Friday, 1 July 2022

Germans Purchasing Adriatic Property en Masse, Then Renting it Out

July the 1st, 2022 - Germans have been purchasing Adriatic property en masse, and then renting it out. While this trend is less than satisfying for many Croats living on the coast themselves, the Germans engaging in this are getting quick returns on their investments this way.

As Morski writes, more and more Germans are snapping up Adriatic property along the Croatian coastline and then renting it out. Two such Germans sat down to talk about their experiences with builders, taxes and processes.

Jens and his family from the German state of Baden-Wurttemberg have fulfilled their dream by purchasing Adriatic property. They now own a luxury villa with pool and gorgeous sea views. It all started with a joint holiday of his family and his sister's family in beautiful Istria. They really liked this region, but the rent for a large enough and well-equipped villa with a pool was quite high. When they started calculating the figures, they decided it would be more worthwhile for them to own their own house. They searched for a long time, but couldn't find something they loved, writes Deutsche Welle.

Eventually they discovered a beautiful construction site on the edge of a fishing village in the south of Istria with a magnificent view of the sea, and they decided to build their own house. "It was simpler than we thought it would be," said Jens, 53. He says the price of construction materials is about the same as it is over in Germany, but that labour is still significantly cheaper. As such, last year they finished building their villa with a pool, and this year they already have their first paying guests coming.

In order to facilitate it all, they took out a construction loan in Germany and they plan to repay it by renting the house out during periods when they aren't using it themselves.

An interesting tax model

Oliver, 55, from Bavaria, decided to "build, not rent" using the same model.

''It was actually somewhat accidental. From Italy we went further towards Istria and there we saw some truly beautiful cities, the crystal clear sea and stunning clean beaches. That immediately won me over,'' recalled this German. After that, he went on, they spent a couple of years in the south of Istria and decided to buy a house there. But they, like Jens' family, couldn't find anything suitable, so they decided that it was better for them to build their Adriatic property from scratch as well, and do it all according to their own personal wishes and needs.

A few years ago, they found a large construction site, and the original intention was to build their Adriatic property for their own needs. But on a plot with a fantastic sea view, the construction of a larger facility ended up being planned.

I asked the salesman, "What am I supposed to do with a family of three on 500 square feet?" and he said, "Well, build some apartments and rent them out!" And so a larger building was created in which his two-level private apartment with an imaginatively decorated pool and three other apartments for rent are all located.

''I founded a company in Croatia and thus got back 25 percent of the VAT when building the facility,'' he explained. He already has a company in Germany for the sale of machines for industrial plants, so he then started selling through his Croatian company.

''Everything we did through Croatia, all the way to the motor boat that belongs to the company, these are definitely some interesting tax models,'' said this German entrepreneur.

He admits that renting out purchased Adriatic property is worthwhile, but added: "In the meantime, it has become difficult to rent something out in Croatia if you don't have a swimming pool, because the offer is very large. And really, all over Istria, a bit like like mushrooms after the rain, it's mostly luxury villas with swimming pools that keep on popping up, despite the drastic increase in construction costs. A pool has become important if you want to make a good living," Oliver explained.

Most of the foreign buyers in Croatia are German nationals

Jens and Oliver are just two of thousands of Germans who own real estate across the Republic of Croatia, and there are more and more of them coming and doing the same every day. According to recently released data from the Tax Administration, foreigners bought 9,514 Croatian properties last year, up 50 percent from a year earlier, and this still isn't the complete data for that period. Germans, Austrians and the neighbouring Slovenes buy the most. Real estate sales to German citizens rose by as much as 70 percent last year.

Many foreigners buy for their own needs, but there are more and more of them who come and invest their money in this way. Renting out Adriatic property has obviously become a lucrative business in Croatia, and after the coronavirus crisis, tourism is finally booming again, rental costs for both apartments and houses are rising, and taxes are relatively favourable for foreigners as well.

For more, make sure to check out our dedicated lifestyle section.

