Updated: Nov 3, 2022
Regular visitors to my site will know that a piece of my heart lives in Croatia. It’s the first country I lived in outside the US and somewhere I regularly return to. It is a beautiful country, especially along the Adriatic coastline. The people are welcoming and, despite being small, the country brims with culture and history.
But for me, Croatia is more than a cherished getaway. The country also has bags of investment potential. Here's my pick of the reasons why buying real estate in Croatia is hot right now, with a little breakdown on how to make the dream a reality.
4 reasons to consider investing in Croatia right now
Before we get tangled up in the nitty-gritty of buying real estate in Croatia, here
are my top reasons to consider investing in the ‘land of a thousand islands.’
#1 The Euro (€) is coming to Croatia
Croatia’s membership of the European Union is reassuring for investors, as it confers solid legal protections and points to a stable economic future. But Croatia has an additional ace in the hole. From January 2023, the country will replace the Croatian Kuna and join the Eurozone.
There are clearly fiscal headwinds for the EZ to address, especially in today's volatile economic climate. But the citizens and businesses of 19 wealthy nations will gain easier financial access to Croatia. With around 2/3 of Croatian debt held in Euros, the switch should reduce interest rates and improve credit ratings, further boosting investment.
There are other positives buried in this momentous decision. Countries can only adopt the Euro if strict economic conditions are met. This means Croatia has sound public finances, relatively low inflation, affordable borrowing costs, and a consistent exchange rate. Becoming the 20th country to adopt the Euro reflects well on Croatia’s past and future economic performance.
#2 The US Dollar is going far in Europe...for now, at least
I'm an accountant, not an economist. So, I don’t have any tips on currency futures. But I can say with confidence that, right now, the US dollar is strong compared to the Euro, making everything in Europe cheaper for Americans.
It’s not quite a fire sale, but there have been points in 2022 when a dollar was worth more than a Euro. You have to reach back over 20 years for a similar exchange rate. https://www.exchangerates.org.uk/USD-EUR-spot-exchange- rates-history- 2022.html#:~:text=This%20is%20the%20US%20Dollar,EUR%20on%2006%20Feb% 202022.
You’ll have to wait until January to benefit from the Euro exchange rate when buying real estate in Croatia. Although, even against the soon-to-be-extinct Kuna, the dollar has made solid gains in 2022.
#3 Tourism is booming in Croatia
Tourism is a major economic driver in Croatia. And vacation rentals are thriving.
Some key numbers paint the picture.
• Croatia is the 12th most visited country in the world. https://www.worlddata.info/europe/croatia/tourism.php
• 20% of the national economy depends on tourism. It’s a bigger slice of the GDP pie than other countries in the region, and yet another reason why adopting the Euro makes sense (the majority of visitors are from Europe.)
• Tourist numbers were heading skywards before the covid pandemic. 2019 was a record year for international visitors (with Germans leading the way.) https://www.total-croatia-news.com/travel/63317-croatian-tourist-arrivals
• London’s Financial Times reports that Airbnb rentals in Dubrovnik doubled between 2015 and 2019. https://www.ft.com/content/07d828c8-e69e-11e9- 9743-db5a370481bc
#4 Property taxes can be as low as zero in Croatia
Low property taxes are another reason to consider buying real estate in Croatia. For properties built after 2015, there is no property tax to pay when you're planning to let the building as a vacation home.
Homes built before 2015 are subject to a 3% property transfer tax. This rate is lower if the owners had previously paid VAT for the property.
That's not all. Capital gains tax is applied if you sell your property within three years. But sell after three years, and there’s no capital gains tax. It’s a big incentive for real estate investors.
Even rental incomes are taxed reasonably. If you rent via Airbnb, you will only need to pay a flat-rate annual income tax on rental income.
Trust an accountant when I say taxes are a messy business. It is always best to seek local professional advice. But to give you some insight, here's Airbnb’s own assessment on rental taxes in Croatia, which covers all the key numbers. https://assets.airbnb.com/help/airbnb-pwc-taxguide-croatia-en.pdf
Where to buy property in Croatia
If you think property in Croatia is inexpensive, you’re right and wrong. Property prices along the coast and in the capital, Zagreb, are comparable with western Europe. Head inland, prices are more in line with central Europe.
For vacation rentals, it makes sense to buy where tourists go. Here are the top 5 destinations in Croatia by overnight visitor numbers:
3. Primorje-GorskiKotarCounty(9.5million) 4. ZadarCounty(7.7million)
Source: Schengen Visa Info, 2022. https://www.schengenvisainfo.com/news/10-3- million-tourist-arrivals-registered-in-croatia-this-year-so-far/
Putting my buyer’s hat on, here’s my brief overview of those 5 popular regions.
Istria is a peninsula bordering Italy, often called the 'Tuscany of Croatia.' It is home to Pula airport and charming towns coastal towns like Rovinj and Poreč. Cosmopolitan and on the doorstep of western Europe, real estate is highly sought-after in Istria.
Accordingly, property prices are relatively high in Istria but very variable. Properties close to the sea command a premium. Expect to pay at least €1,000- 3,500 per sq. m for habitable property, depending on quality and location.
The Dalmatian coastline is the vacation jewel of Croatia. A slice of natural beauty centered on the venerable port town of Split, the region is many people’s idea of the perfect Croatian getaway.
And it’s not just Split. Towns like Trogir and the Dalmatian islands, notably Brač, are attractive destinations and great places to find real estate in Croatia.
Prices vary markedly around the region but offer plenty of investment opportunities. Expect to pay anything from €2,500 – 3,500 per sq. m in Split. Prices outside Split tend to be lower.
