Boom That Never Came

Croatia opened its property market, most notably its stunning Adriatic coast, to buyers from the European Union in February, but real estate agents expect no immediate boom of German, Austrian or British interest due to the world financial crisis.

Under the terms agreed in pre-accession talks with the EU, