Sharing a coastline with the Adriatic Sea, Croatia is an incredibly popular tourist destination, located at the crossroads of Central and Southeast Europe and one of the largest Balkan countries. Despite a slump in the years prior to 2022, Croatia's housing market has since demonstrated how robust it is, with house prices increasing at unprecedented levels.

Throughout 2022, the Croatian Bureau of Statistics (CBS) has recorded the highest nominal growth in property prices in Croatia's recent history. During the year to Q2 2022, Croatia's house price index rose by 13.6% compared with the previous year. This is an increase of 6.48% from Q2 2021. In real terms, this was an increase of only 1.39% over the same period, due to inflation.

Although laws between landlords and tenants are neither pro-tenant or pro-landlord, evicting overstaying tenants can be difficult. Croatia's law courts are experiencing a backlog and so external agencies are often relied upon. For those looking to purchase property, roundtrip transaction costs can be steep, ranging from 8.01% to 13.05% for older properties.

  • Globally, inflation continues to damage strong nominal yields – Croatia is no exception.
  • High demand and limited supply makes attractive ROI likely for property investors.
  • A strong flow of tourists each year makes the seasonal buy-to-let market attractive.

1. Zagreb

Zagreb is the capital city of Croatia and the largest city in the country, with a population of over 806,000 as of 2019. The city is located on the banks of the Sava River, in the northwestern part of Croatia. Notable for its distinctive architecture – including an array of church spires – and collection of parks, Zagreb is gradually becoming a more prominent fixture of the tourist calendar.

Zagreb has seen appreciable increases in house prices year-on-year. Figures are promising for those looking for ROI opportunities. New dwelling prices rose by 14.8% y-o-y in Q2 2022, whilst on a quarterly basis, prices increased 3.85%. When adjusted for inflation, these figures are more modest, at 2.45% and -1.38% respectively. Gross rental yields can reach around 5.4% to 6.0%.

Throughout the various districts in Zagreb, rental prices do not vary too much in relation to apartments. For studio accommodation, prices mostly sit around the EUR 300 – 400 mark per calendar month. On the other end of the spectrum, four-bedroom properties can range from EUR 1,000 to nearly EUR 2,000 pcm in places like Gornji Grad and Donji Grad.

2. Split

Croatia's second largest city after Zagreb, Split is livelier and more dynamic than the comparatively subdued capital city. Split attracts a whole other demographic of tourists, who are drawn to the city's bars and nightlife. As with other Croatian cities, visitors and residents are still spoilt for choice for architectural landmarks – the UNESCO site, Diocletian's Palace, is a fixture of the city.

Despite its potential for rental returns, the buy-to-let market has performed at a more modest rate than Zagreb. Gross rental yields of 3.6% on larger apartments and 4.7% on smaller apartments is what property investors can expect. However, with demand surging and little room for construction, property prices have surged to 6,900 euros per SQM in upmarket areas like Meje.

Generally, Split's buy-to-let market is more subdued than other more lucrative parts of Croatia. Investors may find themselves relying more heavily on seasonal rentals from tourists rather than year-round income. Studio apartments across all locations in Split start at approximately EUR 320 and can reach EUR 1,000 for a four-bedroom apartment – far cheaper than prices in Zagreb.

3. Pula

A seafront city located at the top of Croatia's Istrian Peninsula, Pula is much smaller than either Zagreb or Split, with approximately 56,000 – 60,000 inhabitants. Historically, Pula has not been as popular as places like Split or Dubrovnik for tourists, However, Pula's lush beaches, proximity to scenic towns and incredible Roman Amphitheatre mean Pula is growing in popularity.

Despite its relatively low-key reputation, Pula is still one of the most popular destinations for tourists in Istria. Indeed, its proximity to Italy means the city has been hugely influenced by the country. Italian is the region's second language and Italian names appear often. Pula is also Istria's busy economic and administrative centre.

Gross rental yields across the whole of Pula are less than more prominent areas like Zagreb, with Pula's rental yields reaching 3.87%. Rents are also far cheaper than average, with one-bedroom, two-bedroom and three-bedroom apartments fetching EUR 360, EUR 600 and EUR 545 pcm respectively. For investors hoping to enter the buy-to-let market, Pula is not the first point of call.

4. Zadar

A city packed with history, Zadar is the oldest continuously inhabited city in Croatia – Roman and Venetian ruins feature prominently in Zadar. Religious artwork and landmarks date as far back as the 8th century AD and the Roman Forum has been the city's meeting point for centuries. Croatia's last glassblower also works in the Museum of Ancient Glass.

Gross rental yields for properties both in the city centre and outside of it are modest – reaching 3.39% and 3.23% respectively – failing to keep up with cities like Zagreb, Split and Pula. The price-to-rent ratio is also 29.5 and 30.93 for properties within Zadar's city centre and outside of it. This suggests demand will continue to remain favourable for investors in the buy-to-let market.