Monday, 9 May 2022

Can Brits Purchase Croatian Property? Yes They Can, Here's How

May the 9th, 2022 - Brexit resulted in more questions than it did answers, and whatever side of the fence you happen to be on, be it Bremain or Brexit, we can all likely agree on that. British nationals living across the EU ended up in strange and often unclear positions overnight, with very real legal and financial worries on their plates. With that being said, can Brits purchase Croatian property now Brexit is done, dusted and in the past? Yes.

''Can Brits purchase Croatian property?'' is a question that I see often, and the answers provided are somewhat vague. Given that the United Kingdom is no longer an EU member state, British citizens are no longer EU citizens, meaning that certain rights which were once afforded to them merely by being the holders of British passports no longer apply. Brits can no longer take up residence in Croatia with a quite registration and the flash of a UK passport like they once could, and only those Brits who were here before Brexit and who have acquired rights are still treated like EU citizens.

Up until February the 1st, 2020, ironically just before the global coronavirus pandemic reached Europe and caused havoc like we've never seen before, Brits could purchase property in Croatia as they were EU citizens. The same continued to be true between that aforementioned date and the 31st of December, 2020, during a transition period when all EU law continued to apply to the UK as it slowly made its way out of the bloc of which it had been a leading, powerful and wealthy member for over 40 years. 

During the UK's transition period out of the EU, British (and as such EU) nationals were free to purchase Croatian property without having to get any particular permissions and without having to engage in anything out of the ordinary. This applied to all property with the exception of what was classed as ''property and real estate in protected areas'' and agricultural land. Then came January the 1st, 2021, and everything changed for Britain. That was the real D-Day, when the UK ceased to be a member of any kind of the EU, the transition period ended at midnight (Central European Time) on the 31st of December, 2020.

The answer to the question of: Can Brits purchase Croatian property? was expected to change, but it didn't alter all that much. In short, yes they can, but that desired property absolutely needs to be classed as a residential property, and for that it must be in a certain ''zone''. This is all based on reciprocity agreements held between the Republic of Croatia and various other countries, and this functions in the British sense much like it did before Croatia joined the EU back in July 2013.

A tip for looking this sort of agreement up in Croatian would be to Google: Uzajamnost za stjecanje prava vlasnistva na nekretninama u Republici Hrvatskoj.

It sounds a little bit complicated, but in reality it isn't. If a Croatian citizen can buy property in a certain country, then the citizens of whatever country that might be can typically do the same in Croatia, with certain conditions attached in each specific case. You also do not need to registered as a resident of Croatia in order to buy a property here.

So, what needs to be done?

Consent for the acquisition of ownership rights over Croatian property by foreign citizens who aren't nationals of the EU/EEA or an EFTA country requires what everyone in Croatia just adores - an administrative procedure. I can hear you jumping for joy just reading that. A Brit intending to buy a property here must first make a request to the Ministry of Justice.

In the case of a British citizen who isn't protected by the Withdrawal Agreement wanting to purchase a property here, this procedure is conducted at their request to purchase real estate. Again, that real estate needs to be ''zoned'' as residential, and Brits cannot purchase agricultural land, nor can they buy property situated in a so-called protected area. 

An updated list of countries (aside from the UK) which comply with the reciprocity principle is available under Information on reciprocity in the acquisition of ownership rights of real estate between the Republic of Croatia and countries other than EU Member States, the Republic of Iceland, the Principality of Liechtenstein, the Kingdom of Norway or the Swiss Confederation.

The procedure is laid down in the provisions of the Act on Ownership and Other Real Rights and the Act on General Administrative Procedure. A mouthful, I know. Any submitted application must be written and then be submitted to the Registry and Archives Department. This can be done by post to the following address:

Croatian: Ministarstvo pravosudja i uprave Republike Hrvatske, 

Uprava za gradjansko, trgovacko i upravno pravo

Ulica grada Vukovara 49, 10000, Zagreb, Grad Zagreb, Republika Hrvatska

English: The Ministry of Justice and Public Administration of the Republic of Croatia,

The Directorate for Civil, Commercial and Administrative Law

City of Vukovar Street 49, 10000, Zagreb, Croatia

The following documents must be enclosed along with your (written) application form:

- An acceptable legal basis for the acquisition of ownership (this can be a property purchase agreement, the deeds proving the property has been gifted to you, etc). These documents can be in their original form, or they can be certified copies.

