House Hunting in … Croatia

House Hunting in … Croatia


MARKET OVERVIEW

The global recession of 2008 hit the Croatian property market hard, with prices falling between 25 and 50 percent, brokers said, but in the past few years it has begun to recover.

While Dubrovnik continues to be the pearl of the Adriatic, the coastal areas of Split and Istria have seen moderate price growth, said Marko Ljutic, research and marketing manager of the real estate brokerage Dream Estates Croatia.

In Split, prices in the city center have gone up 20 to 30 percent in the last three years, said Tim Coulson, owner and director of the real estate brokerage First Property Croatia. “The town is unrecognizable from, say, four to five years ago,” he said.

Renovated homes in the old town center — one of the areas most favored by foreign buyers — sell for 3,500 to 5,000 euros a square meter (or about $380 to $545 a square foot), Mr. Coulson said, while unrenovated ones go for 2,500 to 3,500 euros a square meter (or about $270 to $380 a square foot).

WHO BUYS IN CROATIA

Most foreign buyers are from Western European countries, particularly those within driving distance, Mr. Ljutic said, adding that he also has clients from England, Ireland and Slovenia, as well as Bosnia.

Other brokers said they are seeing buyers from Germany, Austria, Italy, the Czech Republic, Slovakia, the Netherlands and the Scandinavian countries, as well as Ukraine, South Africa, China and Russia, although visa difficulties have made it more problematic for Russian buyers since Croatia joined the European Union in 2013.

And “though more limited in comparison to Europe, interest from North American buyers is on the rise, particularly those whose roots go back to Croatia,” said Jelena Cvjetkovic, an associate director at Savills International.

In the past, most foreign buyers were looking for second homes, but now they are primarily investors seeking properties to rent to tourists, said Peter Ellis, the owner of Croatia Property Services.

“Foreigners are increasingly recognizing Croatia as a sound investment with a decent yield, and a wonderful place to spend some time with family,” Mr. Ljutic said.

BUYING BASICS

A reciprocity rule allows foreigners to buy property in Croatia without restrictions if their home country doesn’t restrict Croatian buyers.

That means European Union residents can easily buy a home in Croatia, but United States citizens may or may not have reciprocity, depending on their state of residence, brokers said. (More than half the states in the United States have reciprocity agreements with Croatia, including New York, New Jersey and Connecticut, according to the Croatian government website.)

Buyers from places without reciprocity are required to set up a Croatian ownership company that generates income, Mr. Coulson said.

Brokers recommended hiring a lawyer in Croatia, which usually costs about 1 percent of a home’s purchase price. A title search may be done by the real estate agent, but buyers should also request that the notary do a search on the day of the contract signing, Mr. Ellis said, adding: “It’s worthwhile asking the lawyer whether there are any reasons, like local planning consent, that might impinge upon the value of the property.”

Closing costs are roughly 8 percent of a home’s purchase price, and include transfer tax, agency fees, legal fees and notary costs, brokers said. While some Croatian banks do offer mortgages to foreigners, the terms are not advantageous and most buyers instead use funds from abroad, Mr. Ljutic said.

WEBSITES

Croatian National Tourist Board: croatia.hr

Croatian government: vlada.gov.hr

Tourist Board of Split: visitsplit.com

LANGUAGES AND CURRENCY

Croatian; kuna (1 kuna = $0.16)

TAXES AND FEES

Annual property taxes on this home, if used as a residence, would be about $500, Mr. Pazanin said.

CONTACT

Marko Pazanin, Croatia Sotheby’s International Realty, 011-385-98-904-8370; sothebysrealty.hr

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