Foreigners interest in buying property in Croatia is not something new. Before the war in the nineties many tourists showed interest in buying property in Croatia. At that time, they were not allowed. With the Croatian independency from Yugoslavia the thing changed and particularly, from 2000 the market started to emerge.

Germans and Austrians, who have a long history of tourism and commerce in Croatia were the first ones to buy property. British interests started around the end of 2002. Italians for example cannot buy property in Croatia because of reciprocity.

Reciprocity works in the following way: if a Croatian national does not have any restrictions to buy property in an x country then the nationals of that country will have no problem in purchasing property in Croatia. Great Britain, Ireland, Australia, USA, and many other Europeans countries have reciprocity with Croatia.

The advance in developing became quite notorious by 2001. Nevertheless, the Croatian authorities saw what was done with Southern Spain and immediate legislation was implemented to protect the landscape and especially the coast. We do not have to forget that tourism plays a major part in Croatia s economy, with 46.4% of the workforce involved in the service sector.

The building standards in Croatia are really good indeed. Most of the builders, now developers, previously worked in Germany, when times in Croatia were harder. The quality is spot a first sight by many people who look for property in Croatia and helps them to decide for this country, where development is limited and there is good quality for value.

A good investment

Croatia is undoubtedly a good place to invest in property. Prices are rising steadily and rises of 20 per cent per annum aren t unreasonable along most resorts of the coast.

Croatia s EU ascension is playing a big role in the Croatian property market as it is expected to boom the prices much more. World financial institutions are predicting an increase in Croatian real estate value of 200 per cent - 300 per cent in next few years.

Also, as the Croatian government started to restrict further developing alongside the coast in order to protect the environment and the place not to become a concrete jungle as other holiday destinations, the properties already built and the plots of land that already got the planning permission are much better valuated.

Moreover, property in Croatia is still much cheaper in comparison to other property hot spots in the Mediterranean, like Spain for example. If there is a time to make a move in the Croatian property market it seems to be now as there is a big number of foreign that have bought property lately.

Property prices now are quite different depending on the area of Croatia you decide to buy. Dubrovnik, which has received a lot of good press in the last years, is already very expensive place to buy property. The square meter of property has reached €6,000 (£4,000). In Southern Istria, towns like Pula, Medulin, Premantura and Pjescana Uvala prices are still much more affordable. An apartment with Sea view in those areas could be valued at €2,000 (£1,400) per square meter in the most expensive of the cases.

What to buy

The most popular investments seem to be stone houses and one and two-bedroom apartments. Buying an apartment permits the buyer rapid returns if they decide to let it. In general, good-quality apartments in tourist areas are usually easy to rent out and can provide useful income on top of the capital growth.

Old stone houses require usually renovation and more paperwork to allow that renovation being implemented. The good point with this kind of property is the big potential they have for those looking for agro-tourism. An incredible amount of Europeans are looking anxiously for a very quite place to stay but at the same time it has to be half and hour drive to the Sea, beaches and the exciting night life. Only recently, for example, an article in The Sunday Times highlighted the shortage of villas that are available for rent in Istria when compared to the huge demand in the area, and it s this demand that is attracting more and more people to Croatia.

The inland Istria also known as green Istria is the right place in Croatia for those ones. Istria is easily accessed by car from Italy, German, Austria and Hungary, to name a few nationalities that spend their holiday there and by cheap air fares from Ryanair and easyjet to adjacent airports for those coming from the Britain and Ireland.

So, to conclude, if you plan to obtain income from your property in Istria, Croatia, regardless the type, bear in mind that the chances are very positive providing that you do it yourself or by getting a local letting agency to manage your property; who s writing have spent many years in Croatia and seen car plates from over the whole central and eastern Europe coming and staying in Istria. Istria is their nearest access to the Mediterranean and therefore to their holiday.

Croatian Economy

The country is economically sound and EU accession is set for 2008.The economy is a mixed one, with 30 per cent attributable to industry, 7.9 per cent to agriculture and 62.1 per cent to services, including tourism. The growth in GDP is 4.3 per cent per annum. The currency, the kuna, was formerly pegged to the deutschmark and now shadows the euro. It has been stable for several years.

Before the dissolution of Yugoslavia, Croatia, after Slovenia, was the most prosperous and industrialized area, with a per capita output perhaps one-third above the Yugoslav average. The economy emerged from its mild recession in 2000 with tourism the main factor, but high unemployment remains a key negative element.

Now, Croatia is on track to join the European Union and its foreign and economic policies are all tailored to achieving this as smoothly as possible. Many people, Croatians and foreigners, are investing in property here now, fully expecting the same rises in property values that were seen in other EU candidate states immediately prior to their accession.