- Proof of ownership from the seller of the property, such as a copy from the land register confirming their ownership.

- A certificate of the administrative body responsible for urban and physical planning, according to the location of the property, on the legal status of the property.

- Proof of the prospective owner's nationality (such as a certified copy of their passport showcasing their citizenship) or proof of legal entity status (evidence with a copy from the court register) if the prospective owner is a foreign legal entity.

- When the applicant is represented by an attorney-in-fact, the original power of attorney or a certified copy thereof must be submitted.

In certain cases, additional documentation will be sought from would-be buyers of Croatian property. It all depends on the individual request. 

So, in short, the answer to Can Brits purchase Croatian property? is a resounding YES, given that all of the requirements for reciprocity have long been met. This was of course helped not only by the UK's recent EU membership, but also by the fact that Croatia is the EU's youngest member state and that many bilateral agreements between the UK and Croatia before Croatian EU accession were long-standing and clear.

For more, make sure to check out our dedicated lifestyle section.

Saturday, 6 June 2020

Croatian Property Remains Hit With Foreign Buyers, Could Prices Fall?

When it comes to selling Croatian property to people who hold foreign passports, the record for the country was 2019.

As Poslovni Dnevnik writes on the 5th of June, 2020, foreigners love the Croatian capital of Zagreb the most when it comes to buying apartments, but if they want a house, they choose the coast. Still, some locations were more sought after last year than others.

"The first choice were houses in Vir, then those in Vodice and Porec," Ivana Beljan, a spokeswoman for Oglasnik za nekretnine, told Dnevnik.hr

When it comes to Croatian property to people with foreign passports, the record for Croatia was 2019.

''They acquire somewhere around five to seven thousand properties a year. 2019 was the year when we had almost the biggest amount of acquisition, it was somewhere around seven thousand,'' said Dubravko Ranilovic, president of the Real Estate Association at the Croatian Chamber of Commerce (HGK). It is rare, he says, for a foreigner to decide to buy real estate in Slavonia, a part of Eastern Croatia which is regularly overlooked on an array of fronts.

Last year, real estate along the Croatian coastline was the subject of interest mostly for Germans and Swiss citizens, but neighbouring Slovenians still own the most real estate on Croatian soil. They are followed by Germans, Austrians, Croatia's other neighbours from Bosnia and Herzegovina and Italy, and then Slovaks.

The island of Vir has been a hit among foreigners for years, as the latest figures show. In the first four months of this year, as many as 60 building permits were issued for that island, and there are currently 159 open construction sites there.

It's worth mentioning that this island was well known for illegal construction for some time, but from year to year it continues to break the records when it comes to tourist numbers. Even during the coronavirus pandemic, the island of Vir still somehow managed to boast decent tourist numbers.

How the ''curve'' when it comes to foreigners buying Croatian property will look this year also depends on the epidemiological picture. So far, it is known that the coronavirus pandemic has "frozen" the real estate market.

"Sellers don't dare to go out too much or give in to prices, and buyers are waiting for a better opportunity," says Ranilovic.

The first segment in which prices could fall, according to those in the profession, could be apartments. "Because the assumption is that property owners who are still hoping for some income from tourism will be left without that income and will be forced to get rid of real estate and thus get rid of their credit debts," explained real estate agent Julijo Klarin.

As much as 62 percent of tourist accommodation in the Republic of Croatia consists of beds in apartments. Many of them are still very much empty.

For more on Croatian property, follow our lifestyle section.

Friday, 16 October 2015

Virovitica-Podravina County Buying Dilapidated Manors

Local authorities buying up historic buildings in Croatia.

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