Earthquake in Zagreb

There is talk about the market collapse and sharp property price drops in central Zagreb due to the earthquake. Owners, buyers and the media are wondering how it has affected this market niche. Speculative investors have already emerged, offering ridiculously low prices for damaged properties.

As transactions fell sharply due to the situation with Covid and the earthquake, there have been no significant price changes yet. Since the marked has slowly started reactivating, major price adjustments have not yet occured, as it is too soon, and the outcome of the situation is still unclear. Prices in central Zagreb will be affected by the result and length of the rebuilding process, as well as the economic situation in the medium term. Having said that, we do not expect further price increases, given that the market in central Zagreb was at its peak before the Coronavirus situation and the earthquake.

Downtown Zagreb-the historic, architectural, artistic and tourist centre of Zagreb and Croatia-will always have value, which will never be lost. Owners of properties in which they reside, or those of which were investments for short- and long-term lettings, will not suddenly forego the perceived or actual value of their home or investment, and will try to retain it. Certainly, we do not expect 50% price drops of all properties in central Zagreb, as was reported by some media. 

Price differentiation will occur depending on how much damage the property suffered, and how, and to what extent, it will be repaired. The differentiation will not occur immediately. More comprehensive static inspections of a larger number of properties have to be carried out, which will determine the actual extent of the damage. After that, we need to see how many owners will renovate their property, and in what way. Some properties may not be salvageable, or their owners might not have sufficient funds to carry out comprehensive repairs, so the prices of such properties will naturally fall. In contrast, many properties will be repaired because they were not damaged to such an extent to warrant a write-off or demolition. Many remained intact, or the damage to them has already been repaired because it was not substantial. Given that many properties already are, or soon will be, in good condition, there will be no general market or price crash due to the earthquake, especially not so soon after it occured.

How and when the more severely damaged properties will be rebuilt, and consequently their future price, depends on several factors. 1. Available funds of individual owners. Those who can afford repairs will carry them out. 2. The amount of service charge fund reserves in the building. In those buildings where reserves exist, the repairs will be carried out more comprehensively and quickly. 3 Interpersonal relationships of the owners in a building. Where the owners are on good terms, the repairs will be carried out more easily. 4. The new law being passed by the Ministry of Construction. If it will be implemented without excessive bureaucracy and favoritism, it will result in a larger number of quality repairs.

Although this post is about how prices in central Zagreb will be affected by the earthquake and its aftermath, the general economic situation due to Covid cannot be disregarded. Many properties in the last 4 years were converted into apartments for short-term lettings in the Summer and Winter seasons, limiting the offer on this microlocation, and driving prices up. If demand from tourists for short-term lettings drops, some properties will be marketed for sale, especially if their owners have funded their purchase or refurbishment with a loan.

 

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