Original Coverage & Source Attribution: www.croatiaweek.com
(Photo: DOMinvest grupa)
Property prices and construction costs in Croatia have long been among the most discussed topics in both public and private circles. But how much does it really cost to build a home, and is Croatia still cheaper than the rest of Europe?
We spoke to Saša Perko, a construction expert and director of DOMinvest, who shared detailed figures and an analysis of the market.
At first glance, building residential properties in Croatia still appears considerably more affordable than in Western European countries. However, a closer examination of the figures suggests that this advantage is rapidly disappearing.
According to Eurostat data for 2025, the price level for residential building construction in Croatia was 54% below the European Union average, while Germany was 50% above it. However, actual construction costs reveal a smaller gap.
Building a residential property of a medium standard in Croatia costs approximately €2,400 per square metre of net floor area, including VAT but excluding other costs. In German cities, the equivalent construction cost is around €3,600 per square metre, including VAT. Neither figure includes land, design or other associated expenses, representing a difference of approximately 50%.
Construction costs rising faster than in Europe
The main challenge for Croatia’s construction market is not the current difference in absolute costs, but the exceptionally rapid pace of price increases.
The cost of building apartments in Croatia has increased by 64% since 2020, compared with 44% in Germany and 31% across the European Union.
(Photo: DOMinvest grupa)
Although Croatia remains significantly cheaper, construction costs are rising roughly twice as fast as the European average.
One of the key factors behind this trend is the structure of labour costs, with Croatia increasingly relying on workers from abroad.
At first glance, hourly labour costs give Croatian contractors a considerable advantage. According to Eurostat data for 2025, the cost of an hour of construction labour, including associated contributions, was €16.20 in Croatia, compared with €39.60 in Germany and €44.80 in Austria.
However, these figures should be treated with some caution, as a significant proportion of construction businesses in Croatia still operate in the informal economy.
Labour accounts for approximately 40% of total construction costs. Last year, labour costs in Croatia increased by 11%, compared with just 3% in Germany.
“Foreign workers are not cheap workers. Last year, 52,776 permits were issued to foreign workers in the construction sector. During their first year, such workers are two to three times slower than experienced domestic tradespeople. This means that an hourly rate of €15 effectively becomes €30 to €45 per hour in terms of actual productivity,” Perko said.
Building materials no longer offer a price advantage
Unlike labour, construction material prices in Croatia have become almost identical to those in Western Europe, meaning the domestic market has largely lost its cost advantage in this area.
(Photo: DOMinvest grupa)
A 25-kilogram bag of cement costs between €5.50 and €6 in Croatia, almost identical to the €5.30–€6 range in Germany. Steel, joinery and associated equipment also come from the same European manufacturers.
Some local differences remain for materials such as cement, concrete and aggregates, which are sourced domestically. Limited competition in a market with just three cement producers continues to influence prices. In 2017, the European Commission blocked a proposed merger between two leading producers.
However, materials have not been the main driver of recent construction price increases. Since 2020, material costs have risen by approximately 40%, while the cost of building apartments has increased by 64%. This suggests that much of the difference is attributable to labour costs and commercial margins.
Administrative delays add significantly to costs
Another major burden on Croatia’s construction sector is administrative red tape and the lengthy process of obtaining the necessary documentation.
(Photo: DOMinvest grupa)
Although the direct cost of administrative fees is relatively small, the indirect financial impact is substantial.
In its final edition of the Doing Business report, the World Bank ranked Croatia 150th out of 190 countries for dealing with construction permits. Germany ranked 30th and Austria 49th.
Croatia had 22 procedures, taking an average of 146 days to complete, compared with nine procedures and an average of 126 days in Germany.
Permit and utility connection costs account for 9.2% of a building’s value in Croatia, compared with just 1.1% in Germany and Austria.
Last year, the average time between submitting a complete application and receiving a building permit in Croatia was 169 days. This does not include the lengthy period required to collect documentation and prepare the application itself.
“An additional nine months in the development cycle of a building with, for example, 10 apartments costs approximately €775,000, twice as much as all contributions combined. Administration does not cost us money primarily through fees, but through the cost of capital and time,” Perko explained.
Energy standards are not the main reason for higher prices
The introduction of stricter European energy efficiency standards does not create an additional price gap between Croatia and Western Europe, as the requirements are largely the same.
Nearly zero-energy buildings (nZEB) have been mandatory in Croatia for all building permit applications submitted after 31 December 2019. Germany and Austria introduced similar requirements even earlier.
From 2030, the entire European Union is expected to move towards zero-emission buildings.
An analysis of 32 European projects found that introducing these standards initially increases construction costs by approximately 11%, or around €200 per square metre. However, in Germany, the additional cost has fallen to between 2% and 7% after several years of practical implementation.
In Croatia, meeting these requirements involves installing 15 centimetres of mineral wool insulation instead of the previous 10 centimetres of polystyrene, triple-glazed windows and heat pumps.
Buyers gradually recover this additional investment through lower energy bills. According to Perko, these requirements are not the reason apartment prices in Zagreb have reached €3,500 per square metre.
How affordable is housing in Croatia compared with Europe?
Comparisons of housing affordability between Croatian cities and major Western European centres reveal some interesting figures, despite Croatia having lower construction costs and average salaries.
A conventional housing affordability assessment considers three key factors: property prices, average salaries and interest rates.
A newly built apartment in Zagreb costs an average of €3,554 per square metre, compared with €5,200 in Vienna and more than €10,000 in Munich.
Mortgage interest rates in Croatia are currently around 2.9%, compared with 4% in Germany.
According to Eurostat, just 3.7% of Croatian residents spend more than 40% of their income on housing. The figure is 12% in Germany and 8.2% across the European Union.
Saša Perko (Photo: Dejan Tatomir)
Meanwhile, the European Central Bank estimates that Croatian property prices are overvalued by 9%, compared with 12% across the euro area.
Deloitte calculations show that purchasing a newly built 70-square-metre apartment in Zagreb requires the equivalent of 7.5 years of annual salaries. In Ljubljana, the figure is 11.7 years, while in Prague it reaches 15 years.
Property market analysis also indicates that housing affordability in Croatia is 43% better than during the record levels of 2008. However, affordability has deteriorated over the past year, falling by 4.8% nationally and 7.3% in Zagreb.
Property prices have increased by 153% since 2015, one of the highest increases in the European Union, alongside Hungary.
Mortgage conditions and access to finance
Financing conditions and access to capital currently offer some advantages to Croatian buyers, although lending requirements are becoming increasingly restrictive.
Mortgage interest rates in Croatia, at around 2.9%, remain more favourable than in Germany, at 4%, or Austria, at 3.6%.
However, the Croatian National Bank has introduced restrictions limiting mortgage lending to a maximum of 90% of a property’s value. This means buyers must provide at least 10% of the purchase price themselves.
Monthly mortgage repayments are also limited to 45% of a borrower’s total income.
Perko pointed to Germany as an example of how quickly changes in interest rates can affect the property market.
“Germany has been going through this for four years. Buyers were accustomed to mortgages at 1%, but when rates climbed above 4% in 2022, demand stalled and the number of completed apartments fell to its lowest level since 2012,” he said.
