Located in the southern area of Europe, Croatia is bordered by the likes of Slovenia, Hungary, Serbia, Bosnia and Herzegovina, Montenegro and Italy (by sea).  Even though the country is well positioned for both international trade as well as tourism, the economy has been very subdued over the last decade.  It is only in the run-up to full membership of the European Union (talks are expected to resume in 2007) that there have been real signs of improvement.

Introduction To Croatia

Predominately a service based economy, the country has a massive divergence of unemployment with some areas reporting a rate of 20%, while others are down at 7%.  There is no doubt that the country is moving in the right direction (recent signs indicate unemployment is falling by 5% a year) but there is much to do.  Full membership of the EU, as and when it happens, should give a boost to the country’s economy and open up a number of new trading markets.

Over recent years the country has been the centre of a number of bloody wars which have perhaps given a biased picture of the country.  True, there have been problems with corruption, religious friction and much fighting, but vast areas of the country are free of major problems.  The country offers a variety of terrains including lakes, plains, hills and densely wooded mountainous areas, as well as many different architectural styles giving the country a beauty not seen by much of the world.

There is a lot more to Croatia than many would have you believe, and after membership of the EU is confirmed there should be a major improvement in prospects for the future.

Property Market in Croatia

While there is a large variety of property types, prices and markets throughout Croatia it has suddenly become one of the hot spots of Europe - again, probably due in the main to the forthcoming confirmation of entry to the EU.  Over the last couple of years many areas (especially the coastal regions) have seen property prices rise by upwards of 20% and while under normal circumstances you would not expect this to continue, there are many factors in favour of the property market.

Even after recent rises the Croatian property market is still one of the cheapest in the region, and the coastal areas have seen much development and foreign interest of late.  Compared to the likes of Spain, it is possible to pick up a prime coastal property for a fraction of Spanish prices, and still enjoy the same benefits of the region.  The Croatian authorities have also been fairly astute in their actions, recently restricting further developments, ensuring that the property market remains very firm indeed (less available properties and a growing appetite from investors).

While the future can never be certain, many market observers are expecting average property prices to increase by upwards of 200% in the next few years - offering potentially enormous gains for investors willing to take the plunge now.  Even though the headline property market rises will be in the coastal regions, this will slowly but surely filter into the central areas.

Buying Property in Croatia

For a country which has not seen an awful lot of foreign investment until the last few years, the property purchase process is fairly straight forward and easy to follow.  However, the process whereby foreign individuals apply to acquire property can take a few months to complete. 

For foreign investors, an application needs to go to the authorities which will be cleared if a “condition of reciprocity” is satisfied.  However, many foreign nationals have taken a slightly different route, registering a company in the country and using the company to hold the official registration of the property (while no prior clearance is needed for this, there are possible tax implications.)

The actual purchase process can be divided into three different stages which include :-

Reservation contract.  A contract is signed by both parties, confirming an interest in a property.
Preliminary contract.  This is signed where a foreigner is looking to buy a property, and requires that a 10% deposit is passed to the seller.  If the seller were to break the contract, they are legally obliged to pay 200% of the deposit back to the other party.
Final contract.  This is signed when all of the relevant documentation is in place, and the buyer has the funds to complete the purchase.  If the buyer cannot attend the final meeting, a “power of attorney” can be granted, passing signing powers to a legal body.  

It seems as though the Croatian authorities have recognised the importance of foreign investment and while there are procedures to follow, it ensures that the authorities are able to keep control of the situation.

Future Property Market

At this stage of Croatia‘s development it seems that the property market still has a lot of potential for both short term and long term growth.  That is not to say that it is not important that you choose the correct areas, with coastal regions still very much the flavour of the day.  However, as time goes by it is inevitable that interest from buyers will move further inland and slowly but surely the whole market will receive a lift.

The economy will obviously have an impact on both the country as a whole, and in particular the property market.  As seen in many similar countries in the region, a substantial increase in economic activity has very often preceded a significant rise in employee income, which has a natural knock on effect to the property market where prices will move to reflect average incomes.

The authorities seem to have a good control of the market as a whole, and while this may change in the future, they seem to appreciate the need to restrict over development in the short term (which could cause major swings in what is still a very young property market).  However, overnight they could change the guidelines on planning permission which would then have a sharp effect on short term property price movements. 

The main advice for buying property in Croatia is be vigilant, keep an eye on the markets, government policies and the economy.  The potential for growth over the next few years is significant for those willing to do their research.