Property valuation is not an unambiguous term — it depends on who is asking and why. The same property can have three different values depending on whether a buyer, a bank, or the Tax Administration is looking at it.
This guide explains:
- what market, mortgage, and tax value of a property are
- how each of them is determined and by whom
- why the amounts differ and what it means for buyers and sellers in Croatia
Three Types of Property Valuation: What Each Is and What It's For
Each of the three types of value answers a different question and serves a different purpose:
1. Market value — the estimated amount for which a property could be sold between an informed buyer and an informed seller, without compulsion, on the date of valuation. This is the starting point for any negotiation.
2. Mortgage value — a conservative estimate used by banks as a basis for granting loans and calculating the maximum financing amount. It is almost always lower than the market value.
3. Tax value — an informal term for the amount used by the Tax Administration as the tax base when calculating property transfer tax. It is important to note that "tax value" is not an officially defined legal term in Croatian law — it is the market value of the property at the time the tax liability arises, but the Tax Administration reserves the right to determine this value independently if it estimates that the agreed price is below the market average.
Understanding the differences between these three categories directly affects the amount of loan you can get, the amount of tax you will pay, and the strength of your negotiating position.
Market Value: Definition, Methods, and Who Determines It
The market value of a property is legally defined by the Property Valuation Act (Official Gazette, no. 78/15) as the estimated amount for which a property could be exchanged on the valuation date between a willing buyer and a willing seller, with both parties acting knowingly, reasonably, and without compulsion.
Market value is determined by a licensed valuer — a natural person who is a permanent court expert for property valuation, appointed according to special regulations. The valuation is documented in a valuation report, which is the only document accepted by banks, courts, and public authorities as expert evidence of value.
Licensed valuers apply one of three methods or a combination thereof:
1. Comparative method — the most commonly used. The valuer compares the property with recently sold comparable properties in the same market. The more relevant transactions, the more reliable the valuation. In Croatia, the application of this method is more demanding than in some other countries because data on realized sale prices are not fully publicly available — asking prices and actual achieved prices often differ.
2. Income method — used primarily for commercial properties and rental properties. The value is derived from the future income that the property can generate, using an appropriate capitalization rate.
3. Cost method — starts from the question of how much it would cost to build the same property today. The cost of land is added to this value, and depreciation due to age and wear is deducted. It is applied to specific or rare properties without comparable transactions.
Market value is not the same as price — it is an expert opinion based on data, methodology, and current market conditions. Sellers use it as a basis for setting the initial price, and buyers use it as an argument in negotiations.
When is Property Valuation Mandatory?
Property valuation is not always legally mandatory, but in practice, it is unavoidable in a number of situations. In the following cases, a valuation report by a licensed valuer is either mandatory or practically necessary:
1. Residential loan — the bank always orders its own valuation for lending purposes; without it, there is no approval.
2. Inheritance of property — valuation is required to determine the value of assets in probate proceedings.
3. Court dispute or divorce — the court requires a valuation report from a licensed valuer as proof of asset value.
4. Gift of property — the Tax Administration may require a valuation as a basis for determining tax liability.
5. Sale below market price — if sold at a price significantly lower than the market average, valuation protects the seller and buyer from subsequent tax complications.
6. Registration as collateral — for business loans and other forms of security where the property serves as a guarantee.
Mortgage Value: Why Banks Value More Conservatively
When a buyer seeks a residential loan, the bank orders its own property valuation. This amount — the mortgage value — is almost always lower than the market value, sometimes by 10 to 20%.
The reason lies in the purpose of the valuation: while market value answers the question of how much the property could be sold for under normal market conditions, a mortgage valuation answers the question of how much it could be sold for under conditions of forced sale or market decline. The bank must ensure that the collateral remains sufficient even in an unfavorable scenario.
LTV Ratio and What It Means for the Buyer
According to the macroprudential decision of the Croatian National Bank (HNB) made in March 2025 and applied from June 30, 2025, the maximum LTV ratio (Loan-to-Value) for residential loans is 90% of the estimated property value — not the purchase price. The difference is crucial.
Practical example:
- Agreed purchase price: EUR 200,000
- Bank's property valuation: EUR 180,000
- Maximum loan (90% of valuation): EUR 162,000
- Difference the buyer must cover with own funds: EUR 38,000
A valuation lower than the agreed price can directly change the buyer's financial plan, even when all other items are properly planned. In addition to the LTV ratio, the HNB's decision also limits the DSTI ratio (debt service-to-income ratio) to a maximum of 45% for residential loans.
What Makes a Difference in the Bank's Valuation?
The bank's valuation is particularly sensitive to the location and physical condition of the property. A property in a less attractive location, on higher floors without an elevator, or with evident structural problems will receive a lower valuation regardless of the agreed price. The energy class of the building, seismic stability, and completeness of documentation also directly affect the amount.
If the bank's valuation is lower than expected, there are three options in practice: cover the difference with own funds, negotiate a price reduction with the seller, or request a new valuation from another licensed valuer.
Read more about this on our blog: Buying a Home with a Loan – A Guide to Costs, Interest, and Taxes.
Tax Value: How the Tax Administration Determines the Base
The property transfer tax is 3% of the market value of the property at the time the tax liability arises, according to the Property Transfer Tax Act. The Tax Administration generally accepts the price from the sales contract if that price is comparable to the market prices of similar properties.
