Housing and rents, two answers to the same question of “Where and how do I live”, are strongly influenced by market dynamics and developments, especially in the EU which allows free travel between member states. Today, we bring you an overview of the housing & rent price development in the EU, based on the latest Q1 2024 data released by Eurostat just a couple of days ago. A special focus is made on Croatia.
Due to its importance to our lives, housing gets significant attention in the media. While not as developed in Croatia as in some other European countries, rents are also starting to become more and more prominent, but housing still plays by far the most major role. Given the inflationary pressures we have seen in the last couple of years, and the 2nd use of housing as a form of savings, how have the prices developed since 2015?
Housing prices change in the EU vs. 2015 (2015 – Q1 2024, %)*
Source: Eurostat, InterCapital Research
*Greece is excluded from the list as no data is available
Looking at the chart, the largest increase was recorded in Hungary, where housing prices grew by almost 188% compared to 2015, followed by Lithuania at 127.7%, and Czechia at 114.3%. In fact, out of the 26 countries represented here, 7 recorded 100% or more growth in the last 9 years, and what’s also interesting is that these include many developing Eastern European countries. This is to be expected, as these countries were growing faster than the EU average, and with the development of the living standards in these countries, higher prices were also expected.
Furthermore, traditionally home ownership in these countries is more prominent, as compared to the more rent-focused countries of Northern and Western Europe. On the other hand, Finland recorded growth of only 1.9%, supported by various Government policies, steady housing supply, and slower urbanization as compared to other EU countries, but also slower economic growth and a stagnant population, especially in the last couple of decades. A similar situation is present in Italy, with only 8.6% growth, also influenced by high homeownership, stagnant population, and of course the significant challenges faced by the economy.
Lastly, Croatia recorded 89% higher prices since 2015, under the influence of lower supply & high demand, the usage of housing as a form of investment, investments from foreigners, especially from the EU, and the general improvement of the standard of living, as well as of course, the inflation which was also significant in the sector in 2022 and 2023, and even partially now in 2024. Compared to the EU average of 49.1%, this is app. 40 p.p. higher, placing Croatia somewhere in the middle of the list, mainly due to the influence of outliers on both sides (Hungary, and Finland for example).
Rent prices change in the EU vs. 2015 (2015 – May 2024, %)
Source: Eurostat, InterCapital Research
Looking at the 2nd answer to the housing questions, rents have also experienced growth as well during the period, albeit to a lesser extent. Up until May 2024, rent prices have grown by 84% in Hungary, followed by 73.8% in Lithuania, 70.5% in Slovenia, 65.6% in Poland, and so on. While there are many different reasons, each depending on the country for this, the main factors can be summarized as follows: firstly of course, economic growth which usually attracts people into cities, leading to urbanization. Depending on the supply & demand of housing, as well as how developed the construction sector is, rents are indirectly raised if there isn’t a balance in the supply, and if new construction cannot be done due to lack of sufficient eligible companies. Secondly, available areas can also play a role, such as in the Baltic countries of Lithuania and Estonia, smaller members such as Slovenia, or tiny island nations such as Malta.
For Croatia however, the situation is far better when compared to housing prices, with rents increasing by “only” 24%, which is even below the inflation rate since 2015 (app. 31% in this period). Home ownership still dominates the Croatian public discourse, with a focus on it leading to steady price growth, supported by newly issued loans which have expanded the balance sheets of Croatian banks the most during this period. Rent has been discussed as a possible solution, with many different ideas such as Government subsidized rents, or local initiatives to construct more housing, especially for rent. However, as is evident in the rents’ growth as compared to housing, this has yet to take root. This isn’t likely to change much, as rentals are for the most part tied to tourism in Croatia, with beneficial taxes in the sector which also aren’t likely to change much soon. Foreigners also play a role in this, in a twofold way. First is the purchase of apartments and houses for lower prices compared to more developed EU countries and renting them out for stable returns. The 2nd is the newest trend, which is related to third-world foreign workers, who when they arrive in the country have to have their accommodation taken care of, which is usually done for a lot of workers at once through rentals.
