Real Estate Investment in Croatia

Stability and Continuous Growth of Real Estate Prices

When we invest in something, we expect to recoup our investment and potentially earn a profit. Every investment carries a certain level of risk, and investors must be aware of it before embarking on any venture. Unlike investing in financial instruments such as stocks, bonds, or investment funds, investing in land and real estate is considered a safer form of investment.

Large financial losses caused by the instability of the financial and foreign exchange markets have led citizens to lose confidence in such types of investments. Additionally, investing in financial assets requires knowledge of how financial markets and securities markets work, as well as using the services of authorized stockbrokers. The lack of knowledge about financial markets is one reason why many individuals hesitate to engage in investment ventures to avoid significant financial losses. People are generally risk-averse when it comes to foreign exchange and securities markets, and those less inclined to risk prefer alternative investments, most commonly investing in real estate located in attractive locations, often known as tourist destinations.

Real estate prices in attractive locations continue to rise steadily, making them a stable investment for their owners. With Croatia gaining increasing recognition as a tourist destination, land and property prices in attractive locations on the Adriatic coast or near important tourist destinations continue to rise, guaranteeing investors not only a return on their investment but also the potential for additional profits if they decide to sell.

Stability and Profitability of Investment

Stability and continuous growth of real estate prices guarantee an increase in property values, making investment in real estate more stable compared to other types of investments. The value of financial assets can plummet overnight due to various economic and political events. Real estate prices, on the other hand, are maintained, and while the value of money and shares can significantly increase or decrease, the value of purchased real estate can only rise, especially if the owner invests in its renovation and furnishings, or due to market circumstances beyond the investor's control, such as increased demand or increased attractiveness of the location. Therefore, we can say that investing in real estate allows for greater control over the investment compared to investing in financial assets. If the market value of real estate declines, and you wish to sell your property, you can always wait or make further investments to increase its value. When trading securities, investors are often powerless and can only hope that the company they have invested in will recover from a crisis, or they can sell their stocks to salvage what little remains. Investing in real estate allows individuals to shape their destiny, whereas their destiny on the financial market is influenced by others.

Buying Real Estate as a Form of Savings

Interest rates on fixed-term savings are becoming increasingly lower, making savings a less attractive form of profit. For this reason, many individuals seek alternative ways to increase their capital. As already explained, investing in stocks and bonds is too risky for someone who wants to preserve the value of their assets, leading such individuals to prefer savings. However, due to low interest rates, many people opt to invest in real estate instead of keeping their savings in banks.

Real estate can be used for various purposes and can generate much higher revenues than interest from fixed-term savings, primarily through rental income. While interest rates on fixed-term savings are decreasing, the prices of house and apartment rentals are increasing. This trend is particularly evident in Zagreb and along the Adriatic coast, where rental prices are highest. Such market conditions indicate that owning real estate is always profitable, as it represents not only a place to live but also a means of generating income through renting.

If you decide to place your savings in a fixed-term deposit, the amount you would receive with interest is significantly lower than the income you could generate from renting out your property. Bank interest rates on fixed-term deposits in euros are currently lower than one percent, so with an annual interest rate of 0.60%, you would earn 600 euros per year on a savings of 100,000 euros. After deducting taxes, this amount would be reduced to 520.80 euros. On the other hand, by renting out a property of the same value for 3,000 kuna per month, after deducting taxes, with expenses of 297.36 kuna per month, you would earn 32,431.68 kuna annually.

Monthly rentals are prevalent in continental Croatia, especially in Zagreb, where many students are looking for rental accommodation due to the rapid increase in the number of foreign students. On the Adriatic coast, daily or weekly rentals are more common due to the high influx of tourists during the tourist season. Therefore, during the tourist season, rental income for shorter terms is higher than monthly rentals. Additionally, various online rental platforms enable landlords to achieve 100% occupancy throughout the entire season quickly and at low costs. In just a few months, it is possible to generate profits that may never be achievable if you had decided to deposit your savings in a bank.

Due to the potential for renting out real estate and generating higher income, the value of the property itself is increasing. Properties with such characteristics in good locations are increasingly desirable on the market due to high demand, and as a result, real estate prices continue to rise. Moreover, holiday homes are becoming more popular among both domestic and foreign tourists. The increase in property values allows the owner to sell at a significantly higher price than the purchase price and generate additional profits.

