Zagreb’s Housing Crunch: Why Rents and Prices Keep Rising — What Buyers Must Know

Zagreb’s housing squeeze: what’s happening now

Croatia real estate buyers, renters and investors are watching Zagreb closely because the city’s housing metrics have moved into alarm mode. In simple terms: average net salary in Zagreb at the end of 2025 was €1,650, while average rent is €900, and the average price of an apartment is about €2,800 per square metre. Those three numbers explain much of the tension in the market: wages lag, housing costs surge, and affordability collapses for many households.

This article maps the causes, the city’s response, the role of short-term tourist rentals, and what property buyers, investors and expats should consider when making decisions in Zagreb’s real estate market. Our analysis uses official municipal data, the Economic Institute’s housing gap estimate, and the City of Zagreb’s policy statements.

How we got here: supply, demand and investment-driven construction

The rise in Zagreb’s housing costs is not a mystery. Several interacting forces are driving prices higher and supply lower for long-term renters.

• Demand outstrips supply: The Economic Institute estimates a housing gap of about 38,000 apartments in Zagreb. That is the shortfall needed to rebalance long-term housing demand and supply.
• Short-term rentals pull stock off the market: The city reports about 2,500 apartments and 3,500 rooms registered for short-term tourist rentals. The ratio between apartments in first and second category rentals is about 1:5, removing many units from the long-term pool.
• Construction boom, but many units are empty: New residential buildings appear across the city, yet a high number of apartments sit vacant. Different sources estimate between 54,000 and 85,000 empty units out of roughly 350,000 total dwellings, signalling that much of recent construction is speculative investment rather than intended to house residents.

The result is predictable: a smaller long-term rental supply combined with continued tourist demand pushes both rents and sale prices upward. According to the municipal Strategic Information and Research Department, rents and sale prices have risen at more than 10% annually in recent years.

The municipal response: measures Zagreb has taken

Zagreb’s city administration has adopted several concrete measures aimed at stabilising the market and protecting vulnerable residents. Key actions include:

• Ending the sale of municipal housing and keeping stock in public ownership.
• Regulating access to municipally owned apartments using income-based criteria, with strong protections for lower-income households.
• Increasing the tax on short-term rental beds from €40 to €200 per year to discourage tourist conversion of long-term homes.
• Building new municipal rental developments: a 288-apartment project in Podbrežje, plans for another ~170 apartments, 130 apartments at Klara Nova (via Europan competition), and about 600 apartments in Borovje.

The city says it owns approximately 6,300 apartments, which is roughly 2% of the 360,000 apartments reported in the city (municipal figures use slightly different totals). About 60% of municipal apartments are allocated to socially disadvantaged citizens, with rents for the lowest-income households set at €0.36 per square metre under the new progressive scheme.

These measures are not cosmetic. They reflect a shift in allocation logic: the higher a household’s income, the higher the rent charged for municipal accommodation. The aim is to prioritise limited public housing for those who need it most.

Why short-term rentals matter and what the city can do about them

Short-term tourist rentals reshape urban housing markets by converting long-term homes into income-generating vacation units. Zagreb’s experience follows a pattern familiar across European cities.

What we know about Zagreb’s short-term rental impact:

• Registered short-stay units: about 2,500 apartments and 3,500 rooms on municipal records.
• Growth trend: both categories have continued to expand in recent years.
• The municipality argues that encouraging owners of vacant apartments to list them for long-term rent has helped increase the long-term supply to around 5,000 apartments placed back on the market.

Policy levers available to Zagreb include taxation, registration enforcement, zoning rules and incentives to convert empty apartments into long-term rentals. The city has already used taxation by raising the per-bed charge. That is a blunt but visible tool. It raises costs for hosts and may reduce short stays that generate large occupancy volumes during peak months.

From an investor viewpoint, the tax increase matters because it reduces the net yield of short-term lets relative to long-term leasing. For buyers considering purchasing apartments for rental income, this shift should prompt a re-evaluation of yield assumptions and cashflow stress tests under higher regulatory costs.

The European angle: funding, policy alignment and the Affordable Housing Fund

Zagreb is a signatory to the Mayors for Housing initiative and backed the European Affordable Housing Plan. The city hopes a new EU financing instrument will provide sustained capital to increase affordable housing supply and enable large-scale renovation.

Key EU-related points raised by Zagreb officials:

• The European plan envisions mobilising up to €300 billion across the EU to boost construction and renovation of social and affordable housing, though the instrument still needs approval and operational detail.
• Zagreb expects the eventual Affordable Housing Fund to be a multi-year financing tool able to support projects that are otherwise financially unviable at the municipal level.
• Some EU cohesion instruments have been adjusted so cities can use European Regional Development Fund resources for rental housing, but allocations so far are limited and typically small relative to the scale of Zagreb’s needs.

For investors and developers, EU funding creates opportunities for publicly-backed partnerships and projects with reduced financing risk. For homebuyers and renters, such funds could mean more long-term supply and targeted renovation of ageing stock, easing price pressure over time—if the fund is approved and Croatia channels sufficient national co-financing.

Practical advice for buyers, investors and expats

We translate municipal data into practical steps for people considering property moves or investments in Zagreb.

For buyers and long-term investors:

• Recalculate yield assumptions: short-term rental returns face higher taxation and regulatory risk. Base models on conservative long-term rental yields and test against rising interest rates and vacancy risk.
• Location matters: central studio rents range €600–€800, but peripheral family homes differ. Compare capital growth expectations with local rental demand.
• Check municipal plans: developments in Podbrežje, Borovje and Klara Nova signal municipal supply increases. New supply can weigh on prices in neighbourhoods where large schemes complete.

For renters and expats:

• Affordability pressure is real: €900 average rent on a €1,650 salary means single-earner households often pay a much larger share of income than the common 30% affordability benchmark.