Renting becoming unaffordable for average Croatian

Zagreb

Housing affordability is a pressing issue across the EU, but in some regions, it has reached critical levels. Croatia, particularly its coastal counties, is one of the hardest-hit areas.

Often referred to as the EU’s ‘black hole’ for real estate, Croatia faces severe socio-economic challenges due to high property prices and rental costs.

As Index.hr reports, recent studies reveal the extent of the crisis and highlight the struggle many Croatians face in securing affordable housing

A Study on Housing Affordability

A recent study, conducted as part of the ESPON project (European Spatial Planning Observation Network), titled Access to Affordable and Quality Housing for All, examines housing affordability across the EU.

Although the final version of the report is expected next year, preliminary results already show that Croatia ranks as one of the least affordable countries for renting residential properties.

Croatia’s Costly Coastal Regions

The study aimed to address the lack of systematic data on housing affordability across the EU. It combined internet-scraping methods, analysing advertised rental prices, with income estimates based on GDP per capita to gauge affordability.

The findings highlighted that long-term rentals are prohibitively expensive in many parts of Croatia, particularly in the southern regions, making it one of the most costly areas for long-term rentals in the EU.

In Croatia, available data indicate that renting is unaffordable for the average citizen in many counties. In the counties of Dubrovnik-Neretva, Split-Dalmatia, Šibenik-Knin, Zadar, Istria, Koprivnica-Križevci, and Osijek-Baranja, 40% of the average monthly income can only afford a property smaller than 30 m².

The capital region of Zagreb and Krapina-Zagorje fare slightly better, where the same percentage of income can rent properties ranging from 30 to 50 m².

The most “affordable” areas are the City of Zagreb and the Primorje-Gorski Kotar County, where 40% of the average monthly income allows for rentals between 50 and 60 m².

Limited Options for Larger Homes

For many Croatians, renting larger properties remains out of reach. Most residents live in small, overcrowded homes, primarily due to the size of units built, especially during the Yugoslav era. Additionally, the high costs of renting or purchasing a property force many young people to stay in smaller spaces for longer periods.

Renting a 100 m² property in the counties of Dubrovnik-Neretva, Split-Dalmatia, and Šibenik-Knin requires more than two average monthly incomes. In Istria, Osijek-Baranja, Krapina-Zagorje, and Zagreb counties, the cost is between one and two monthly incomes.

Dubrovnik

In the City of Zagreb and Primorje-Gorski Kotar County, renting a 100 m² property consumes around 70-80% of an average monthly income—still high compared to the rest of the EU, but relatively low for Croatia.

Regional Disparities and Common Trends

The study reveals three key patterns across the EU. First, Eastern EU countries face greater challenges with rental affordability. While rents may not be higher than in Western EU countries, they consume a larger share of income. Poland, Bulgaria, Romania, Hungary, Croatia, and Slovakia, for instance, have comparatively higher rent-to-income ratios than Germany, France, or the Netherlands.

Second, capital cities and their surrounding regions tend to be more expensive than other parts of the country. However, some exceptions exist, such as Sofia, Warsaw, and Bratislava, where the income levels in these capitals are significantly higher than in the rest of the country.

Lastly, coastal regions are generally less affordable than inland areas, particularly in Southern EU countries like Italy, Spain, Greece, and Portugal. In France, for instance, the Mediterranean coast is the priciest part of the country outside of Paris.

Similarly, in Croatia, there is a clear divide between the cheaper interior and the more expensive coastal areas. While tourism partly explains this disparity, similar trends in inland Hungary and Poland suggest other contributing factors.

A Widespread Housing Crisis Across Europe

Europe as a whole is grappling with a housing crisis, with more people struggling to afford rising housing costs, especially in major cities, Eastern EU countries, and tourist regions. Since 2015, EU property prices have increased by 44%, outpacing wage growth in most countries. In some Eastern EU nations, property prices have doubled or more. Croatia, in particular, has seen some of the highest annual increases in property prices in recent years.

This trend has pushed more people towards renting, as buying a home becomes increasingly unattainable. In regions like most of Germany, Austria, Northern Italy, Denmark, Sweden, and Norway, renting remains a viable option.

However, in much of the EU, particularly in the East and South, rental prices are so high compared to incomes that they are not a sustainable solution.

Consequently, it is no surprise that the average age at which young people leave their parents’ homes is highest in the South and East of the EU and lowest in the West and North. In Croatia, young people leave home at an average age of 31, the highest in Europe.

Croatia’s Housing Crisis in Context

These initial findings indicate that housing—whether buying or renting—is unaffordable for many Croatians relative to their income. While the research still has some gaps and limitations, and the final results will be published in 2025, there is little reason to expect significant changes from the preliminary data.

The conclusions align with previous studies on housing affordability. For example, according to an analysis by Towergate Insurance, one of the UK’s largest insurance firms, Croatia ranks as the second most expensive country in Europe for housing relative to local incomes.

Future Outlook: Policy and Tax Implications

Whether property taxes or increased taxation on short-term rental properties will expand the long-term rental market and reduce prices remains a topic of debate.

The implementation of such policies is also crucial. Nevertheless, it is widely acknowledged that Croatia’s housing market is unaffordable, and finding effective solutions is essential for the country’s socio-economic well-being.