However, the law gives the Tax Administration the right to disregard the agreed price and independently determine the market value using its own internal database of comparable sales — if it estimates that the agreed price is below the market average. In that case, the tax is calculated on the amount determined by the Tax Administration, not on the price from the contract.
Practical example:
Sale price from the contract: EUR 150,000 → tax: EUR 4,500
Value determined by the Tax Administration: EUR 170,000 → tax: EUR 5,100
Subsequent difference: EUR 600, plus possible interest and procedural costs
How to Protect Yourself?
If the price is lower than the market average for justified reasons — visible damage, unresolved ownership issues, unfinished works, unrecorded renovations — this should be documented. A valuation report from a licensed valuer that clearly argues why the specific price is market-justified can be the basis for contesting the tax assessment.
Note: a buyer purchasing a new building from a legal entity that is VAT-registered does not pay property transfer tax — the price of a new building generally includes VAT at a rate of 25%, and property transfer tax is not calculated in that case.
Read more about this on our blog: Property Tax – In Detail.
Key Factors Affecting Property Valuation
A valuer does not just look at the square footage and floor. There are a number of factors that can push the final value in the valuation report up or down — and many owners seriously underestimate them.
- Micro-location within the city — two apartments of the same size can differ by 30 to 40% just because of the address. The location within the neighborhood, proximity to public transport, schools, and infrastructure are directly reflected in the value in all major Croatian cities — from Zagreb to Split and Rijeka.
- Energy class — properties with energy class A or B can carry up to 10 to 15% higher value than energy-inefficient properties of the same size and location. Older buildings without an energy certificate or with a low rating automatically receive a negative adjustment in the valuation.
- Seismic stability and quality of construction — new construction with proven seismic resistance carries higher value than older construction without proof of renovation, especially in areas affected by the 2020 earthquake.
- Completeness of documentation — building permit, occupancy permit, and a clean land registry record are prerequisites for a reliable valuation. Without them, the valuation report cannot be complete. Read more about the land registry record on our blog: What are the Land Registry, Cadastre, and How to Read Them.
How Much Does Property Valuation Cost and Who Pays for It
The cost of preparing a valuation report by a licensed valuer typically ranges between EUR 150 and EUR 400, depending on the type and complexity of the property. For commercial spaces, larger buildings, or valuations for court proceedings, the amount can be higher — the cost is determined individually in such cases.
The costs of valuation are most often borne by the buyer, but this is a matter of agreement between the parties. When the valuation is ordered by the bank for lending purposes, this cost regularly falls on the buyer as part of the total costs of a residential loan.
A valuation report by a licensed valuer is the only document that carries weight in legal, tax, and credit procedures. Informal or online valuations are useful as a guide but cannot replace an official report.
What Does Property Valuation Mean for Buyers and Sellers?
If you are buying: The valuation tells you how much the bank can finance and whether the price you are paying is market-justified. Order an independent valuation before signing the pre-contract if there is any doubt about the justification of the requested price — this cost is more than worth it if it prevents overpayment or a financial gap in the loan plan.
If you are selling: A professional valuation of market value gives you a solid basis for setting the price and a concrete argument for negotiating buyers. Sellers who come with a valuation report negotiate from a position of knowledge, defend their price more easily, and speed up the entire sales process by reducing the number of open questions on the buyer's side.
Frequently Asked Questions (FAQ)
1. What is the market value of a property?
The market value of a property is the estimated amount for which a property could be exchanged between an informed buyer and an informed seller, without compulsion, on the date of valuation. It is determined by a licensed valuer and documented in a valuation report according to the Property Valuation Act (NN 78/15).
2. Why does the bank value a property lower than the agreed price?
The bank uses a mortgage value that answers the question of how much the property could be sold for under forced sale conditions. This value is conservative by definition — the bank must ensure that the collateral remains sufficient even in an unfavorable market scenario.
3. What is the LTV ratio and how does it affect a loan?
LTV (Loan-to-Value) is the ratio of the loan amount to the estimated property value. According to the HNB's macroprudential decision applied from June 30, 2025, the maximum LTV for residential loans is 90% — the bank finances a maximum of 90% of the estimated value, not the purchase price.
4. Can the Tax Administration reject the price from the contract?
Yes. According to the Property Transfer Tax Act, the Tax Administration can independently determine the market value if it estimates that the agreed price is below the market average. The tax is then calculated on the amount determined by the Tax Administration — not on the price from the contract.
5. Who pays for property valuation?
The costs of valuation are most often borne by the buyer, but this is a matter of agreement between the parties. The cost of a valuation report by a licensed valuer ranges between EUR 150 and EUR 400 for standard residential properties.
6. Is property valuation mandatory when buying?
It is not legally mandatory for every purchase, but it is practically unavoidable when the transaction is financed by a loan. It is also recommended in cases of inheritance, court disputes, gifts, and sales below the market average.
7. Can a valuer make a mistake and what happens then?
Valuation is an expert opinion based on available data — it is not a guarantee of value. If you believe the valuation is incorrect, you have the right to request a new valuation from another licensed valuer. In court proceedings, the court may also order a so-called super-revision valuation.
8. Can the same person be both a valuer and an agent in the same transaction?
No. A licensed valuer must be independent of the parties in the transaction. An agency valuation is not the same as a valuation report from a licensed valuer.
Property valuation is a crucial step in every purchase and sale transaction — whether you are buying, selling, or financing a property in Croatia. If you need help or advice on the purchase and sale process, the Regent team is here for you.
Contact us.