Property prices in many of the new EU members country have seen considerable rises, the forecast is that for Croatia, that rise would be at a very high rate. After that, Croatia will be a new "European" rival of Spain, Italy, Portugal and Greece in the Mediterranean coast.

Accession to the EU in 2008 means that the outlook for the property market is very bright. However, the government has a heavy backlog of civil cases involving tenure land that must be dealt with.

Property Management & Letting

Once in Croatia we can recommend you local agencies to manage and/or rent your property. We understand how important some issues are such as:

-         Project Management

-         Changeover Cleaning

-         Key Holding

-         Contract Monitoring

-         Bookings Control.

We would be happy to discuss your needs and give you our best advice.

Do not forget that if you have bought your property to let you will have good chances of making profit of it, many central and eastern Europeans are coming and staying in Istria every year. Istria is their nearest access to the Mediterranean and therefore to their holiday.

Also British and Irish, thanks to budget flights, are increasing in number during the season. The season in Istria commences in April and ends in October with the summer months seeing the most visitors.

If you travel to Croatia because you have an interest in buying property it''''''''''''''''s a good idea to open a foreign currency account as soon as possible. It''''''''''''''''s quite simple, entailing only production of a passport and a nominal sum.

Blenham Investments’ team can advise you which banks are available and perhaps take you directly there. Opening a foreign currency account is important as in Croatia it''''''''''''''''s essential to have the funds available for handing over the same day. In that aspect, Croatian''''''''''''''''s process of buying property differs from UK''''''''''''''''s where funds can arrive after the contract is signed.

If you decide to purchase a property you will need a proof of citizenship: your passport has then to be notarised in Croatia. Your agent should present you with a local notary, the notary will attests to your identity (it costs about £4).

Blenham Investments recommends that intending buyers do this immediately, while they have plenty of time to slot it in, rather than leaving it to the last minute. If you choose our agency, the Croatia Properties team will help you in locating the notary and obtain the required documentation. If buyers leave this too late and find there are no working days before they return to the UK, they wind up having to do it in the UK and since UK notaries are not known to the Croatian authorities, it is necessary to get the UK Foreign Office to validate the notarization, wasting your time and money.

Costs & Taxes 

When calculating your budget for buying a property in Croatia you take some points into consideration. Starting by agents, many charge to show you around properties. Whereas this is intended to enable them to focus on genuine buyers, rather than simply holidaymakers, Blenham Investments does not charge for showing you around! Our only fee is our commission if you decide to buy a property trough us.

Blenham Investments has a fixed price policy of 3% + VAT commission charge to the purchaser. This figure is added to the purchase price and is paid at the moment the deposit is given for the chosen property.

Our agency in Croatia is entitled to arrange all the legal documentation for you and prepared to guide you through the process of the Ministry of Foreign Affairs and Land Registry. If you do not prefer this route you can always contract a lawyer to act on your behalf, legal fees for a lawyer for the same service will cost you around 1.5% of the purchase price.

The property transfer tax in Croatia is currently 5%. If you buy newly-built property like off plan apartments, this 5% will be levied just on the cost of the land. If the property is older, the 5% will be on the entire property value.

Please also note that property transfer tax has to be paid once you receive the approval from the Ministry of Foreign Affairs which takes between 12 and 18 months from the moment your agent/ lawyer sent the documentation.

The Pre-contract 

The next point to consider is whether you are in a position to pay just a deposit or the whole amount. Many people buy property in Croatia with a mixture of savings and a loan against equity in a UK property.

Frequently, they will transfer their deposit into their local bank account from savings and arrange to come out a few days later to sign a pre-contract. The balance then follows in two to three weeks once they can get it out of their lender, at which time the vendor signs the full contract. Without a previously established bank account, another trip would be necessary. This is why setting it up, even before selecting a property, pays off.

Paying a reservation deposit guarantees that the property you have chosen is taken off the market and is reserved for you at the agreed fixed price.

The pre-contract acts as a receipt for the money and ties it closely to the property. It will specify when the balance is to be paid and this date should be carefully considered and agreed with the vendor. You should allow enough time for withdrawing money from any deposit account it may be held in, or allow a margin of error from a lender''''''''''''''''s assurances of when a UK loan might be available.

In the undesired case you fail to complete on the agreed date the vendor has the right to retain the deposit. In case the vendor withdraws, he has to pay you double the deposit.

The Contract 

On the assigned day of completion, the buyer and seller (or their authorized representatives) will be presented at the office of the Notary (Javni Biljeznik) to sign the title deed (Ugovor or Kupoprodaji Nekretnine).

