Croatian property to get limited boost from EU entry

Croatia's admission to the European Union on July 1 will have a limited overall effect on the country's real estate market, says JLL.

However, EU entry will create opportunities in certain pockets of the market, according to an analysis by the firm.

'Whilst we are optimistic that it will have a positive influence on the real estate market, the difficult economic conditions will somewhat limit the effects that were seen by previous entrants,' JLL's Croatian team said in the report. 'We do see however opportunities in the short to medium term in the underdeveloped industrial and logistics market and we expect an increase in the number of property investment transactions.'

JLL conducted a brief survey among its offices in other CEE countries to ascertain what impact accession had on these markets.

'The general consensus among property professionals is that there was improvement in leasing activity post EU accession in all of the key real estate markets. It is however difficult to isolate whether this was a direct result of EU entry or because of the very favourable macro-economic conditions at the time of entry,' the report said.

Going further back in time and analysing data from three of the countries which entered the EU in 2004 - Czech Republic, Hungary and Poland - the firm found that they saw property investment increases of 57%, 236% and 84% respectively between the years 2003 and 2005. Although economic conditions in the EU have deteriorated significantly since then, these figures offer some hope to landlords in Croatia.

The report continues: 'We do not anticipate that risk-averse investors will suddenly enter the market but, we do see that those opportunistic investors who are prepared to operate higher up the risk curve could begin to recognise some of the favourable margins available over the existing European core cities. We also do not believe that property prices will rise and on the contrary, expect that that local landlords will need to be more realistic in their expectations.'

Click on the link below for the full report.