Luxury Real Estate

Croatia in the Buyers and Investors Focus on Luxury Real Estate

The focus of buyers and investors of luxury real estate is increasingly turned to Croatia. The most deserving of such a change is the arrival of global real estate companies, but also the coronavirus pandemic.

How has the pandemic affected the rise in demand?

Although the coronavirus pandemic has brought many negatives in business terms, we must emphasize that it has contributed a lot in terms of demand for luxury real estate in Croatia.

Namely, regardless of the increase in real estate prices, Croatia is still cheaper compared to, for example, Germany, Austria, and Slovenia. Also, luxury real estate is selling easier than before, there are more and more such buyers and the growth is increasing every year.

Work from home, intimacy, and isolation are the consequences of a pandemic that has contributed to the greater demand for such real estate that will separate individuals from large numbers of people. Foreign buyers are looking for special locations with more privacy with amenities such as sea views, yacht connections, and the modern design of the property itself. They are moving away from mass tourism and are increasingly environmentally aware.

Looking at the stable epidemiological situation, Croatia has become safe for the arrival of foreigners, but also more easily accessible than other European Union countries. Even in this extraordinary situation, it has been shown that the demand for luxury real estate is not endangered. On the contrary, demand is higher than before.

Demand is greater than supply

The global market brings new trends and challenges for this type of business, both for buyers and sellers. Customers who used to be based in countries like Spain, Italy, and France have now turned to Croatia.

Croatia is in a good position due to its natural resources, geographical location, local diversity, and lower prices. The problem is that in our country the demand is higher than the supply. There is room for improvement. We have not yet used our full potential, but it is important to note that a large number of customers have been registered who have the financial means to make larger investments and purchases.

Customer expectations and requirements

Customers certainly have new expectations and standards – they want a safe purchase and a quality product. They are taught to a higher level when looking at urbanism, infrastructure, and content. In Croatia, it is still in development, and we still cannot offer it to them.

It is important to note that our offer is significantly better than in previous years, but the problem is to prevent the construction of separate residential areas without tourist purposes. Our legislation does not allow the development of new housing estates but only tourist zones intended for commercial activities.

Professionalization is needed

Buyers and investors in luxury real estate will be attracted and retained by conditions such as safe buying and a reliable intermediary. We certainly have places for professionalization, such as profession, designers, and architects’ engagement. In any case, the offer is better than before.

Due to urban and spatial constraints, but also the lack of quality infrastructure, the development of this area is minimal. This is because urban planning is planned based on existing land ownership, and should be planned strategically.

The model we should strive for is designing settlements and drawing plots, as well as building infrastructure. In this way, we could offer investors a concrete solution. We have great potential for the luxury residential market that could attract many buyers.

Foreign nationals and buying real estate

The first and most important information refers to the status of natural and legal persons when buying real estate in Croatia. Namely, from February 2009, citizens and legal entities from the EU Member States can acquire the right to own real estate in the Republic of Croatia. This means that citizens of EU member states are free to acquire real estate in Croatia for private and business purposes under the same conditions as Croatian citizens. There are exceptions such as agricultural land, protected cultural assets, and natural assets that cannot be acquired by people from the other EU Member States.

Citizens and legal entities from non-EU countries may, under the presumption of reciprocity, unless otherwise provided by law, acquire ownership of the real estate in the Republic of Croatia, but subject to the consent of the Minister of Justice of the Republic of Croatia.

To purchase real estate, the buyer must have a tax number as well as a personal identification number (OIB). The buyer can request the personal identification number from the Croatian Tax Administration or an authorized person such as a tax advisor.

Real estate can be taxed with VAT at the rate of 25% or real estate transfer tax at the rate of 3%. Taxation of real estate located in Croatia will depend on:

  • Tax position of the real estate supplier/recipient;
  • Status of the property (unused or used); and
  • Types of land (agricultural or construction).

Delivery of real estate before the first occupancy or use or delivery in which no more than 2 years have elapsed from the date of first use to the next delivery, will be subject to VAT at the rate of 25%.

The first occupancy or use will be considered the moment of putting the real estate into use, about which the taxpayer must have the appropriate documentation.

Deliveries of real estate where more than 2 years have passed since the day of the first settlement or use will be exempt from VAT and taxable with real estate transfer tax. If such real estate is sold by a taxpayer who is in the VAT system, he will have the right to opt for taxation.

When the buyer does not pay VAT on real estate at the rate of 25%, then the buyer should pay real estate tax at the rate of 3%.

Right next to the beach

The greatest demand is related to the first row to the sea. We are looking for villas ready to move in, but also empty land. In Croatia, such a market has only just begun to develop compared to the surrounding countries. To look at Croatia as a luxury destination, we need luxury hotel brands. For example, Montenegro is working on such a plan. Luxury hotel brands have raised prices so the square is selling for an average of 8,000 euros.

The advantage of buying real estate in Croatia certainly concerns the price, which is significantly lower compared to other EU members. On the other hand, acquiring real estate for foreigners is not so simple. We recommend consulting a tax advisor before purchasing.

CONFIDA has many years of experience in tax consulting related to real estate. Our experts have many years of experience, especially with customers from Austria and Germany. If you need help with additional information and buying real estate, contact us to guide you in more detail.

It is necessary to change the pattern of market development and mechanisms that will bring luxury and high-quality content to a higher level. It is important to encourage investors by arranging land registers, speeding up procedures for obtaining various permits, and concessions, greater integration between local communities and relevant ministries, adopting adequate spatial plans and care for the destination, environmental impact studies, and punishing violators and the like.

It is difficult to predict future trends in the global market, but it is certain that the market is changing and that customers are getting used to new ways of life such as expressed awareness of health, responsible behavior, and environmental protection.

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