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Last Updated: Oct 24, 2013




As Croatia’s economic downturn continues, so does the contraction of its housing market, with house prices still declining.

In Croatia’s capital, Zagreb, the average asking price of flats fell by 5.5% during the year to September 2013, at €1,593 per sq. m., based on the figures of Croatian property portal CentarNekretnina. When adjusted for inflation, the asking price has declined further by 6.6%.

As compared to the capital, smaller house price drops were experienced in the Adriatic Coast, with the average asking price of flats declining by 3.3% during the year to September 2013, at €1,581 per sq. m.

Most districts suffered from house price declines, except for Gornja Dubrava (4.7% growth) and Sesvete (0.9% growth). Pešćenica – Žitnjak had the sharpest price drop, declining by 9.7% to €1,617, during the year to September 2013, followed by Novi Zagreb – West (-9.2%) and Novi Zagreb – East (-8.8%).

The upper town of Medveščak had the most expensive apartments, with an average asking price of €2,177 per sq. m. in September 2013. Apartments are also expensive in the Center, with an average price of € 2,017 per sq. m.

Property prices in Croatia have been falling for the past four years.
  • In 2009, the national property price index dropped 4.8% y-o-y (-6.5% in real terms)
  • In 2010, the index dropped 4.8% (-6.5% in real terms)
  • In 2011, the national property price index dropped 1.3% (-3.3% in real terms)
  • In 2012, the national property price index dropped 3.1%

The total number of dwelling permits issued in 2013 has fallen sharply (32% down), from the same period in the previous year, based on the figures from Croatian Bureau of Statistics.

Croatia house prices With its accession to the European Union on July 1, 2013, Croatian economy is expected to be more open. However, the benefits of the accession to the housing market will not be significantly felt immediately, especially since the country is still suffering from stagnation.

The property market has been adversely affected by the Euro zone sovereign debt crisis. By end-2013, Croatian economy is expected to contract by 0.6%, according to the IMF, down from its previous estimate of -0.2% last April. However, the economy is expected to recover with 1.5% growth in 2014.

Analysis of Croatia Residential Property Market »


RENTAL YIELDS
Last Updated: Sep 08, 2013



Apartments in Zagreb are priced at around 2,000 Euros per square metre.

Gross rental yields in Croatia’s capital, Zagreb, are moderate, at around 5.5% to 6.0%. There is no particular connection between size of apartment and yields.

Both apartments and houses in Central Dalmatia tend to be more expensive, at around 3,000 Euros per square metre.

Houses in Istria seem something of a bargain, at around 1,700 Euros per square metre.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Sep 11, 2013



Rental Income: Rental income, of nonresident foreigners is considered ordinary taxable income and is taxed at 12%.

Capital Gains: Capital gains are taxed at a flat withholding rate of 25%. Capital gains realized from properties held for more than three years are not subject to capital gains tax.

Inheritance: Inheritance tax is levied at a flat rate of 5% in Croatia.

Residents: Personal income tax for residents is levied at progressive rates, from 15% to 45%.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Sep 11, 2013



Total roundtrip transaction costs are high, ranging from 13.76% to 21.93% for old properties. The bulk of the cost is accounted for real estate agent’s fees, at 6% to 12%, split between buyer and seller. The real estate transfer tax is 5% but does not apply to the first sale of new buildings. Instead, the sale is subject to 25% VAT on the net construction value.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: Jul 14, 2006



Croatia Dubrovnic luxury housesCroatian law is neutral between landlord and tenant.

Rent: There is neither rent control nor a maximum deposit. One or two month’s deposit is customary.

Tenant Eviction: Evicting over-staying tenants can be difficult. Zagreb’s courts are clogged, and cases take time. Informal methods of using ‘agencies,’ i.e., thugs, are common and tend to be recommended by realtors.

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Oct 24, 2013


Croatia’s still in recession; high public debt

Croatia gdp unemployment

Croatia’s economy has been depressed for 4 years since the global financial crisis. In 2012, the economy contracted by 2%.

Unlike other new European Union members which experienced an economic boost after their accession, Croatia, which joined the EU on July 1, 2013, rather entered at a time when EU is struggling. The economy is expected to remain in recession by end 2013. The Croatian National Bank expects a 1% GDP decline in 2013. GDP recovery is seen to happen in 2014, with around 0.7% growth.

In 2009, Croatia fell into recession, with the economy contracting by as much as 6.9%. The recession slowed in 2010 with a 2.3% drop, and had a meagre decline of 0.05% in 2011.

In September 2013, Croatia had another rating cut from Fitch Ratings, downgrading its credit rating to junk.. Before Fitch, Standard & Poor’s already downgraded Croatia’s rating to junk status in December 2012, followed by Moody’s Investors Service in February 2013.

In an attempt to slow Croatia’s budget deficit and public debt, the government moved to privatize its last state-owned bank. The country’s public debt is currently 55% of GDP, and is expected to rise to 62.5% of GDP in 2014. The budget deficit for this year is forecast to widen to 4.7% of GDP, up from 3.8% in 2012.

In September 2013, inflation was only 1.1%.

Croatia’s most serious problem is its very high unemployment. Croatia had the third highest unemployment rate among EU countries, following Greece and Spain. As of September 2013, Croatia’s unemployment rate was 19.1%, up from an average of 8.9% from 2007 to 2009.






  • Strong tourist rental market
  • Moderate tax rates
  • Multiple foreign ownership limits
  • Moderate to high transaction costs
  • Vulnerable & unstable economy
RESIDENTIAL PROPERTY FACTS
Price (sq.m): €2,026 For a 120 sq. m. property, usually an apartment.
Rental Yield: 5.75% For a 120 sq. m. property, usually an apartment.
Rent/month: €1,164 For a 120 sq. m. property.
Income Tax: 10.50% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 21.93% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: n.a. Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Neutral Rating is based on a detailed study of each country’s law and practice.

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