Croatia’s branding as your second home resulted to the upsurge of foreigners buying properties in country. This in turn drove real estate prices to sky rocket although there are still some inordinate deals that you can find. The unspoiled natural beauty of Croatia remains as its major come on and is bound to stay. And if you plan to buy property in Croatia, here are a few things that you ought to know.
Who can buy?
Only foreigners from countries with reciprocity agreement with Croatia can buy properties in Croatia. This agreement includes US, Russia and EU citizens where Croatian nationals are also allowed to buy property in their home country. However, citizens from Italy, Switzerland, and Bosnia and Herzegovina can only buy property in Croatia only if they plan to settle there for good.
What foreigners cannot buy?
Foreigners are not allowed to buy agricultural and forest grounds. They also cannot get hold of properties considered as cultural monuments except if the local authorities surrender their pre-emptive right to purchase said properties.
How much the average price of real estate in Croatia?
Property costs vary depending on location and condition of the property. In Dubrovnik where it is the most expensive, average price range from €3,200 to €4,700 per sqm. In other sough after urban cities like Split and Rovinj, price ranges from €2,000 to €2,800 per sqm. In the less known areas, it is between €1000 to 1,200 per sqm.
What other costs should buyers expect to pay?
These other costs are usually computed as a percentage of the total cost of the property. Among the essential costs that buyers are required to pay over and above the property included: Real Estate Transfer Tax which is pegged by law at 4% of the property’s market value; the Value Added Tax (VAT) that is levied at a fixed rate of 25% of property value; attorney’s or legal fees which is usually 1% to 1.25% of the property purchase price plus 25% VAT; real estate agent´s commission which ranges from 1.5 – 3 % of property plus 25% VAT; registration fee of 0.01% to 0.05% of the property value and other miscellaneous fees/ transaction costs which amounts to around 14% – 30% of property cost.
How to buy?
Here is the typical acquisition procedure:
- A pre-contract agreement must first be made between the two contracting parties i.e. buyer and seller. Depending on the agreement, buyer must make a down payment of 10% -15% of the selling price. Legal ownership of the property should be verified before the pre-contract agreement.
- Buyer must apply and secure consent from the Ministry of Foreign Affairs (MOFA). This essentially involves the Ministry reviewing the foreign laws of the buyer to ascertain if there is a reciprocity agreement with his home country. The following documents must be submitted by the buyer along with the application: purchase agreement; seller´s proof of title or land registry certificate; certification that property is within the borders of the construction zone specified in the urban development plan; proofs of citizenships of buyer and seller; and power of attorney. The application for consent usually takes two to six months.
- Lawyer prepares a final binding contract to be notarized and submitted to the Land Registry.
- After consent from MOFA is secured, the notarized contract must be registered in the Land Books (Zemljišne Knjige) of the Municipal Cadastral Department.
- Corresponding purchase taxes must be paid to wit: real estate tax of 4% and VAT of 25%. The VAT on new houses is essentially charged to the seller but is often passed on to the buyer by incorporating it in the property price.
- Land title registration is a painstakingly long-winded in Croatia which takes an average of 3 months to complete.
- The down payment made by the buyer during the pre-contract agreement is mandated by law to be returned to be returned in case the seller fails to fulfil his part of the contract. As protection to the buyer, Croatian law stipulates that sellers must pay double the amount of the down payment for failures in fulfilling the terms of the agreement.
What is a major problem you can face as a buyer?
A clean title is one major concern that buyers must always look into. Many houses and properties in Croatia have scattered owners especially properties whose ownership have been handed to children. This is because many Croatians have fled the country during the war. Hence, some owners cannot be found while others may be unwilling to sell. This may be a long-winded and laborious process. Note that if the owner happens to be a Serb, there is a great chance that he is not the legal owner. Properties with unclean titles are not allowed to be sold or purchase.
How can I prevent myself from getting screwed up?
Regulation of Real estate agencies is essentially loose in Croatia. Thus, it is not advisable to rely on a real estate agency or broker to make deals in your behalf. Instead, what you need is the get a credible lawyer from Croatia to handle the legal proceedings involved in the property purchase. Aside from preparing the legal documents, the lawyer will help verify that the property you intend to buy is allowed for sale because of clean title and is free from the zoning laws that may restrict use of property.
How is the quality of houses in Croatia?
Houses in Croatia are generally built with quality. Strict building laws are enforced. Nevertheless, it is still advisable for a buyer to verify if water and electricity have been appropriately linked to municipal systems, to avoid any supply interruptions or illegal connection.
Where is the best place to buy property in Croatia?
Almost majority of the properties bought by Foreigners in Croatia were located in Zagreb, the capital city. The rest are roughly scattered in Dubrovnik, Split, Trogir, Čiovo, Dalmatia, and elsewhere. When choosing a property to buy, a major consideration should be accessibility of the place. The beautiful nature and perfect climate of Croatia is practically consistent across the nation. However, accessibility can be a major hurdle. Some regions and places have limited accessibility especially during winters and holiday off seasons. When you find a property that interests you, it is advised that you spend time in the place to observe and gather feedbacks from the local residents.