector were issued this year alone, Plenković said. Furthermore, 27% of the workers in Croatian construction are foreign nationals.

Like other sectors of the economy, construction has faced several challenges in recent years, including labour shortages, rising business costs, stagnation of key trade partners, as well as the usual issues of sustainability and competitiveness, he said.

He recalled that the government has invested €3.6 billion in the reconstruction of Zagreb and Banovina.

Plenković pointed out a worrying statistic about 600,000 vacant apartments in Croatia.

Regarding the National Housing Policy Plan, adopted by the government last week, he said the goal is to increase the availability of affordable housing, improve the sustainability of housing, and use space for housing purposes through tax, financial, land, and ecological energy policies.

He also mentioned several other measures, including tax rebates for young people, an affordable rental programme, and accelerated construction of apartments by the state-owned Real Estate Agency (APN) in cooperation with local government units.

Through the APN, 8,000 housing units will be built, and 2,000 housing units will be renovated in assisted areas, Plenković concluded, adding that the affordable rental programme will activate around 9,000 housing units.

Apartment prices rose by 48% from 2020 to 2024

Minister of Construction, Physical Planning and State Assets Branko Bačić emphasised that the volume of construction work in Croatia has increased by 33% from 2021 to 2024. He also said that 68.1% of Croatian construction businesses are operating profitably. The average net wage in the sector grew by 46.7% from 2020 to 2024, although the price of construction materials has also risen, he said.

Furthermore, compared to 2021, the average price of an apartment (excluding the government-subsidised POS housing construction scheme) has increased by 47.9% in Zagreb and by 37.1% in the rest of the country, Bačić said, noting that his ministry and the government plan to increase the supply of apartments on the market with new construction and by activating vacant apartments.

Croatian National Bank (HNB) Governor Boris Vujčić pointed out that the share of inhabited residential spaces is shrinking.

High rates of homeownership, he said, are often achieved through borrowing, but not in Croatia.

Vujčić also noted that young people in Croatia stay with their parents much longer than in more developed EU countries. Moreover, he said, the share of foreign buyers in real estate transactions has decreased over the last two years, but property prices continue to rise.

The prices of residential properties increased by 10% last year, but the number of transactions has stagnated following the decline during the COVID pandemic, Vujčić said. He believes that a decrease in interest rates could boost the growth of housing loans.

Vujčić also mentioned that housing-related costs have a small contribution to overall consumer price inflation. Referring to new measures introduced by the HNB from 1 July, Vujčić emphasised that the HNB is limiting credit criteria for consumers, meaning 90% of loans will be secured by property, with a 10% contribution required for property insurance.

Apartment prices could be much lower

Mirko Habijanec, CEO of the construction company Radnik, said that the government's affordable housing project is a significant step in regulating construction in Croatia.

When asked whether apartment prices could be lower, he said they could be much lower, adding that today, construction companies are often not involved in apartment investment, and a large portion of the profit is taken by traders, speculators, and anyone with excess money.

"Apartment prices can be lower, and quite a bit. If construction costs are between €1,500 and 1,900 euros, the price can't be €4,000 per square metre. Construction has always accounted for around 70 or 80% of the total price," Habijanec said.

Berislav Borovina from the Split-based construction company Spegra believes that real estate prices can decrease, but he also pointed to the problem of unfair competition.

Irena Weber, Director of the Croatian Employers’ Associationn (HUP), said that, among other things, the easing of inflation pressures and the relaxation of construction material price growth would help make housing more affordable.

Contracts for energy renovation projects

After the meeting, 25 funding decisions and 67 grant contracts were awarded to applicants for energy renovation projects for multi-apartment buildings, property managers, and co-owners, covering a total of 92 energy renovation projects.

Funding for these projects has been secured under the Recovery and Resilience Mechanism in the amount of €107.83 million. The energy renovation will cover a total of 5,826 households.

News | Information