More than 70,000 foreigners already own real estate in Dubrovnik, Split, Opatija, Istria, the islands of Hvar and Brac; How to get into their company, and is it possible in principle? Let’s tell you now, don’t switch!
Croatia’s housing market has been growing steadily since 2016. The peak occurred in 2022 and the first half of 2023 – the period after the state joined the Schengen Area (from January 1, 2022) and the opening of borders after two years of pandemic restrictions. A wave of delayed consumer demand swept away a huge part of the objects being sold and pushed prices up. This was also facilitated by the country’s transition to the euro, which always leads to a rounding up of prices.
Since the end of 2023, the situation began to stabilize, sales decreased, but square meters continued to rise in price – the country was the EU record holder for apartment and house prices until the 3rd quarter of last year. Now the market has calmed down, but sellers are not in a hurry to give in yet. Real estate in Croatia, unlike other countries in the Balkans, is expensive, especially on the Adriatic coast.
The elite sector in the coastal regions is very well developed. A discerning client can easily choose a nice villa, an apartment in a chamber complex or a building site among the natural beauties. It is not surprising that wealthy foreigners are drawn to Croatia from different countries in search of a “second home”, profitable investments, and sometimes a permanent home.
Opportunities and limitations
The luxury house market is focused on people with funds from abroad, so it is logical that foreigners have the right to purchase real estate in the country. However, there are nuances that depend on the buyer’s passport.
EU citizens, except Swiss and Norwegians, can enter into transactions freely. Important: it is citizens who are meant, not residents (holders of a residence permit / permanent residence).
As for the rest of the foreigners, it all depends on whether there is an agreement between your country and Croatia on reciprocity (reciprocity) or not. If there is such an agreement, then you apply to the Ministry of Justice for consent to the transaction. Usually this procedure is formal in nature, and you, having secured permission, buy the object you like.
If there is no agreement, you can purchase a house only by opening a legal entity in Croatia and making a deal for it. It’s longer in time, but it’s quite realistic.
Regardless of the presence or absence of a reciprocity agreement, when it comes to the purchase of agricultural land, foreigners (except EU citizens) must register a legal entity.
For many years, there has been no reciprocity agreement with Russia, Ukraine, and Belarus, so many facilities are still owned by companies founded by citizens of these countries. However, 10 years ago, in 2014, agreements on the reciprocity of property rights were signed. Now Russians, Ukrainians and Belarusians can buy real estate after receiving official consent from the Ministry of Justice.
There are no obstacles for Ukrainians and Belarusians today. It is more difficult with Russians. The Ministry of Justice must check whether the name of the buyer does not appear on the sanctions lists. If the full name coincides with someone from the list of those who have been sanctioned, you will be refused without proceedings. Of course, you can appeal the decision in court, but it will take time.
It is also unlikely to be possible to follow the path of opening a legal entity. Theoretically, it is possible to register a company, but it will not be possible to open an account for a founder from the Russian Federation.
I must say that the demand for Croatian apartments has fallen among Russians not only for the above reasons, but also because buying real estate in this country does not give preferences in obtaining a residence permit. Despite the fact that in some European and not only countries it is possible to combine the acquisition of property with the issuance of a residence permit (and not even a simple one, but a privileged one, if we are talking about buying an elite object). For example, a villa in Croatia worth 500,000 euros will give the buyer only the joy of owning and, possibly, passive income, and a similar price in Spain will also give the EU a “golden visa”. In Montenegro, which is not a Schengen member and not an EU member, the purchase of any housing will be the basis for residency.
Thus, there are still a lot of Russian-speaking interested parties in the Croatian market, but these are mainly people living in Germany, other European countries, and Israel – those who do not care about the issue of legalization abroad.
Note that not all doors in Croatia are closed to Russians. So, Russian remote workers are happy to apply for a digital nomad visa. However, this category of foreigners mainly rents housing, rather than buying it.
Stages of purchase
Choosing a location and an object
First, you and the realtor make a list of houses or apartments that match your initial requests. Next, you will have pleasant trips along the picturesque coast to see the facilities. Of course, together with the agent. The process, I must say, is as fascinating as it is tedious. And in the final, the best option was found. It remains to discuss all the conditions with the seller and start preparing for the deal.
Choosing a lawyer
The lawyer is responsible for all legal aspects, checks the documents. He looks, for example, whether claims from neighbors, heirs of the seller may arise in the future, whether there are encumbrances on real estate. They discuss with him whether it is legitimate, say, in the future to make an extension to the house being purchased or dig a swimming pool in the yard.
It is difficult to overestimate the importance of a lawyer in such an expensive purchase. As a rule, realtors recommend good specialists whom they have known for a long time.
Is it possible to do without a lawyer at all? According to the law, it is possible, but risky! According to the experience of agents, only about 10% of transactions are completely transparent, in other cases certain points require clarification.
The services of a lawyer will cost 0.5-1% of the contract amount.
Opening a tax number
A local tax number (OIB) is a prerequisite for the purchase of real estate. As a rule, realtors help to arrange it, as well as open an account in a Croatian bank. Russians are allowed to open accounts only if they have residency or citizenship of other countries. Such rules are now in almost all EU countries (exceptions are rare, but there are).
Preliminary agreement
The parties often first conclude a preliminary agreement, which prescribes all the terms of the further transaction. It usually provides a deposit of 10% of the value of the property. If the buyer refuses the deal, he will lose this amount, and if the seller changes his mind, he will have to return it in double the amount.
The preliminary agreement may not be concluded, but the main one can be signed immediately if the buyer is ready for full payment immediately.