The Croatian Notary does not check any terms when buying property in Croatia, but certifies that both parties have agreed to the terms stated, (the Notary is in place to witness both parties'''''''''''''''' signatures). At that stage your agent will prepare a copy of your contract and all other (see below the list of documents needed) necessary documents to be sent to the Ministry of Foreign Affairs of Croatia.

When acquiring a property in Croatia, foreign citizens need to obtain the approval of the Ministry of Foreign Affairs of the Republic of Croatia. This is a formality that requires 12 to 18 months to complete. Applications are not refused unless the individual has an adverse history with relation to Croatia.

In Croatia the ultimate proof of ownership is entry of the owners name in the local Land Registry (Zemljisne Knjige) on that specific property. The local courts will not allow a foreign citizen to be entered in the Land Registry without the MFA approval. Here is a list of the documents, which have to be supplied to the MFA when requesting an approval to purchase property in Croatia:

The sales contract;

An excerpt from the land registry for the particular property (In Croatian ZK izvadak). This document is usually obtained in each municipality (Opcina) at the local municipal court (Opcinski Sud); it''''''''''''''''s land registry division (Gruntovni Odjel);

A document from the local municipality (Opcina), from the following department: "Ured za prostorno planiranje". The document is called "Uvjerenje o namjeni", for the particular property;

Proof of citizenship for both buyer and seller (photocopy of passport); any photocopies have to be notarised by a Croatian Notary Public

When buying property in Croatia, a clause in the contract safeguards your finances, protects your rights and allows you to take advantage of your property with immediate effect while you wait for the paperwork. Once the approval arrives from the Ministry of Foreign Affairs of Croatia your agent will fax it to the local Land Registry and confirm you as a new owner, then the final step is to pay the tax for your new property in the Taxation Office.

Setting a Company 

Blenham Investments’ Croatian Agency works in partnership with local lawyers who are experienced in establishing limited private entity''''''''''''''''s for individuals wishing to purchase property in Croatia via this route but we also advise whether this is the convenient route for you and your circumstances. This could be that you need to get the property registered in the Land Registry more quickly or that you need a quick registration in order to apply for planning permission.

By setting a company in Croatia for buying property you can also claim the VAT back but if you also establish a company, you will have a liability to make regular returns.

You will need to contract an account in order to make those returns, which will cost a modest amount each time. The risk you run by no making the returns is of the company being closed with consequences for its assets like your property. Forming a company does not automatically register you for PDV (VAT) .You would need to register with the tax authorities for it and you will incur a liability for submitting regular returns. If you put yourself in the PDV regime, you''''''''''''''''ll be liable to charge PDV on all sales. This could have implications when you want to sell your property.

A Croatian lawyer will have to check that your choice of name is acceptable. Once the name is agreed, it will need to be registered with the Trade Court appropriate to the area you will operate in. The time for this varies from a few days to six weeks, depending on the court.

Your lawyer will also have to register your company with the tax office and get a statistical number and this is usually achieved with specific powers of attorney to save you from regularly having to go to Croatia. There is a minimum share capital of the equivalent of 20,000 kunas (about £1,800), although this can be recycled into your purchase.

Mortgage in Croatia 

At the present time, mortgages are not available to foreigners in Croatia secured on property in the country.

Local banks are unwilling to lend to owners whose income is outside the country and who could be difficult to pursue in default.

Average Flight cost:

Budget flights to Trieste or Croatia with average cost of 60,00 Euros return. Airlines to Pula with a average cost of 400,00 Euros return

Airport(s):

Pula Airport.

Hotel Cost & are you getting any deals from hotels?

N/A.

Surveyor charges:

150,00 Euros.

Solicitors fees:

Average of 500,00 Euros.

Government taxes:

None, only once it s purchased.

Number of client’s expected visit before completing:

One year.

Expected return on property(ies):

20-25% per year.

Expected market growth:

20-25% per year.

Buy-To-Let: Expected rental income & Letting agencies fees:

Return on a Croatian property is 6-8% per year. Agencies fees are 15%.

Other comments:

Closing/Selling costs: 

Solicitors fees:

1.5% of the purchased price.

Government taxes:

5%.

Capital Gain Taxes:

35%.

Other comments: N/A.

Croatia is situated in Southern Central Europe, a roughly horseshoe-shaped country with a coastline 1,777 kilometres long. No less than 1,185 islands lie offshore, but only 66 of them are inhabited. Italy lies to the west and Slovenia to the north.

Croatia s stunning coastline is on the Adriatic Sea, one of the cleanest seas in the Mediterranean and wonderfully warm.

Croatia is much closer to the UK than many people imagine, only two and a half flying time from London and three hours from Manchester and Birmingham.

Weather in Croatia

The best period to visit the Croatian coast is from April to October. Peak temperatures in high season summer months (July, August) can reach 38°C (100°F), and the water surface at that point reaches a comfortable 26°C (79°F).

