Government Scraps Incentives for Housing Savings

Government incentives to encourage savings in building societies will be revoked in Croatia next year after debate at a government session in Zagreb on Thursday.

Government incentives will be scrapped from 1 January 2014 to 31 December 2014, although Finance Minister Slavko Linić is keen to see their permanent removal. Government incentives were initially put in place to make housing savings an attractive savings product for citizens and to building societies in the accumulated funds from which it is possible to grant a favorable long-term loans with fixed interest rates.

Currently in Croatia, government incentives amount to 15% of the amount of available housing savings per year and can be up to 5,000 Kuna (660 EUR) of available housing savings by their savers in one calendar year. This means that the maximum amount of incentives for housing savings achieved in one year is 750 Kuna, and can be acquired in only one building society.

“From 1998 to today we have paid out over one billion kuna (115 million EUR) in incentives,” said Linić on Thursday, adding that the effects of it are too low with credits of 5.5 billion kuna (700 million EUR).

“The share of savings on the total weight of the loan is only 5.5 percent,” said Linic, explaining that there are a large number of unsold apartments with 87 per cent of savers owning one property, while 17 percent own two, and therefore are not likely to purchase another but will rather save for their children.