Why Croatia Property Prices Keep Rising: Land Scarcity, Labour Costs and the Construction Crisis

A question we hear often at 385 Real Estate is some version of this: "With fewer people buying, shouldn’t prices be coming down?" It is a reasonable question. But in Croatia’s case, the answer is no — and the reasons are structural, not cyclical. To understand why prices will keep rising, you need to look at what is happening on the supply side of the market.

The Supply Side: Where the Real Problem Lies

Croatia’s residential property market has a fundamental imbalance. Demand — from domestic buyers, foreign residents and investors — remains strong relative to what is actually available to buy. And the ability to add new supply is constrained by three interlocking forces: the scarcity of buildable land, the cost of labour, and rising construction input costs.

These are not short-term pressures. They are embedded in Croatia’s geography, planning system and labour market. That is why experts are broadly agreed that property prices in Croatia are unlikely to fall in 2026 or the near term, even as transaction volumes slow.

The Land Problem: You Cannot Build What You Cannot Find

Croatia’s coastline is among the most regulated in Europe. UNESCO heritage zones in cities like Dubrovnik, Split and Trogir, combined with strict coastal development laws and limited urban expansion zones, mean that suitable building plots in desirable areas are genuinely scarce.

In Split, which has now overtaken Dubrovnik as Croatia’s most expensive city for apartments, land prices in established neighbourhoods are rising faster than the properties built on them. The Marjan Hill area regularly sees apartment prices above €6,100 per square metre — a figure driven as much by the value of the location itself as by build quality.

Beyond the coastal zone, urban land availability is tightening in Zagreb and other major cities too, as Croatia’s National Housing Policy Plan (approved in March 2025) acknowledged. The plan commits to constructing 11,200 new apartments for affordable purchase and rent — but this is a multi-year programme that will not meaningfully expand supply in the near term.

For investors and buyers, this scarcity means that well-located properties retain and grow their value even during periods of reduced market activity. There is simply no equivalent substitute being built.

The Labour Crisis: Half the Workforce Is Foreign

Croatia’s construction sector has grown by more than 15% annually in recent years — but that growth has exposed a severe structural labour shortage. According to Croatia’s Ministry of Physical Planning, Construction and State Assets, foreign workers now make up approximately 50% of the construction workforce, a proportion that has grown rapidly as domestic workers migrate to higher-wage markets in Western Europe.

The sector needs between 8,000 and 9,000 new workers annually to keep pace with ongoing strategic projects and housing demand — a shortfall of around 6% of total required new entrants each year. Finding, importing and retaining construction workers is increasingly costly, and those costs are passed directly into the price of every new apartment and house.

Labour now represents the dominant driver of rising construction costs in Croatia, ahead of materials. When a developer prices a new-build project in Split or Dubrovnik, a significant portion of that premium reflects not the views or the marble finishes — but the wage bill required to get the building finished.

Materials: Broadly Stable, But Carrying New Risks

On the materials side, experts are cautiously optimistic for 2026, projecting stable and moderate growth broadly in line with general inflation of around 4% for most standard building materials. Unlike the supply-chain disruptions of 2022–2023, there is no widespread crisis in cement, timber or glass at present.

However, a new risk has emerged. Ongoing disruptions in the Strait of Hormuz — through which approximately 20% of the world’s oil and liquefied natural gas passes — are pushing energy and shipping costs higher. Construction is one of the most energy-intensive industries, and the ripple effects are already being tracked by Croatian developers.

Steel, aluminium, copper and cement — all of which require enormous energy inputs to produce or transport — are all exposed to sustained energy price increases. Industry analysts and designers are already reporting shifts in procurement strategies in response to the disruptions. If the situation worsens, it could add a material upward shock to construction costs on top of the existing labour pressures.

This is not a crisis yet. But it is a risk that informed buyers should understand when assessing whether to buy now or wait.

The Developer Calculus: Why New Supply Will Not Solve the Problem

Some buyers assume that rising prices will eventually attract enough developers to flood the market with new supply, bringing prices back down. In Croatia, this logic breaks down for several reasons.

First, the planning and permitting process for new coastal developments is slow — typically three to five years from concept to completion in high-demand areas. Supply responses are structurally delayed.

Second, developers are not building at a loss. With land prices, labour costs and material costs all elevated, the minimum viable sale price for a new-build apartment in coastal Croatia has risen substantially. Developers will not sell below cost; they will simply delay or not build at all.

Third, a significant share of available apartments in tourist hotspots continues to be channelled into short-term rental platforms rather than the sales market. Until Croatia’s proposed vacant property taxes and short-term rental reform measures take effect — which remains uncertain in timeline — this dynamic will persist.

The Forecast: Slow but Sustained Growth

Taken together, these structural constraints point to a property market that will keep rising, but at a more measured pace than the 10–13% annual growth seen in 2024–2025.

Current forecasts project annual price growth of 3–6% nationally, with prime coastal markets likely to reach the higher end or beyond — some analysts forecast up to 7% annually for Dalmatia and Istria. Over a five-year horizon, cumulative growth of 20–30% is the consensus view.

For buyers, the practical implication is clear: waiting for a price correction that structural forces make unlikely means paying more later. The window of lower competition and slightly more negotiable sellers that exists now in 2026 may prove to be the best entry point this decade.

What This Means for Foreign Buyers in Croatia

For our clients at 385 Real Estate — the vast majority of whom are foreign nationals buying their first Croatian property — these cost dynamics have direct implications.

New-build properties will continue to carry a premium that reflects real input costs, not developer greed. Resale properties in well-maintained condition in desirable locations will hold their value even as transaction volumes ease. And the coastal properties that attracted you to Croatia in the first place — the views, the climate, the UNESCO heritage — will remain in finite supply by law.

Our job is to help you find the right property at the right price within this market. If you would like to understand what your budget can realistically achieve in your preferred area of Croatia in 2026, contact our team in Split for a no-obligation consultation.

Sources:

• Croatia property prices in 2026: Land and labour costs to drive further growth, expert says — Croatia Week
• What Hormuz Strait disruption means for Croatia’s property market — Croatia Week
• Croatia’s construction sector grows over 15% annually but faces labour shortages — Ministry of Physical Planning
• OECD Economic Surveys: Croatia 2026 — Tackling housing challenges
• Construction material costs to rise with Strait of Hormuz blockade — Dezeen
• Croatia Real Estate Market Predictions 2026: Prices, Trends & Investment Outlook — Club Property
• Is Croatia property market cooling down? (2026) — Investropa