Rental income from real estate can cover significant costs, such as repair, renovation, maintenance, and loan repayment for the property. Whatever remains after covering expenses represents net profit for the landlord. In this respect, tenants are the ones paying off the investment, and as the owner of the property, you can receive a steady income without ever losing money, whether through unpaid rents or through renting out your house or apartment.

Undertaking an Investment Venture

The numerous benefits of investing in real estate need to be utilized correctly. Before each investment venture, it is essential to be well-informed and research the market situation. One should consider the appropriate location, the size of the property, and the layout of the rooms. The more attractive the location, the higher the property prices. However, it is likely that these prices will continue to rise in the future, so choosing the right time to purchase the property is crucial. The attractiveness of the location will also facilitate finding tenants if you decide to generate income through renting.

In addition to location, one must find a property that suits their needs. Often, due to the characteristics of the land and the surrounding area, it may not be possible to build properties that cater to the preferences of most investors. In cities, this often means smaller apartments, while in suburban areas, it is usually larger houses with significant land area. It can be said that the location and size of the property often do not go hand in hand. The layout of the rooms is also essential and should meet the intended purpose of the purchased property. For apartments, it is essential to consider the characteristics of the building, such as the floor where the apartment is located and the age of the building.

All the elements mentioned above must be carefully considered when purchasing real estate to ensure that the investment is profitable. The larger the value of the property, the larger the investment required, and the longer the return on investment period. Therefore, one must carefully consider whether they prioritize quicker, smaller returns or are willing to invest more and wait longer for a higher return on their investment.

Using Real Estate for Personal Use

In addition to the financial benefits that real estate can bring to its owner through rental income, it also provides personal benefits if the owner decides to use it for personal purposes. Real estate offers comfort and a sense of ownership, making it feel like home rather than a temporary residence owned by someone else. It becomes a place where one lives and spends time, and as owners, they must cover utility bills, maintenance costs, and invest in the property to preserve its value. Having one's own property means there are no rental expenses or costs associated with hotel accommodations. As a real estate owner, you can gain and never lose financially, whether in the form of not having to pay rental prices or by renting out your house or apartment.

Undertaking an Investment Venture

The numerous benefits of investing in real estate need to be utilized correctly. Before each investment venture, it is essential to be well-informed and research the market situation. One should consider the appropriate location, the size of the property, and the layout of the rooms. The more attractive the location, the higher the property prices. However, it is likely that these prices will continue to rise in the future, so choosing the right time to purchase the property is crucial. The attractiveness of the location will also facilitate finding tenants if you decide to generate income through renting.

In addition to location, one must find a property that suits their needs. Often, due to the characteristics of the land and the surrounding area, it may not be possible to build properties that cater to the preferences of most investors. In cities, this often means smaller apartments, while in suburban areas, it is usually larger houses with significant land area. It can be said that the location and size of the property often do not go hand in hand. The layout of the rooms is also essential and should meet the intended purpose of the purchased property. For apartments, it is essential to consider the characteristics of the building, such as the floor where the apartment is located and the age of the building.

All the elements mentioned above must be carefully considered when purchasing real estate to ensure that the investment is profitable. The larger the value of the property, the larger the investment required, and the longer the return on investment period. Therefore, one must carefully consider whether they prioritize quicker, smaller returns or are willing to invest more and wait longer for a higher return on their investment.

Investing in real estate has been considered a form of wealth since ancient times, and it remains an attractive investment option today. Real estate offers stability and continuous growth of prices, making it a safer investment compared to financial assets. It provides the opportunity for rental income, making it a viable alternative to low-yield savings accounts. Additionally, owning real estate for personal use provides a sense of comfort and ownership.

To make a successful real estate investment, individuals must conduct thorough research, consider the location, size, and layout of the property, and choose the right time for investment. Investing in real estate can be a lucrative venture, providing financial stability and potential for significant profits in the long run. However, it is essential to remember that all investments carry a level of risk, and it is crucial to seek professional advice and consider personal financial circumstances before making any investment decisions.