High season has its obvious advantages for people looking for fun and excitement and disadvantages for others, but in Croatia you can always find some nice hidden place if you want to sleep far from loud music.

Spring starting in March can bring some rain showers, but the autumn months, September and October, are ideal for travel if you want to relax. In the off season the beaches are less crowded and the prices drop, weather, however, remains stable and the water is still agreeably warm.

Generally, you can travel along the Croatian coast at any time of the year. During winter season, however, you should pack some warm clothing in spite of the mild Mediterranean climate. The temperatures seldom drop below the freezing point but some winds might be unpleasant in the winter.

Food & Culture

Croatian cuisine is heterogeneous, and is therefore known as the cuisine of regions. Its modern roots date back to Proto-Slavic and ancient periods and the differences in the selection of foodstuffs and forms of cooking are most notable between those on the mainland and those in coastal regions.

Mainland cuisine is more characterized by the earlier Proto-Slavic and the more recent contacts with the more famous gastronomic orders of today - Hungarian, Viennese and Turkish - while the coastal region bears the influences of the Greek, Roman and Illyrian, as well as of the later Mediterranean cuisine - Italian and French.

Croatia is justifiably proud of its broad palette of high quality wines and brandies

Croatia is justifiably proud of its broad palette of high quality wines (up to 700 wines with protected geographic origin) and brandies, fruit juices, beers and mineral water. In the south, people drink bevanda with their food (heavy, richly flavoured red wine mixed with plain water), and in north-western regions, "gemisht" (dry, flavoured wines mixed with mineral water).

Many Croatian traditional festivities are distinctly linked with food independently of whether they are related to strenuous labour (crop harvesting or threshing, the grape harvest and Christening of wine, the completion of a house), religion (mostly Catholic - Christmas, Easter, pilgrimages, local saints days), or to memorable moments in an individual s life (baptism, wedding, birthday, name-day, funeral wakes, etc.).

Some festivities are typically of a public character, such as the Dionysian St. Martin s Day, celebrated in private farmhouses, wine cellars and restaurants; others are almost exclusively family reunions (weddings, baptism, Christmas Day, New Year s Day, Easter, etc.).

Living in Croatia

Visas aren t necessary for UK and Irish citizens, although if you plan to stay, you will need to apply for one as a prerequisite for first getting an extended stay visa and, later, permanent residence.

Work permit are required for all non-Croatians. Nationals with no tourist visa requirement (most West Europeans and Americans) are allowed to leave and enter Croatia while the work permit application is in process.

The Croatian currency is the kuna, established in 1993. One kuna is worth 100 lipa. Kuna notes come in 1000, 500, 200, 100, 50, 20, 10 and 5 denominations. Coins are delivered in 5, 2 and 1Kn amounts and 50, 20, 10, 5, 2 and 1 lipa amounts. MasterCard and Visa are accepted practically everywhere, and your Diner s Club and American Express cards can be utilized in a fair number of establishments too.

For opening a foreign currency bank account you only need to provide your passport and a nominal sum and it can be done in any of the main banks. It s a quite straightforward process and takes a short time. Banks in Croatia open at eight in the morning and close very late at seven in the evening.

ATMs are numerous and are available everywhere. Cards bearing the Visa, Cirrus or Maestro names will work everywhere and often prompt a choice of languages in which to effect the transaction.

The population is 90% Roman Catholic and many aspects of Croatia are reminiscent of Italy, Spain and France, where strong family values remain and churches are well supported.

Transport

Istria borders with Slovenia and has a maritime border with Italy. This peninsula is the most popular destination for foreign visitors to Croatia. The tourist season is longer than Dalmatia. Umag and Porec continually top the annual poll of best holiday resorts in Croatia, as organised by the Croatian National Tourist Board and Croatian TV.

Istria is easily accessible from Eastern, Central and Western Europe: Germans, Italians, Slovenians, Austrians, Dutch, Belgium, French and Hungarians between others, access Istria by car and are also starting to buy property in Istria. A big investment is being done with the motorways; a new stage is being built to access Trieste faster. Zagreb, the capital of Croatia, is now also one hour less far and that is an incentive to bring more people to the peninsula.

As we ve said before, most visitors arrive by car, but you can fly in to Pula Airport. It has been said many times that Pula airport will be reached by cheap air fairs; Ryanair and Easyjet have done some incursions already but until now there is not confirmation. The fact is that after Croatia ascension to the EU, Istria will be the closest point to these companies to reach Croatia and the airport of Pula has all the resources and capabilities to deal with these flights. Moreover, it s only just 15 minutes by car to the town centre of Pula.