THE PROPERTY MARKET

Cheaper than France and Spain but more expensive than Turkey, the Croatian property market is much more established than many people think. Croatia’s neighbours, most notably the Austrians, have been buying property in the country since the end of the Balkan war, as have the Germans and Italians. Croatia is regarded as a solid and safe investment, with a well-established tourist industry and a strong rental season.

Property prices in Croatia have increased by between 12% and 28% per annum over the last three years, although this isn’t consistent throughout the country as prices vary dramatically depending on the area you buy in. Dubrovnik is already an expensive place to purchase, with certain properties reaching an unbelievable €6,000 per square metre, compared to Zagreb, which averages €2,300 per square metre. Despite recent price hikes–of up to 40% in some places–prices still remain an average of 30% to 40% lower than those of Spain and France. Generally speaking British buyers are choosing either entry-level apartments for an average of €100,000, small stone-built houses with pools for around €280,000, or large stone houses with pools for around €400,000.

Expected accession to the EU in 2009 means that the outlook for the Croatian property market is bright. Expectations are high as increasing numbers of foreign buyers will find it easier to purchase once the country becomes an EU member, with regulations set to become more flexible with regard to the financial packages available and registration of ownership. At the same time, more Croatian buyers are investing into their own market, which is making it more stable.

Slovenia is another state that emerged from the break-up of Yugoslavia and has gone on to become a success story. In the two years prior to its accession to the EU, Slovenia enjoyed price rises of 40% and given Croatia’s track record, it is believed that she is on course to exceed these appreciation rates. However, before EU accession, the Croatian government is faced with reducing the backlog of civil cases involving questions of land tenure. They are making progress with the land registry office, as much of the process can now be conducted over the internet, thereby cutting out the previously slow bureaucracy.

Croatia is a different type of market compared with much of Eastern Europe as buyers tend to be well-heeled and affluent. Generally speaking, you shouldn’t go to Croatia seeking a bargain. What Croatia does deliver is good-quality property and, while costing slightly more–a result of a shortage of property and affluence in the market–you are virtually guaranteed higher capital appreciation. Supply is destined to continue being restricted thanks to the geographical restraints on development–a result of Croatia’s narrow coastal plain–and the choosy nature of the municipalities, which limit development in order to preserve the natural environment. The limited number of budget flights has also led to the establishment of a wealthy tourist industry. As a result of this, prices have been pushed up by the fact that the average buyer has more cash to spend.

Where to buy?

Prices vary drastically in Croatia depending on where and what you buy. A two-bedroomed apartment in Istria costs an average of €100,000 to €150,000. Prices are similar on the Dalmatian coast (including Split) whereas prices in Zagreb are around €130,000 to €170,000 rising to between €140,000 and €180,000 in Dubrovnik.

Istrian peninsula

The triangular county of Istria is situated in Croatia’s north-west, bordering Slovenia and jutting into the northern Atlantic. Most foreign buyers in Croatia head for the Istrian Peninsula, an area where steady appreciation of between 20% and 30% has been predicted for the next couple of years. Remarkably untouched by the ravages of tourism and foreign property investment, this is a region with a rich blend of Italian, Slovenian and Croatian cultures and lifestyles. Croatia’s most accessible area–thanks to the international airport at Pula–it is also the most popular with foreign tourists, with a total of 2.3 million visitors to the region between January and October 2006; Umag and Porec top the list of Croatia’s most visited destinations.

There is a swathe of hotel developments and resorts along the coast, such as Porec and Pula, but they still maintain a certain Italian charm. Most foreigners come here to snap up the wealth of stone-built Istrian houses, causing prices to rise by 20% per annum. In the coastal town of Rovinj, prices are hitting £4,000 a square metre, which is a lot when you consider the local monthly wage sits at around £500 per month, and so many Croatians have been priced out of the market.

The most popular locations here are Rovinj, Pula, Vrsar, Porec and Novigrad–essentially the peninsula’s west coast. Despite a massive rise in prices and interest over the last few years, there is still a large stock of property here and you can still find a bargain. For example, you can pick up a one-bedroomed new-build apartment, only 15 minutes from the sea, for €85,000. Looking for something a bit more historic? Stone ruins can be found for anything from €39,000 to €220,000. An average two-bedroomed house will set you back by €177,000 while for a newly-built villa you can pay anything between €240,000 and €300,000. Essentially, whatever you want to spend, there is something to suit your budget.

