Croatia and Property Market Growth in 2007

In terms of property price growth and the popularity of the property market in Croatia, 2007 will be another exceptional year for this emerging nation poised on the brink of EU entry. 

Why? 

Because all the fundamentals are in place for the development of a broad range of sustainable real estate demand across the country over the next few years and currently supply is nowhere near up to speed to meet this impending stream of demand representing property investor heaven.

Despite the fact that Croatia has been compared in terms of its real estate price growth and developing tourism economy to the likes of Bulgaria - and Dubrovnik has been compared to Sofia, Prague and Budapest and coastal Croatia has been likened to coastal Italy - in reality Croatia is a nation unlike any other. 

Sure, it has deep rooted economic issues to be resolved, it has many fiscal and structural reforms to get in place before EU entry can be achieved and it has an unemployment problem and corruption accusations to address, but the government and people of Croatia are committed to the improvement of their stunningly beautiful nation and are doing all they can to welcome foreign investment and even foreign residents…and because there is no denying the exceptional appeal of this under explored, idyllic nation, investment and tourism traffic are inward flowing unabated.

Here are the top five reasons why we believe property in Croatia will represent an exceptional investment opportunity in 2007…

1) Cheap Flights and Tourism

According to the World Travel and Tourism Council’s recently revised annualized real growth figures for travel and tourism demand from 2007 to 2016, Croatia achieves a coveted top five position in the charts with expected tourism demand growth of 7.6% a year for the next nine years. 
These figures could be even higher when you factor in the cheap flight aspect of developing tourism economies and realize that from 2007 the likes of Flybe and Thomsonfly are opening up extensive flight links from across the UK to Croatian cities such as Dubrovnik and Split.  Basically Croatia is about to benefit from the cheap flight effect that has seen so many other European nations enjoy a property price boom.
More people from more areas of Europe will have increased and cheaper access to Croatia and as a result tourism is likely to soar and on the back of tourism comes the second home market…these are market factors a property investor targeting an emerging nation cannot afford to ignore.  Flight routes should be checked out and the properties in areas of desire in an hour’s radius of the airports being serviced by regular cheap flights should be targeted for both tourism rental demand and also second home sales.

2) Mortgages and Affordability

Unlike in so many other emerging nations - from Cape Verde to North Cyprus - mortgages are readily available for resident and non-resident purchasers of property in Croatia.  Going in to 2007 interest rates start at just 4.4% with the Maximum Loan to Value available around 60%.  Mortgages are available for at least 15 years from most lenders operating in this particular market and this has led not only to increased interest from overseas buyers seeking a decent second home investment, but it has boosted the local property buying public’s interest in Croatian real estate as well. 

As any investor knows, where there is both demand from the local population and demand from tourism and holiday home hunters there is more than double the opportunity for profit.

Mortgages are allowing for affordability to enter the marketplace which means that property prices can naturally afford to rise – not only that, but more people are demanding real estate at a time when development is not yet up to speed in any of the main centres of interest to meet the surging demand…this represents the perfect natural environment for fast paced price expansion and so far in the most popular parts of Croatia prices have been rising by up to 20% a year.  In 2007 this trend will continue and because prices are on the whole starting from a subdued level (apart from in the most popular resorts and economic hotspots) Croatia offers an affordable entry point for investors seeking a relatively stable emerging market with room for growth as well as those looking for an affordable holiday home overseas for example.

3) Improvements to the Property Buying Process

It’s a fact that has been made clear in no uncertain terms by the EU – Croatia must improve its property buying process and the transparency involved in the real estate marketplace in Croatia in general if it is to become a fully fledged member of the European Union.  At the moment potential buyers can only own property in Croatia if they meet certain criteria such as being of a certain nationality and heralding from a nation where Croatian citizens are granted at least the theoretical right to own property; furthermore non-Croatians have to gain permission to purchase from the Ministry of Foreign Affairs of the Republic of Croatia who seek an opinion as to whether the individual can own property from the Ministry of Justice as well as local Government in the location in which the proposed property is situated.  This is not acceptable to the European Union which demands that all EU citizens have the right to purchase real estate in any other member state and are also afforded the same rights as domiciled Croatian citizens when it comes to ongoing property ownership rights.  Croatia understands and accepts this ruling and therefore as it is determined to gain EU entry possibly as early as 2009 it is highly likely that over the next year or so changes will be made to the property ownership rules which will lead more buyers to the market which will push up prices.  Investors should therefore position themselves in Croatia before that surge in interest happens.

4) Near Shoring, Corporate FDI and Economic Expansion

Dubrovnik is becoming a near-shoring centre of excellence; it has an affordable workforce with the skills and determination to fill many roles, it has affordable commercial premises at the moment – although these are quickly being filled and vacancy rates are falling.  There is a demand for more commercial space from many international businesses which have made a decision to relocate to Croatia, and as a result there are active plans in place to reduce unemployment, create opportunity and expand the Croatian economy. 

Investors looking for an alternative to the tourism fuelled residential options available across many parts of the country and especially prevalent along the extensive Croatian coastline could consider tapping into the emerging commercial marketplace.  Commercial property in Croatia will likely be a more stable, slower growing but strong yielding investment approach to take from 2007 onwards.

As stated earlier, the Croatian government are doing a lot to attract foreign direct investment and to make their economy more competitive and Dubrovnik is not the only city to attract inward investment.  Zagreb is key to the economic development plans of the nation, its airport is expanding, its international transport links are improving, it already has half the unemployment rate of the rest of the nation and it has attracted leading international companies such as GlaxoSmithKline, IBM and Siemens, L’Oreal and Nestle to establish regional bases there and what’s possibly even more interesting is the fact that Croatia is becoming a centre for UK and EU domiciled overseas commuters.

The whole business environment is changing as the economy grows, there is active interest for commercial property from Grade A office space in Dubrovnik to logistics and warehousing space in Zagreb, and in the main economic hubs there is intense interest for decent property for sale and rent from an increasingly affluent local and expatriate professional class…could an investor want or expect any more opportunity from a single nation?

5) EU Entry

And finally – let’s not forget the fact that of all the nations hoping for EU entry Croatia is the one coming closest at the moment. 

It is determined to achieve entry by 2009 with the EU holding back on any form of commitment but tentatively suggesting 2010 is more realistic…and whichever way you look at it Croatia will join sooner rather than later; it is aligned already and poised and doing all it can to harmonise with EU policies, strategies and standards and according to the CIA World Factbook “the EU accession process should accelerate fiscal and structural reform” meaning that there will be no holding this nation back in 2007 and beyond.  Those who get in now ahead of accession are taking the greatest risks but could well reap the greatest rewards…and because property investors are well aware of this you can expect Croatia to fly in 2007.

Special Reports: Property News for Croatia

Croatia Investment Property Buying Process
Property investors interested in Croatia will be pleased to learn that the property purchase process is relatively straightforward

Croatia Property Buyer’s Guide
Why Croatia's emerging investment property market is growing in attraction for international real estate buyers.

Croatia Property Investment Overview
Croatia is re-emerging as a tourism hotspot and represents an excellent property investment opportunity for overseas real estate investors.