Croatian Property Prices Likely to Fall Further in the Near Term - HolProp.com

Online, March 29, 2011 (Newswire.com) - Croatia sits pretty on the Adriatic, its landscape an eclectic blend of dense forests, vineyards, olive groves, a long coastline and numerous small islands. Stunning natural beauty, quiet coastal towns, an interesting mix of contemporary facades and medieval edifices and a more natural lifestyle all combine to give Croatia a distinctive allure. Parts of the country still exude a pristine charm, unspoiled as they are by the excesses of tourism and commerce.

Having put the Balkan conflict of the early 1990's behind it, Croatia is facing the future with a new confidence as it modernizes and implements EU regulations in preparation for EU membership. Efforts are under way to weed out political corruption and to proceed with structural reforms, which are essential for its progress as a market economy. Currently, economic growth is sluggish because of the recession. Salaries have shrunk and the unemployment rate is relatively high. Economic revival depends on global factors, the successful implementation of reforms within the country as well as increased competitiveness.

Due to current domestic and global economic factors, real estate sales and prices are still weak and unlikely to improve over the short term. Reportedly, the number of building permits issued in 2010 was down by 14% from 2009. In 2010, property transactions and prices were lower than a year ago across the country, even the popular Adriatic coast. According to a leading Croatian property portal, the price index in Zagreb fell by 3.4% y-o-y as on April 2010. Prices of apartments in Zagreb registered a y-o-y decline of roughly 3.8% and house values dropped by approximately 1.9% over the same period. Along the coast, the overall price index fell by 5.8% y-o-y from April 2009 to 2010. Currently, most foreign-owned properties are located in Zagreb and along the Adriatic coast.

The average price of an apartment in Zagreb is around 2000 euros per square meter and approximately 3000 euros per square meter in central Dalmatia. Houses in Istria are cheaper at an average price of 1700 euros per square meter.

According to some analysts, price increases are expected in Zadar, Dubrovnik and Split this year. In Split and Dubrovnik, prices in January 2011 have already increased by 1.2% and 1.7% respectively on a monthly basis. So far, foreign demand this year appears to be mostly for properties in Zagreb, Split, Istra and Zadar. Currently, international demand in these cities is being driven largely by Serbs, Bosnians, Slovenians, Germans and Austrians.

Real estate agents and industry watchers expect property prices to increase once Croatia joins the EU as anticipated in 2012. However, prices are unlikely to soar as much as they did in the case of countries that joined the EU a few years earlier. The extent to which prices could rise hinges on the economic scenario in the EU and its ability to implement structural reforms, In general, market experts and agents expect a moderate and sustainable recovery. Like elsewhere in Europe and the US, Croatian banks are currently reluctant to lend and until they begin lending again, a robust revival is unlikely.

Interest among overseas holiday home buyers and investors is growing in anticipation of Croatia's entry into EU. Croatian property laws pertaining to foreign ownership were amended in 2009, permitting foreigners to purchase property on the same terms applicable to citizens of Croatia. In the years to come, this will likely account for an increase in foreign demand. Not only is it much easier for foreigners to buy real estate in Croatia now, property transactions don't take as much time as they did in the past.

Given the current price weakness and the possibility of capital growth in future, serious potential buyers might want to look around for reasonably valued properties. As elsewhere in Europe, there are bargains to be found and often in the best locations.

Points to remember about property transactions:

• It is advisable to appoint a reputable, independent lawyer who is not associated with the estate agent or seller and who speaks Croat and English.
• It is essential that your estate agent has a solid reputation and professional credentials.
• Foreigners have the option of buying property in their individual capacities or through private companies that they set up.
• It is best to survey the market and compare property prices as well as the service charges of lawyers, agents and other professionals before making any commitments.
• A thorough title check should be undertaken to verify that the seller is the registered owner of the property, that the property is free from mortgage dues, right of way issues and other legal encumbrances. The physical identification of the property must tally with that on the certificate.
• You are advised to verify the legal validity of the Sales and Purchase Contract.
• It is essential that a Croatian notary public verifies the vendor's signature.
• Information pertaining to the vendor's identity on the contract must be the same as that in the land registry certificate.
• Property description as specified in the contract should correspond fully with the description in the land registry records.
• Sale price, mode of payment and date of hand-over must be clearly mentioned in the contract.
• The transaction is complete only once land registration formalities have been concluded. New ownership registration should take place within 30 days of the sale. The permit for land registration needs to be verified by a notary public.