Dubrovnik

This ancient city is more than 1,300 years old and dates back to Roman times, with the city walls not only marking the beginnings of the old town, but some very decisive price bands, with inner city property being decidedly more expensive than that outside the city walls.

Dubrovnik is a city which comes with a hefty price tag thanks to the influx of the rich and famous into the area, which has guaranteed a steady rate of capital appreciation. It is also a very individual market that’s different from the rest of the Dalmatian Coast. However, even the rich and famous can find it hard to obtain property here, with demand far outstripping supply.

Believe it or not, prices are comparable with London. Older, period properties are the most popular, but also the most limited in numbers. However, if you can afford to buy in the city, you’re sure to make a safe investment as appreciation rates are extremely healthy and the rental market is year-round. If you’re looking to purchase a two-bedroomed apartment, expect to pay €220,000 for a furnished property.

In the past, Dubrovnik has broken records, with parts of the city priced at a staggering €10,000 per square metre–that would mean paying €800,000 for an 80 square metre apartment. Within two miles of Dubrovnik you are looking at a more realistic–but still expensive–€3,000 per square metre.

Zagreb

Zagreb is a newly emerging market that offers a different kind of investment. Home to a quarter of the country’s population, this city has been the cultural and political epicentre of Croatia since the Middle Ages. It oozes class and sophistication, and while on the surface this spotless centre is reminiscent of the chic cities of Western Europe, scratch the surface and you’ll find a heady blend of cultures and peoples.

The property market here is diverse but generally fairly expensive. Look outside the capital and you can pick up a ruin for around the €30,000 mark and one-bedroomed apartments for between €70,000 and €80,000. In the city itself, most available property comes in the form of apartments, and if you want something central, you’re looking at €135,000 for one bedroom; a period three-bedroomed apartment in the business district retails at around €375,000. With Zagreb experiencing a growing influx of multinationals and foreign businesses, demand has been growing for long-term rentals from international workers, providing a great opportunity for a healthy rental income.

The islands

With over 1,000 offshore islands to choose from, it’s not surprising that you have the opportunity to buy one of your very own if you have the cash! Of the 1,185 Dalmatian Islands, only 50 are inhabited, but property on these is in high demand, with prices starting at €130,000 for a newly-built two-bedroomed development.

The islands have experienced the usual 20% appreciation rates that have swept across Croatia and for an average one-bedroomed apartment, expect to pay around €93,000, while for three bedrooms you’re looking at roughly €185,000.

The Dalmatian coastline

Stretching from Spilt in the north down to the Montenegrin border in the south, the breathtakingly beautiful Dalmatian region is not a place to find a bargain. However, if you do have the money to invest there, then you’re guaranteed good, steady capital growth. The average price for a two- or three-bedroomed apartment is around €200,000, with property costing an average of between €2,500 and €3,000 per square metre. Popular areas include Trogir and Makarska.

Because of the high costs of buying, one of the recommended locations to look at is the city of Split. This is a much overlooked city, and in places, it’s incredibly beautiful. Located on the coast of southern Dalamatia, Split is Croatia’s second city, being a bustling port and transport hub. A small, central, newly-built property here will cost around €192,120, while there are also a number of renovation properties to be found. Such bargains are generally on the edge of the city in the post-communist tower blocks, but if you’re looking for something for yourself, or to rent, it’s recommended that you look at something with a more ‘Western’ feel. A two-bedroomed resale apartment located in the city centre can be yours for €100,000. If you look to the old town then prices increase. A traditional, six-bedroomed period apartment with coastal views will cost around €600,000.

What to buy?

The recommendation in Croatia is not to go inland and buy something incredibly rural for a bargain price, as it simply won’t make you money, either through capital appreciation or rentals. Unless you intend to live permanently in Croatia or you have a personal preference for resale houses, in order to secure the best returns for your investment, you should look to purchase a newly-built property. Generally, off-plan properties are more adapted to modern demands and living, the quality of construction is higher and it comes with the developer’s guarantee. Newer properties also tend to be lower maintenance, especially apartments, and they offer better rental potential.

As seafront property sells at a premium due to the tough laws protecting the coastline, appreciation rates will be at their highest in these areas. Croatia is renowned for its quality properties and consequently agents recommend that you spend that little bit more to ensure you buy into a market where demand is high, supply limited and you have the option to let out your home–either long-term in cities such as Zagreb, Spilt and Dubrovnik, or short term along the Istrian or Dalmatian coast.