Submission of an application to the Ministry of Justice (for citizens of countries with a reciprocity agreement with Croatia)
The Ministry of Justice considers the application from a foreigner for 2 months and must give permission for the transaction. Refusals are extremely rare, however, for your own peace of mind, it is better to pay the deposit first, and after approval by the Ministry of Justice – the entire amount. This can be specified separately in the contract. If the deal fails due to the refusal of the Ministry of Justice, the deposit is fully refunded.
There are many foreigners in the Croatian market, including those who need to go through a stage with the Ministry of Justice. This practice is common, and sellers are usually willing to wait 2 months until the buyer receives the go-ahead from the authorities and is ready to pay in full.
Signing the main contract with a notary
The main stage of the transaction takes place in the notary’s office in the presence of the buyer, seller, agents, translators, and sometimes witnesses (they are agents). Previously, the notary checks whether the buyer is not included in the sanctions lists.
Not all notaries work with Russians. Some refuse because they are afraid to risk their license and do not want to mess around. The fact is that the sanctions list contains 200 pages, and the names are not arranged in alphabetical order, but by the date of inclusion, so the verification process is quite time-consuming.
Calculations
The seller can be a Croat, an Englishman, a Dane or an Austrian – anyone. It is necessary to transfer funds from your account to his account. The transfer must not be from Russia. It is also impossible from the Russian Federation, since Croatia is one of the so-called “unfriendly” countries.
The required amount must be prepared in advance. Payments are only non–cash. Only rare sellers from Bosnia, Serbia, and Italy will agree to accept part of the payment in cash.
After receiving the funds, the seller signs another document – a receipt.
An important point is that one of the Croatian banks issues mortgages to foreigners, but loans are currently unavailable to Russians, Ukrainians, and Belarusians.
Since Croatia joined the eurozone in early 2023, calculations have become simpler. Real estate has been exhibited in euros before, but there was a lot of torment with the formal conversion into kuna, there could be exchange rate losses.
Getting the keys
The buyer receives the keys to the apartment or house immediately after payment!
As a rule, it takes at least 2 months from choosing a particular house to the moment when you enter it, opening the door with your key. A more realistic timeframe, taking into account the verification of the transaction by a lawyer, consideration of the application by the Ministry of Justice, and payment, is 3-4 months, and sometimes longer.
Registration of ownership rights
The notary submits the documents to the court for registration of ownership. The timing depends on the region. For example, courts on the Makarskaya Riviera can register a year, and on Istra – only 2 weeks.
The court issues to the new owner an extract from the register – the “power list”, after which the procedure can be considered fully completed.
Transactions in the primary market
Plus, buying an apartment in a new building is the opportunity to make payments not immediately, but in installments until the end of the construction of the house. However, an important point is that when buying “in the first place”, citizens of countries who need to obtain a permit for a transaction must first conclude a preliminary agreement.
The fact is that the Ministry of Justice does not accept unprepared real estate for consideration. The house must be completed, divided into apartments, and cadastral numbers assigned to the apartments. Only then can you apply to the Ministry. Thus, until the facility is fully ready, you will have to settle for a preliminary agreement. It can also be notarized, but the element of uncertainty remains. You are waiting for the completion of the work, making payments according to the schedule, while not being completely sure that the Ministry of Justice will approve this purchase for you. Realtors recommend not to contact the “primary” or take a new building, but it is already completely ready.
Deleted transactions
Theoretically, it is possible to entrust the purchase of real estate completely to an agency and a lawyer, having issued a power of attorney for him in advance. However, market professionals do not recommend this way. They are convinced that no online display will replace their own impression. It is better to personally make sure that the right house is chosen.
According to realtors, remote transactions are common among Croats living, for example, in South Africa, Australia, Chile (large diasporas formed in these countries after the Yugoslav war). Such people know the locations well, many of them have familiar lawyers, so they boldly make deals without personal presence.
Taxes and additional expenses
When buying ready-made housing in Croatia, you will have to pay a 3% tax on the transfer of ownership. Please note that the tax may be calculated not from the amount specified in the contract, but from the amount that the tax service considers fair. For example, if the inspectors think that the price of the object is artificially low.
The buyer is exempt from the tax on the transfer of ownership in a transaction on the primary market if the developer pays VAT and included it in the cost of the object.
There is no property tax in Croatia. Some regions charge a small municipal fee (about 2 euros per sq. m. m per year).
In addition to taxes, the buyer will have to pay:
- agency commission – 3% of the contract amount plus VAT on the commission amount;
- notary services and registration fee – 0.01-0.05% of the contract amount;
- services of a certified translator – 200-300 euros;
- lawyer’s services – 0.5-1% plus VAT on the amount of the fee.
To sum up, about 7% of the real estate value should be allocated for taxes and additional expenses.
Pitfalls
As in any market, you can run into unscrupulous sellers or problematic objects in the Croatian market. To avoid trouble, it is worth instructing a professional to carefully study the permits for real estate.
The premises must be used clearly in accordance with their purpose! For example, one developer did such a trick – he sold what was listed in the documents as an attic as an elite penthouse. Of course, an experienced lawyer will not miss such an obvious deception.
Another example. A man bought a penthouse with an exploited roof, on which he broke up a recreation area, put a Jacuzzi. However, it soon became clear that the building does not provide for the use of the roof for such purposes. The neighbors insisted that the would-be owner close the exit to the roof and stop using it. Of course, the value of real estate without this option is no longer the same.
There are cases when the house is not divided into separate apartments, but shares are sold. Such objects should also be avoided.
In general, the Croatian market is quite well–established. All processes, including those related to transactions with foreigners, have been established. If you have the means and the dream of a villa on the Adriatic, then it is possible to turn the first into the second, of course, with some effort and a competent approach.
Thank you for your help in preparing the material:
Elena Stolz, consultant expert of the Adrionika agency
https://www.globalpropertyguide.com/europe/croatia/price-history
Photos used: Depositphotos.com
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