Where to Look
The basic choice is quite simple; Zagreb, the Croatian capital, or the Dalmatian coast. The former is more likely to be seen strictly from an investment perspective while the coast can be viewed either that way or as delightful for owner use. The Dalmatian coastline offers a choice island or mainland destinations and all sizes. With the exception of a few locations such as Medulin, which have large communist era tourist developments, what you nearly always get is plenty of history and atmosphere. Even Pula, a former Austrian naval base, has a fantastic Romanamphitheater, while the Istrian resorts of Porec and Rovinj are less than 60 miles away from Venice (to which they both have ferry services) and like cities further south, Dubrovnik or Zadar for example, are strongly reminiscent of Italy’s centres of renaissance culture.
Opatija is stamped by the architecture of its heyday as a fashionable resort before the First World War. Dubrovnik, Pula (served by Ryanair), Zadar, Split and the island of Krk all have airports capable of taking large aircraft while the island of Brac also has a smaller airport.
Now would seem a good time to invest with substantial increases in real estate prices already under way
Snags, Points to Remember, Legal & Otherwise
Citizens of EU member states are entitled to purchase residential property In Croatia but a process of obtaining official permission has to be gone through. An alternative route is to set up a company to own the property but this brings some administration costs in its train. The tax situation for each approach is slightly different (see below).
Croatian banks do not offer mortgages to non-nationals but it is possible to obtain a mortgage outside Croatia for residential real estate there but using other assets as collateral. Hypo Alpe Adria bank of Carinthia seems to be a market leader in this field. The currency ( the Kuna) moves more or less in step with the euro so it makes sense to borrow in euros to avoid currency risk. Mortgages.co.uk offer mortgages in euros of Swiss francs with a 60% LTV and interest rates starting at an attractive 4.4%. Property-abroad.com quote a much higher 8.8% figure and an LTV of only 50%.
For centuries the Dalmatian coastline has been denuded of trees – the Venetians cut them down to build galleys and use as piles to keep Venice afloat – and the stark limestone landscape has problems retaining sufficient water, especially in the tourist season. It’s probably worthwhile checking how the locality of your choice has fared for water supplies over the last few seasons. There may also be problems with ferry services to smaller islands.
The web has mention (anecdotally) of plenty of problems around property title following the war in former Yugoslavia. This difficulty is most likely to be serious in the east of the country (between Zagreb and the River Danube) where there were instances of ethnic cleansing in the early 1990s, and the inland Dalmatian town of Knin – close to the Bosnian border – whose Serb population left when it became obvious the town was going to be occupied by the Croatian Army in â€˜Operation Storm’ in 1995. The real problem is with title deeds in general and is more widespread. The World Bank has told the Croatian government to ‘clean up its act’. This coupled with an unregulated estate agency profession means that most purchasers should probably be retaining the help of recommended intermediaries.
- A 5% property transfer tax*
- No capital gains tax provided the property is held for more than three years
- But, a 20% capital appreciation tax if the property is held through a company, rising to 35% if the proceeds of sale are repatriated**
- 25% rental tax for properties held personally
* This together with stamp duty, registry fees and notary fees you will probably spend 7 to 8% of the purchase price
** However, this can be avoided by selling the company to your purchase with the property as its asset
What to Read
To begin with you can’t really improve on the relevant of parts Rebecca West’s – Black Lamb Grey Falcon’, her account of an extended tour of Yugoslavia before World War II, with German spies in attendance for part of the time. Property Secrets’ ‘Property Market Profile, Croatia‘ may be a worthwhile purchase but we would welcome comments about good guides available from good booksellers.