Croatia

Country Profile

Croatia is currently governed through a sovereign, parliamentary democracy. Croatia’s war for independence, which began in 1991, officially ended in 1995. The country joined the European Union on July 1, 2013. As of 2013 the recorded population was 4.25 million, with an urban population of nearly 60 percent.¹ Croatia is dominated by small towns, where a majority of housing and employment is located, rather than in large urban centers. As of 2013, the country had a high home ownership rate of nearly 90 percent.²

Before independence in 1991, banks’ operations in Croatia were strictly regulated by the former Yugoslavia. In 1993, the new democracy created the Bank and Savings Bank Act, spurring the creation of new commercial banks, the dominant form of banking today in the country.³ As of 2005, the two largest commercial banks held 42 percent of the banking sector’s assets, while eight largest banks collectively held much of the rest.⁴

The housing finance system is largely dominated by commercial lenders that fund mortgages through the traditional deposit system. The government-supported Long-Term Housing Financing Fund, created in 1977, originates loans subsidized by the state through housing savings banks. As of 2004, only 1.5 percent of total residential mortgages were being financed through these housing savings banks.⁵ As of 2006 the government enacted a 75 percent LTV limit for both subsidized and private lenders.⁶ While the mortgage sector has grown exponentially over the past decade, Croatia’s outstanding mortgage lending accounts for about 20 percent of the country’s GDP as of 2013.⁷