Croatia beckons for Irish investors

IT’S flagged as the affordable Italy: blue skies, a Tuscany-like landscape and only minutes from crystal-clear seas.

Is this the main reason why Irish holiday home buyers are turning their heads to Croatia? There’s no excuse now, because Ryanair is about to commence launched three flights a week from Dublin to the northern peninsula of Istria.

Although outside the European Union, Croatia attracted nearly 38,000 Irish tourists last year. And with its great weather and large numbers of islands, it’s no wonder.

Croatia declared its independence from the former Communist state of Yugoslavia in 1991, sparking a vicious war that engulfed the region until 2001.

Now peaceful, Croatia has much to offer. As well as its spectacular coastline, the country also has attractions such as picturesque lakes, biking trails and vineyards.

IMG, a property development company based in Porec, on the west coast, offers a variety of homes and apartments. Its Irish agent is Adriatic Riviera.

In Novigrad, a small coastal town with plenty of tourist facilities, villa apartments or ‘pinetas’ typically have five to eight units in each complex. The usually three-floored villas look out over the town on an elevated plain with swimming pools and gardens. A two-bedroom ground floor home with IMG costs around €125,000, while a second floor unit is around €130,000.

Those looking for an even quieter escape should head further east. The small village of Brtonigla is host to stone houses and a church tower.

The narrow streets and boutique hotel, the elegant and family run San Rocco, reflect a traditional atmosphere of a different kind.

Greenery and vineyards surround IMG’s latest projects, which include renovated two-storey old stone apartments with 60 sqm of space. One is available for €93,000 in the village.

Back in Porec, a modern apartment complex lies overlooking the busy town.

With many old monuments and Roman remains, the area is also well developed with facilities. In addition, as a tourist resort, its coast offers the curious traveller many islands and peninsulas to explore. IMG’s complex, made of stone and glass, has four floors. Coupled with shops and offices, there are six apartments on each floor, most with views of the sea 200 metres away. With up to 80 metres of living space in two-bedroom units and a car space underground, apartments start at €125,000.

Further inland, prospective buyers can find more luxurious villas with pools.

In the village of Deltini, 10km from the nearest town of Pazin, the capital of Istria, developers are fixing up old stone houses.

Facades are completely refurbished in a traditional old stone masonry style.

The purchase plan for these types of properties involves stage payments, with a deposit of 10%.

A typical construction has a total 199 sqm living area over two floors with two bedrooms and a balcony. Prices are around €255,000.

According to the director of Adriatic Riviera, Liliane Scully, families are the main Irish purchasing types snapping up homes in Croatia.

“Croatian culture is similar to our own, friendly with a warm welcome for strangers, a low crime rate, child friendly and a very safe holiday environment,” says Ms Scully.

However, independent experts — despite recognising the healthy appreciation on property in Istria for Irish purchasers — are also cautious about antiquated ownership schemes still causing debate among investors.

There are two ways to purchase property in Croatia — as an individual or by forming a company. It is necessary for a foreigner purchasing property as a private person in Croatia to apply (through a Croatian solicitor) to the Ministry of Justice for permission. While this is just a formality, it is now taking anything up to two years to come through due to the volume of applications. However, a property may be used by the owner, rented out or even sold on while awaiting this permission.

A much faster route to ownership (approximately two months) but which incurs costs, is by setting up and maintaining a Croatian company. It is important to note that the established company has to trade, eg by renting out the property.

Allow a further 10% on top of the purchase price to cover agent fees (both the seller and the buyer pay a fee to their agent, between 2% and 6%), legal fees and Real Estate Transfer Tax (RETT) payable to the Croatian government.

VAT is currently 22% in Croatia which is included in all new build prices.

An individual’s capital gains tax in Croatia is 35% if the property is sold in the first three years after receiving the final approval, but zero after this time.

Rental income is taxed at 15% less deductible costs, with corporate tax at 20%. Capital appreciation has been running somewhere between 15% and 20% per year for the past three years.

Property prices in Istria are affordable and start at €90,000 for a one bed apartment located about 700m from the sea with two-beds from €120,000.

Istrian stone houses with swimming pool (inland) start at around €250,000 while large upmarket villas (again inland) attract prices from €350,000.

Ryanair was set to commence a thrice-weekly service between Dublin and Pula (Istria) from this week.

The airline estimates that approximately 40,000 passengers will travel on the service during the first year of operation.