Croatia’s Dalmatian Coast Lures Property Investors
“The most popular kind of property,” said Lara Vekic manager of the Adriatic’s largest realtor, Broker Nekretmine Real Estate Agency in Split, “is an old style Dalmatian stone house. This is also at the moment the most difficult to find. In bad condition they can cost EUR 50,000. But they can be as dear as EUR 250,000, depending on the condition and the area and condition of the surrounding land.”
The search for these stone houses, according to Vekic, preferably on an island surrounded by a large plot of land, has drawn both small investors looking to gain from both capital appreciation and from rental income and a mix of holiday makers looking to buy the perfect getaway and older adults hoping to fetch their retirement dream home. The vast majority of Vekic’s clients come from the UK. Other agents, such as NC Real Estate’s Marjan Mallak, sell to a mix of French and Irish with a new wave of buyers coming from Germany and Switzerland.
“The idea that you can buy in Croatia and double your money in a year is a well-known fantasy,” said Mallak. “But if you buy at market price, it is quite possible to earn 15%-20% from a combination of rent and capital appreciation.”
Vekic put the figure of annual capital appreciation at 7%, based on performance in recent years. “But it won’t be like this forever,” she said. “It will be like this for the next 1 or 2 years. Then it will stop. If you were to buy this year, it would be the right time. In the period after the war prices were going up 30% to 40% per year. 10 years ago you could buy an apartment in split for EUR 500 m2. Today you pay EUR 1100 m2 in the worst part of town.”
Vekic recommended vacant land near the sea between Split and Dubrovnik as a good purchase to make, citing prices on the islands off the coast at EUR 100 – 150 m2. Prices on the mainland run 200-300 m2, she said, higher for smaller pieces of land, 2000-3000 m2. “Dubrovnik is already a different category because it is well known among Americans. The jet-set has only heard of Dubrovnik, but there are so many other interesting places where you can go.”
Buying vacant land and building on it can reap the highest profits, said Mallak, but it comes with its own set of problems. Even if the land is in a building zone, he remarked, it typically takes a year to get all the right permits. He described how corrupt or simply negligent builders can reduce a project’s value, citing the example of how buildings close to the shore cannot be built with a metal frame, despite its lower cost.
For investors looking to buy an entire island, Broker Nekretmine’s catalog lists several. One 56,000 m2 island suitable for development is selling for EUR 30 m2, while a larger one – 450,000 M2 – is priced at EUR 11 m2.
According to Mallak, prices have had a tendency to rise in the spring, hence making winter the best time to buy. “Investors seeking to rent out have done well on the island of Brac,” he said, “in the towns of Boll, Millna, Supertar; also apartments in Split and the surrounding areas like Trogir to the north of Split and Makarska, south of Split. New tourist areas that will soon see a boom are Sibenik and Zadar, both north of split. Both of these have the benefit of a lot of nature and little development and the prices are relatively low.”
“All of the islands of the Central Adriatic are hot spots,” said Vekic. “Hvar, Brac, Vis, Korcula. A very nice area with a beautiful natural beach is the area around Makarska or between Omis and Makarska. You have little towns there like Brela, Baska Voda, and other towns that are very popular with tourists and which you can be sure that there won’t be any problems renting them out to tourists. The island of Hvar is very much popular with Italian tourists as well as British tourists. We are selling all kinds of properties on Hvar including houses which are not necessarily on the coast but which are on the interior of the island. These can be very interesting. They are not so expensive, although they may be a few km from the first beach. They go for around EUR 150,000. The price varies depending on the condition of the home and the size of the surrounding land.”
What can happen, however, between the moment a buyer decides to purchase and the time he becomes either an absentee landlord or even part-time resident can be a bit of an adventure, says Alan Fryer, the British owner of a pair of flats in Split’s old town, which faces the Adriatic Sea. Fryer told the story of a British woman who’d considered herself lucky when villagers on the island of Solta – where she’d purchased a house – recommended a local man named Igor to do the renovations in her absence. After a year of delays and change orders, the house was nowhere near completed and double the original budget had been spent. “It was then that she learned what Igor had been up to,” said Fryer. “When word had got round the island that a house had been purchased by a foreigner, Igor decided he wanted a piece of the action. He dropped in on each of the new owner’s neighbors and slipped them EUR 100 notes to recommend him to fix the place up.”
In his own experience with renovation, Fryer remarked that he fired three sets of builders working on his properties before he found one that he was satisfied with. Today he successfully rents out his properties to visiting tourists and consults to foreign investors seeking buy property in Croatia.
Another problem both realtors and investors were quick to mention is the issue of ownership on the part of the seller. “There are a lot of unclean titles,” said Mallak. “For example, some titles are so old that it isn’t clear who – what descendant – is the owner today.”
Other issues involve restrictions on the types of modifications the owner can make to the home, especially if it is older and therefore protected for its historical character. Consultation with a reputable lawyer is recommended, advised Mallak, adding that most realtors could recommend one. He also described such renovation pitfalls as getting stuck with unqualified or dishonest workers, causing the owner to lose money. An attempt to save money on VAT by not asking for an official contract from workers can also derail a project. “If the workers make a mistake and install blue tiles instead of green,” said Mallak “who can you sue? Misunderstandings happen, it’s better to protect yourself.”
Fryer recommended taking time and gathering information from multiple sources before making the decision to buy. He spoke of instances where unclean titles were sold on the advice of crooked lawyers and of a retired British couple who lost their savings when a purchase went awry. His success in Croatia owes partly to luck, he confesses, but patience and perseverance may have played a role.
“I was willing to take a bit of time,” said Fryer. “and I was here to keep an eye on things, rather than back in the UK or somewhere else.”
