Thursday Column - Croatia Lifestyle 1: Property
You may have seen John and I on the recent repeat of A Place in The Sun in Croatia – we were the two local experts at the end who took the buyers out on a yacht. If you did, you’ll already have an idea of what the property market is about and will realise that John talks a lot more than I do! The experience is one we have vowed not to repeat but it was a valuable part of our learning curve.
The newsagents have many magazines on buying property abroad with a surprisingly small number of pages on Croatia. There are also plenty of estate agents ready to sell them to you but is it a good investment?
We are still renting, partly because we feel prices in certain areas are over inflated, partly because we feel our capital is working harder in our UK property, partly because it’s still a risky process and partly because long term rentals are cheap if you know where to look. That’s not to say that if we found the right property, in the right place at the right price, we wouldn’t buy, but we’re still looking. We know a number of people who have bought and its worth trying to hook up with someone that can tell you about their experiences and help you through the process. Quite a few of them, particularly recent buyers, may tell you that they’d think twice before doing it again, not because they aren’t delighted with their property but because they still have some scars from the roller coaster discovery process.
Bargains can still be found although, on the whole, Croatia is not nearly as affordable as, say, Bulgaria or Rumania. Also bear in mind the cost of getting backwards and forward (see Tuesday’s column on getting there). Now that BA have extended their service to Split, prices should get better all year round.
Continuing with the downside, if you are buying as an investment and intend to let out your property, remember that the tourist season is still very short. Don’t expect to be fully booked for more than 12 weeks a year unless you have done some niche marketing and advertising and remember that the competition is fierce. You only have to look at the scale of building going on to understand that.
On the upside, proper market mechanisms are just beginning to fall into place, the country is definitely on the up, with entry into the EU in sight, sterling is quite strong, you get much more for your money than in other more developed destinations, it’s a relatively short flight from London, the people are great and the scenery is spectacular.
If, after reading the above and previous articles, you are still determined that a property in Croatia is for you then here are my top 10 tips.
1. Go Native
If you can find a local to help you, you’ll probably get a better price and a wider choice of properties. Some properties are only advertised by word of mouth so if you find an area you like, spend some time in the bar that the locals use and start practising your Croatian on them! You’ll find out a lot more this way and hopefully get a few introductions to people wanting to sell.
2. Get Good Professional Advice
A good lawyer, preferably one that specialises in property, is essential. Try and get some personal recommendations and make sure you ask plenty of questions. There are two routes to purchasing – you either set up a local company and buy through that, or buy as a foreigner. If you don’t set up a company, you have to get government permission to own the property and that can take six months or more. The rules are changing quickly and there’s some pressure on the government to limit foreign ownership, so it’s risky to buy first and then get retrospective approval. Buying through a company is easier as the purchase will be treated as if it was by a Croatian but, of course, there are complications. The books have to be checked by FINA (the government audit body), the company is supposed to have income, if you are liable to UK tax, any benefit you get from, for example, using the property yourself is taxable and the company has to pay the local equivalent of national insurance and tax.
Either way, there’s a one off tax, a kind of stamp duty, based on the valuation at the time of assessment, and not the purchase price, so make sure this is sorted out before you carry out any major improvements.
Going down the company route, you’ll also need an accountant and you can see how the costs can add up.
3. Title Deeds
Get them checked and double checked. Houses built without planning permission are now being knocked down. A second floor added without planning permission may invoke the same action but will certainly render your property unsellable. There are new rules for how close a new development can be to the sea and multiple ownership amongst family members is common so they all need to agree to the sale. Some historic buildings or houses in protected areas need special permission from the government before they can be sold.
4. Estate Agents
There are some good ones around, local and foreign, who will help you all the way through the maze, in conjunction with professional advisors that they use regularly. However, I believe that some of them have talked up prices to an unrealistic level. The percentages are a lot higher than in the UK, generally around 6% of the sale price, and expect to be charged a fee for viewings to discourage the time wasters. Some agents take a fee from the seller as well.
5. Type of Property
It’s quite difficult to find town houses with balconies or roof gardens so these will add to both the capital and rental value. The stone houses are great but they’ll almost invariably need quite a lot of work so make sure this is included in your budget and that you have sourced a good builder. It may well prove worthwhile to get a reliable local project manager as well. If you are buying a flat, check the sound proofing.
An island property may sound great but think how long it takes to get there and how regular the ferries are. Brac and Hvar are easy, being a short ferry trip away from a ferry terminal that is close to Split Airport. Vis is further away and the ferries are less frequent. Of course prices on Brac and Hvar reflect the fact that they have long since been “discovered”. This summer locals on Brac became a little distressed by the sheer volume of foreigners knocking on doors to see if properties were for sale. Think carefully about the location and how much you are prepared to trade a good location for a more affordable price. Also try and understand how the location works in both August and December – is it so full of tourists that you can’t sleep at nights? Are any restaurants open in the winter? Will you get passing trade if you are renting out? Will someone add a floor to their house and block your view? Are you going to roast in the summer?
7. Quality of Build
It’s sensible to have a survey done. Damp proofing is not good and I’ve not heard of a property that doesn’t grow a little mould in the winter. Soundproofing between floors can also be a problem.
If, like me, you’ve lived in London for a few years, you won’t even think about whether a property has mains sewage, electricity and water. Think now. A lot of work is going into new sewage systems but septic tanks are common place. A property has to be in quite a remote area not to have water and electricity but check. Croatia can be as cold as England in the winter and electricity is not cheap – what’s the heating like?
9. Don’t Be Rushed
If you smell a rat then there probably is one. Don’t take a chance on the paperwork or the property.
Have your funds readily available. If you find a property you like, and have completed all the necessary paperwork and checks, be ready to pay straight away. Croatians are more than aware of the recent interest in property buying and we’ve heard far too many cases of offers being made at the asking price, only to result in the property being taken off the market and put back on at a higher price.
If you want more information, check out http://www.croatia-holidayandhome.co.uk/. Martin Westby has written a book on purchasing property in Croatia and, though he doesn’t live there permanently, he probably knows as much about the subject as anyone else.
Above all, enjoy your property and the lifestyle but be prepared for a few bumps before you finally get the key of the door.