The real estate market should be viewed as a separate area that connects a number of economic and social factors. The aim of this thesis is to investigate chose real estate market challenges that consequently affect urban development. The first part of the paper presents the importance of urban development in the European Union and housing issues, including the Urban Agenda. Then the concept of real estate and what they represent is defined. After the general characteristics of the real estate market, different types and characteristics of the real estate are presented. Selected indicators describing the real estate market in Croatia are further analyzed. The results of the research on the real estate demand are presented, with an emphasis on the regional and local level. Based on the analysis, the differences between different parts of Croatia are presented. The analysis is complemented by an overview of selected social aspects such as affordability and housing costs, in different areas, and a special part of the paper is focused on the analysis of the impact of tourism on the real estate market. After a brief overview of legislation and real estate taxation, a short chapter on the impact of the crisis on the real estate market follows. The last chapter presents the results of regression analysis, which investigates the impact of selected variables on real estate prices in Croatia. It is confirmed statistically significant influence of the determinants such as net earnings and volume of construction works. Based on this work, it can be concluded that an increasing number of residents are moving to cities and towns that have become the main drivers of the economy. However, housing has important position and represents a significant problem in urban development, especially regarding real estate prices. Differences on regional and local levels confirm the need to prevent further increase of the prices, which represents a priority on some (touristic) areas.