A New Place of Attraction. We’ve Talked to an Expert About Prices Per “Square” and Underestimated Locations in Croatia for Real Estate Investment

 The Croatian real estate market is undergoing a transformation after the country’s accession to the Schengen area and the transition to the euro. What is happening to prices in Istria? Which regions are undervalued by investors? What pitfalls can be encountered in the construction of objects? Peter Pollack, founder of the local company IC-REAL, told us about this and more.

Current Market Conditions and Price Dynamics

— Peter, you have been observing the Istrian real estate market for many years now. How has it changed over the last 3–5 years? What in general has been new on the Croatian market during this time?

— The real estate market is currently in crisis throughout all of Europe, and this has, of course, not left Croatia unscathed. Purchasing power has declined considerably. However, this also presents us with many opportunities, as buyers have become more selective and demanding.

Tourism has also recovered after the coronavirus pandemic and remains a stable factor in the region, offering many opportunities to become more attractive year-round.

A particularly important future factor for us: commercial real estate, projects for larger investors — be it in tourism or agriculture. With the introduction of the euro and the Schengen area two years ago, Croatia has become a more economically important market. Forecasts from German economic researchers also describe Croatia as an economically stable growth market with a future!

— How have real estate prices in Istria changed over the last 2–3 years? What is the forecast for the near future?

— Prices remain high compared to other countries. Prices remain high compared to other countries. Newly built apartments cost between EUR 3500 and EUR 4000 per square meter — sometimes even more with sea views. This is especially true in Istria, which has its own special charm, not least due to its landscape and coastline. And also due to its culture, which stretches from the Romans to the Austro-Hungarian Empire

In Italy and Spain, you can find apartment blocks built directly on the coast. This isn’t the case in Istria and Croatia. Here, the beautiful coastal landscape with its many islands remains intact. After all, Croatia, including all its islands, has 6200 km of coastline! And it’s clear that many people love this landscape and its flair, the naturalness of the countryside where you can relax — after all, apartment blocks can be found in every big city anyway.

— Which regions of Istria do you think are undervalued by investors now but have good growth potential?

— The southeast coast of Istria still offers the most options. Here, you’ll find beautiful, dreamy beaches and significantly fewer tourists than on the West Coast. Especially during peak season, “overtourism” is increasingly becoming a problem in places like Rovinj and Porec. Southeast Istria still offers a wealth of scenery and plenty of room for exquisite experiences. Truly exclusive, without the crowds!

Agrotourism and Other Growth Points in the Market

— What new trends in Istria’s tourism sector can you point out? How does it affect the investment attractiveness of different types of real estate?

— The major tourism providers such as Valamar, Liburnia, Arenatourist, and Maistra — to name just a few — are well-organized and invest significant amounts of money each year to improve quality for their customers.

The focus is on sports and leisure, so cycling tourism, for example, is currently a big topic. Spring and autumn in Istria are ideal for cycling, and professional cycling teams also train in Istria during the winter. There’s still a lot of room for improvement here.

But of course, culinary delights are also a focus, as they aim to pamper guests even more. The same goes for spa and wellness areas — there’s still a lot to be done in Istria. Top hotels are well booked year-round; guests want to be pampered and pay for top-notch service!

Renting average apartments and houses will certainly become more difficult in the future. The future of tourism investments in real estate lies in service and quality — because these two factors are crucial.

— Recently, there has been a lot of talk about agro-tourism in Istria. What areas do you consider the most promising for investment?

— Agro-tourism is, of course, a segment for which Istria is perfectly suited: the landscape with its rolling hills, the numerous olive groves, the old villages with their stone houses — all of this has something special. An enchanting flair unfolds here, combined with the blue of the sea and the year-round pleasant climate. Added to this is the fact that olive oil from Istria is probably the best and, therefore, the most expensive olive oil in the world. Seventy of the world’s top 500 olive oil producers come from Istria — that says it all. Unfortunately, the cultivated areas are still too small to export olive oil in significant quantities. Most olive oil is consumed in regional restaurants and sold to tourists.

And yes, many people even buy their own small olive plantation — simply to have olive oil for themselves and their families. People are paying more and more attention to their quality of life!

Buying a Ready-Made Property VS Building a New House in Croatia

— Many people are choosing between buying a ready-made property and building. What would you advise given the current market situation?

— The biggest advantage of buying an existing house in Croatia is that you can move in immediately. But what’s actually best is buying a shell of a house! Then you can discuss the completion and construction process in detail with the construction company, right up to the turnkey handover, and have your wishes implemented according to your budget.

All the fittings — the ceramic, parquet, or marble floors — the bathrooms, all the building services, including the heating. And, of course, the outdoor area — the garden design, summer kitchen with grill — even the pool! Finally, you can have the house furnished however you want: from the kitchen and living/dining room to the bedrooms!

And what’s also very important: if the shell of the house already exists, completion can usually go very quickly — and you can move into your dream home in just a few months.

— What criteria do you consider key when choosing a plot of land for construction in Istria?

— Building plots with sea views are still in the highest demand, that’s clear. The selection is, of course, becoming increasingly smaller. In the aforementioned hotspots like Rovinj and Porec, not only are prices continuing to rise, but it’s clear that there are hardly any building plots available in central locations. The price gap compared to building plots in central Istria is significant. But even from there, you can usually reach the sea in just a few minutes by car, and you can enjoy the peace and quiet of the countryside — albeit without a sea view.

— Many investors are interested in a VAT refund when building through a company. What pitfalls can be encountered in this process?

— What’s really important here is to discuss the project with a tax consultancy before construction and then implement it accordingly. Of course, there are some important parameters that must be met, including the commercial use of the property.

Main Barriers and Source Countries for Investors

— Tell us about typical barriers that foreign investors are facing when entering the Croatian real estate market.

— The biggest mistake often made is dealing with the authorities in Croatia. However, it must be said that Croatia urgently needs to reorganize its administration. Obtaining a building permit or getting an electricity connection can often be a rocky road, simply because too many authorities have a say, and unfortunately, most of them operate very inefficiently.

Croatia currently sits somewhere between “EU overregulation” and the “post-communism” of the former Yugoslavia. One can only hope that those currently in political power will finally recognize the problem and remove these obstacles. This is truly about greater efficiency and the goodwill of its own citizens and foreign investors. 

— Citizens of which countries, apart from Germany and Austria, have become more interested in Croatian real estate?

— The market is still dominated by Germans and Austrians, and of course, Slovenes. Likewise, an increasing number of citizens from the former Yugoslavia — that is, from Serbia and Bosnia-Herzegovina — are buying. And, due to Croatia’s proximity and long-standing history dating back to the time of the Austro-Hungarian Empire, there are, of course, Czechs, Slovaks, and Hungarians.

Whether the market will change once the political situation in Europe eases remains to be seen. Tourism and the real estate business with buyers from Russia, in particular, have completely collapsed. However, in principle, real estate purchases and investments in Croatia are possible for citizens of all countries. So, to all investors from the Far East, the Arab world, Africa, and America: Welcome to Croatia!