Primorje-Gorski Kotar County
Tucked away in north Croatia and off the beaten tourist path, Primorje-Gorski Kotar County flies a little under the radar and offers genuine value for potential buyers. The capital is the old industrial city of Rijeka. But with charming, small coastal towns around the Bay of Kvarner and easy access to Croatian islands, there is plenty of variety. Expect to pay around €1,000 – 2,000 per sq. m.
North of Split, Zadar county exemplifies the best of Croatia and offers some real
Running along the Dalmatian coastline, the region is peppered with picturesque towns. But the main draw is the atmospheric old city of Zadar. If you’re priced out of Split, this might be the place to look. Expect to pay around €1,500 – 2,500 per sq. m.
The star attraction in southern Croatia (perhaps the whole country) is the evocative old city of Dubrovnik. The Game of Thrones setting (King’s Landing in the tv series) is home to zero dragons but numerous festivals and eons of history.
Dubrovnik is also the most expensive place to buy real estate in Croatia. Expect to pay at least €3,000 per sq. m for unremarkable apartments. An enchanting location, if you can afford it!
The capital of Croatia did not make the top five for visitor numbers. But it's you're
investing long-term, or you're a city person, it has plenty to offer.
Zagreb property may also be easier to let outside the summer months. Striking architecture, diverse museums, cultural attractions, and a modern cosmopolitan vibe make Zagreb a compelling city to visit all year.
As the economic center of Croatia, real estate prices in Zagreb are defined by neighborhoods. Prices can range from just €1,000 per sq. m in Brezovica to €2,000+ in the city center.
Real estate prices in Croatia have risen fast in recent years
If you’re looking at making a long-term investment, there are mixed signals about
the future of real estate prices in Croatia.
Property prices are rising fast. Too fast, perhaps. The European Systematic Risk Board (ESRB) issued a statement in 2021 warning that the accelerating property market is unsustainable and may affect financial stability. https://www.esrb.europa.eu/news/pr/date/2022/html/esrb.pr220211~9393d5e9 91.en.html
Some eye-watering numbers speak for themselves. Since 2015, property prices have risen:
• 55% in Zagreb
• 40% in coastal towns
• 22% elsewhere.
In 2021 alone, apartment prices across the country rose by 9% on average.
If you’re worried you've arrived too late to see significant prices rises, the arrival of the Euro in 2023 is forecast to push prices up even further.
Is it sustainable? I can’t answer that. But if you're banking on a continued upward trend, I would seek informed financial advice.
For real-time prices, head to the two most popular websites for finding real estate in Croatia.
• Njuskalo has thousands of properties from across Croatia. You can even see ready-to-go vacation properties under ‘Nekretnine za odmor’. https://www.njuskalo.hr/nekretnine
• Index is a classified site with even more listings. https://www.index.hr/oglasi/
What can you expect to see in rental returns?
A villa in prime locations (i.e., along the Adriatic, on the islands, and in Zagreb) can net €400-600 per night. This is dependent upon the size, amenities, and, above all, location.
Smaller homes in prime locations, like Split, rent for €100+ per night. Apartments are hugely variable, earning €20 to 200 per night.
Everything hinges upon location and the quality of facilities. It is important to note that the window for vacation rentals begins around mid-May and tapers off in September.
What you need to know before buying in Croatia
When you’re ready to take the plunge into buying real estate in Croatia, a few bureaucratic hurdles may force a rethink.
Americans should note that you can only spend up to 9 months per year in Croatia: comprising 6 months of right to stay and a 90-day tourist visa. This is markedly different from neighboring countries, where property ownership usually confers full residency rights.
Another potentially sticky point is that you can only buy property in Croatia if you’re from somewhere with a reciprocal agreement. Surprisingly, that is decided by individual states in the USA. Most are covered, but not all. Check the complete list here. https://mpu.gov.hr/information-on-reciprocity-in-the-acquisition-of- ownership-rights-in-real-estate-between-the-republic-of-croatia-and-countries- other-than-eu-member-states-republic-of-iceland-principality-of-liechtenstein- kingdom-of-norway-or-swiss-confederation-25361/25361
Needless to say, a lawyer will help you navigate the intricacies of buying real estate in Croatia. It’s just not the language that trips people up. Inheritance law is a tangled web in Croatia, and there may be multiple owners of the same property. It can be one of those moments where a lawyer truly earns their fees.
You'll need a minimum 10% deposit to buy real estate in Croatia. If you need a mortgage, the chances of getting one from a Croatian bank are practically zero unless you have a steady local income. You'll have better luck asking lenders at home.
Once proof of ownership and funds are presented, a bunch of permits is required. Nothing unusual, and just the type of thing your lawyer will relish billing you for.
The vacation rental market in Croatia – the essentials
Once you're a property owner, there are a few more obstacles to circumvent
before you can rent your property to vacationers.
Significantly, non-EEA homeowners can only rent their property in Croatia via a registered local company: either one you've set up or via an established agency. https://psc.hr/en/
Local agencies are easy to find and typically charge a commission on rentals rather than an ongoing fee. It's a handy solution if you want the property fully managed in your absence.
The local administrative office must be notified, whether renting via your registered company or using a third-party company. Meeting all the regulations can be slow and knotty, yet is essentially a linear process of checking off a laundry list of requirements. However, fines are applicable if you don’t dot every i and cross every t.
If you plan to rent out property in Croatia long-term, you will need to prove that it is habitable, right down to the water being drinkable. Meanwhile, tourists are expected to put up with anything!
That's it. It's not an exhaustive guide. But hopefully, I've given you a flavor of what to expect and some compelling reasons why I think buying real estate in Croatia is hot right now.