Property in Croatia
Then came 2008 and 2009. The global climate changed, and Croatia, like everywhere, saw fewer transactions. However, thanks to the lack of overbuilding in the years leading up to the market turn (in fact, there was virtually no development at all in this country during what were boom years for real estate elsewhere), again, property prices weren’t affected as much as in much of the rest of the world. The market has seen perhaps a 10% drop in sales prices.
The real opportunity right now is related to development properties. Some interesting opportunities are presenting themselves at big discounts. As they worked to ramp up after the new development rules and procedures were established, developers trying to get off the ground in this country in 2007/2008 were immediately faced with a new challenge: reduced or withdrawn project financing. Money they may have been counting on was no longer available. This has left some developers with little option but to try to sell their projects at fire-sale prices.
One such project my contact in the country has told me about is 5.5 hectares (13.5 acres) on the Adriatic with zoning approval in place for a 200-room hotel, a 50-berth marina, and 45 villas. Last year, the property was listed for sale for 12 million euro. Today, it has an asking price of 3.5 million euro.
That works out to 63.63 euro per square meter, which is a great price for land on the water in Croatia…let alone for land on the water with zoning approval in place. Raw land along this coast was selling in this price range three or four years ago. With the zoning in place, again, this is an excellent opportunity.
Of course, not everyone is in the market for a 3- to 4-million-euro hotel project. My friend is sending information on a number of smaller opportunities he knows of in both Croatia and Montenegro. I’m working with him and others to carry out my due diligence. I’ll share details of those that pass muster with my Marketwatch members.
The mid-term market for Croatia looks positive. The country is enjoying strong and growing tourism numbers (important indicator for rental properties) and is finally coming up to EU entry next year (this has been anticipated for several years but delayed).
While some projects are being offered right now at fire-sale prices for the reasons I’ve explained, others are moving forward and provide good yield potential, both immediately and over the long term. Right now, again, remember, a rental owner benefits from the pent-up under-supply. Long term, you’ll benefit from the strict development restrictions that have been put in place and that will prevent overbuilding (as has happened in other tourist destinations along the Mediterranean).