Adriatic Fantastic - Croatia
Author: Shane McGinley
June 2008
With beautiful beaches, historic towns, and plenty of investment opportunities, Croatia is a magnet for holidaymakers and buyers alike.
[6.5% - Estimated average annual gross rental yields in Croatia]
During the 1980s, Croatia was a tourist Mecca. Half a million Brits, the same amount of Germans and different nationalities from all over Europe made a beeline for this haven on the Adriatic. Then in the 1990s, this all changed, as Yugoslavia’s civil war made Croatia a no-go area and tourism was wiped out.
Since 2000, the popularity of the country as a tourist destination – and as a market for property investment – has continued to rise. In 2006, the number of Brits visiting the coastal nation had reached 250,000 – and it’s easy to see why. Oceanographer Jacques Cousteau once commented that Croatia’s sea was “the cleanest sea in the world”, while Irish playwright and Nobel Prize winner George Bernard Shaw proclaimed: “Those who wish to see heaven on earth should come to Dubrovnik. With the incredible weather and value for money – compared with many of the Italian and Greek alternatives – it’s no wonder Croatia is going from strength to strength.
My first time in Croatia was for a friend’s wedding. After she came here on holiday, she dropped her plans for a big Irish day, and opted for a sun drenched Croatian one instead. That was in Dubrovnik, in the south of the country. An almost self-contained city state and UNESCO World Heritage site, the town has been popular through the ages as a sunny and exclusive getaway.
However, the serious contenders for great-value property are the coastal Dalmatia region, and the northern province of Istria, known as “the Croatian Tuscany”.
Croatia has about 1,200 one-bedroom apartments in coastal towns, with prices starting at about €56,050, and there are numerous developments under construction. Sea-view apartments start at about €125,000, with more traditional stone houses available from around €250,000.
In 2006, the European Tour Operators Association voted Croatia its top European location. Istria was highlighted for its beautiful countryside, activities, yachting and excellent food. The region’s most famous delicacy is the white truffle, and Istria holds the current record for the largest piece of truffle ever found. Pula is famous for its well-preserved Roman amphitheatre, while the surrounding coastline boasts many secluded bays and beautiful beaches, making it popular with naturists. Croatia is considered a real hub of Europe’s “Free Body Culture”, and people have been frolicking in the area since the 1930s.
Dalmatia has benefited greatly from the completion of the Zagreb-Split highway along the Adriatic coast in 2005, giving European buyers and travellers much better access to areas such as Dubrovnik, Zagreb, Split and even Montenegro.
Korcula Cool.
Considered a “door to the national parks”, Zadar is close to North Velebit National Park, which has been declared a UNESCO World Biosphere Reserve. Then there is the nearby city of Nin, the historical birthplace of the Croatian state, which is home to the smallest cathedral in the world.
Istria is only a short hop from Venice, and the similarities in architecture and lifestyle are obvious. Another great selling point is the combination of “Italian” culture and food, such as pasta and fish, but with cheaper prices. And all this makes the Croatian coast a seriously viable option for holiday-home buyers.
According to agent Savills, the price of an apartment in Croatia is one tenth of the price of an apartment in London. If you do choose to buy, then capital appreciation – where the big bucks are to be made – is strongest for apartments built post 1990. So if you’re
looking to move and make some money, it’s a good idea to go modern – or at least choose somewhere with a good, recent renovation.
Prices have been going up by about 15% a year for the last two years, and with Croatia looking set to join the EU before 2010, market watchers are expecting a further increase of 50% in the next three years. However, data from the Global Property Guide found that of the main locations in the top 38 European countries, Croatia ranked 10th from bottom in terms of prices, and is cheaper than countries such as Greece, Turkey, Romania and Poland.
But it’s also important to note that buying in Croatia can be a difficult process, because there are restrictions on where and what foreigners can buy. This means getting professional advice on any sale is essential. For foreign buyers, the only way to finance
a purchase – apart from paying full cash – is either as an individual through a leasing agreement, or by setting up a Croatian-registered company and borrowing through a mortgage. But again, a well-versed, English speaking property lawyer is crucial to getting everything done by the book, and in your interests. As usual, don’t hand over any money until you are 100% certain.
Facts & Figures
- Area : 56,542 km²
- Population: 4.5 million
- Currency: the Kuna
- Cost of Living: 74% of the price of living in London. GDP per capita is €9,781.
- Quality of Life: Croatian capital Zagreb is the 107th best city in the world to live, according to Mercer’s Worldwide Quality of Living Survey 2007.
- House Prices: across the country, prices grew by 10% in 2007.
- Rental Yields: average annual gross rental yields are estimated to be 6.5%.
- Buying Tips: you can only rent your property in Croatia if you set up a company, which means you will then be subject to 22% tax. If you are denied ownership rights, you can’t resubmit for five years, so take your time deciding.
- Taxes: tax in rental profits is 15%, while Capital Gains tax is 25% (if you sell it after after three years it is exempt). There are also local surcharges to be paid.
- Average prices: average prices are €2,555 per m2. In Dubrovnik, prices are approximately €215,000 for a 55 square metre apartment, but Istria and Dalmatia are considered less expensive.