Investing In Holiday Homes In Croatia

by Guest Contributor

Croatia is one of Europe’s fastest-growing tourist destinations, with two of its’ major cities; Dubrovnik and Zagreb, topping the charts for city break getaways. Not only does the city benefit from a historically successful tourist business, people are now flocking to the country in their thousands after seeing Dubrovnik’s historic architecture and beautiful scenery showcased on HBO’s hugely popular Game of Thrones.

croatiaScenes from the TV show are filmed in Dubrovnik’s old town, a UNESCO World Heritage Site since 1979. If you want to see Castilly Rock in real life (dragons not included), why not take one of the Game of Thrones location tours, which are now one of the city’s most popular tourist attractions, alongside many others bringing visitors to the city. 

“Panorama of Dubrovnik” by Dudva. Licensed under CC BY-SA 3.0 via Wikimedia Commons 

Hotel rooms and holiday rentals in Croatia are, understandably, in high demand following this increase in tourism, and now would be fantastic time for a canny investor to buy. Whether you’re searching for a lucrative rental property or holiday homes in Croatia that will pay for itself, Croatia could be the place for you.

If you’re thinking about investing in holiday homes in Croatia, here’s a few key points to take note of:

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It’s A Good Time to Buy Holiday Homes In Croatia!

The Croatian economy has been in recession for the last seven years following the financial crisis of 2008 – even entering the EU in 2013 has not yet bolstered the country’s economy. That might sound like bad news for investors, but if you look at the numbers, it’s actually looking quite favorable. Here are two positives: 

  1. Croatian recession has not impacted tourism or holiday homes in Croatia. In fact, the holiday rental market grew by 34% in 2012 alone.
  2. Property prices have fallen as the recession continued but have now started to increase again. Last year saw an 2% increase in Zagreb property prices, for example. This means you can buy low with great opportunities for growth.

The recent inclusion of Croatia in the EU has made it easier than ever for foreigners to buy property in the country and easier than ever for European tourists to visit. It represents a fantastic chance for holiday home investors.

What Are The Taxes and Costs?

Buying and renting property in any foreign country can be a financial minefield, but thankfully Croatian taxes are relatively simple – and relatively moderate – for foreign landlords:

  • There is a flat 12% income tax on any rent income, from which you can deduct costs such as insurance, management fees and depreciation.
  • There is also a 25% capital gains tax applicable if you sell the property again within 3 years, but this is unlikely to apply to most holiday home investors.

Croatian taxes might be reasonable but other costs involved with the sale itself are slightly higher in Croatia than many other European countries. Expect to pay 3-6% estate agent fees and an estate transfer tax of 5%. Note that new builds are not charged estate transfer tax but 25% VAT based on the construction value of the property.

Getting a Return on Your Investment

The key to turning a holiday home into a successful investment is to rent it out to other holiday makers while you’re not there. Most of us only get the chance to holiday for a few weeks a year, which means there’s lots of time available to rent out your property – earning you money.

While the recent Croatian tourism boom means that finding tenants will be easier than in previous years, you’ll still need to promote your property in the right places to attract business and get ahead of the competition. Holiday home owners that do this promotion right can see occupancy rates as high as 98-100%.

The easiest way to make your property known is to list it on a popular holiday lettings site such as OwnersDirect, to drive customers your way and do the hard work for you. You can also promote your home in travel press ad sections and free gumtree, and if your offering is of a high standard you can benefit from repeat customer and referrals. 

If you’re short on time, enlist the help of a good local management service to look after the property and ensure your guests have a pleasant. Luxury villas/apartments can fetch up to £600 a night if they sleep 8+ people and have a high-end spec.

Importantly, consider properties in areas easily accessible from airports before investing. Croatia’s has international airports in Dubrovnik, Split, Pula, Zagreb and Zadar and are all accessible via direct flights from the UK.

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About Guest Contributor

This article was written by a guest author. For more information about this author, please see the bio information listed in the article. If you would like to write an article for Money Q&A, please visit our Guest Posting Guidelines page.

Guest Contributor has written 260 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.

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