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With confidence that the country will become an EU member by 2009, a thriving tourist industry and an economy that boasts low inflation and steady growth, now is an exciting time for real estate investment in Croatia. Experts such as Chris Kalin of Zurich based international property consultants Henley & Partners, are expecting “average rises in Croatian real estate prices of 100% to 150% over the next three to five years.” The World Travel and Tourism Council have projected annual growth of 7.6% for the next 9 years, with the country quoted in the top five worldwide destinations for tourism growth.
Croatia is perfectly placed for tourism, with over 600 million people within three hours flying distance. Add to this, new low-cost flights to coastal resorts from the likes of FlyBe and Thompsonfly, visiting the country has now become affordable as well as convenient, and property prices will inevitably rise to meet the growing demand.
Croatia’s stunning Adriatic coastline and unspoilt mountain ranges attracted over 10.2 million tourists in 2006, putting it in the top twenty-five destinations in the world for visitor numbers, according to the World Tourism Organisation. During the first half of 2007, Croatia recorded further increases in the number of tourists and overnight stays; in July 2007, 2,645,089 tourist numbers and 16,523,581 overnight stays were recorded, representing a 3.3% and 6.6% rise respectively, when compared to July 2006. The World Travel and Tourism Council have projected annual growth of 7.6% for the next 9 years, with the country quoted in the top five worldwide destinations for tourism growth. Such confidence creates a very positive atmosphere for inbound investment. Croatia’s economy is showing steady progress, with real Gross Domestic Product (GDP) recording 6.6% growth for Q2 of 2007 compared to Q2 of 2006.
Tourism brought in €6.3 billion in 2006, an increase of 5% on the previous year, with daily tourist spend more than doubling since 2001 (Source: Market Research World). Whilst considerable, these figures represent only the beginning of Croatia’s growth cycle - State Secretary for Tourism, Zdenko Micic has recently announced a substantial investment of Ł1.25 billion in tourism, and this, coupled with a Ł500 million investment in roads and seaports, can only add to the popularity of the country, driving forward the real estate market. Figure 1
As well as the EU-led reforms, Croatia has also made many changes designed to make the country more competitive as an investment and business location. These are promoted through the Croatia Investment Promotion Outreach Alliance (CIPO) - a trilateral initiative designed to attract foreign direct investment (FDI) into Croatia. The Alliance is supported by the World Bank Group and an impressive list of partners from both the corporate and private sectors. The CIPO Alliance also represents the united effort of a number of proactive Croatian regional development agencies. This kind of government promotion can only enhance Croatia’s standing on the world stage, boosting the prospects for the economy in general and the real estate industry in particular and provides additional security for investment.
Croatia’s imminent membership of the EU will only enhance its attraction for investors, boosting the economy and FDI still further, creating the ideal circumstances for a property boom, as both income and confidence rise. This pattern has previously been illustrated in the emerging markets represented by recent EU entrants Bulgaria and Romania. Under Croatian law, overseas investors enjoy the same rights and protection as locals, opening up the property market to all, whether for rental or buy & hold investment in direct sales. Colliers report continuous capital appreciation and good annual rental returns for existing properties, while overseas interest in Croatia increases, investors can also target the holiday home, second home, and retirement home buyers from abroad. Recent changes in legislation mean that Croatian mortgages are now also available to overseas buyers, increasing the amount of money entering the real estate sector, boosting long-term prospects for the property market and the wider Croatian economy, whilst providing a spectrum of investment opportunities to the property investor. So as the intrinsic wealth of the country grows through investment and economic improvement, domestic buying power will also increase. This gives overseas investors both higher rental rates in the short term, and more domestic buyers when they decide to sell.
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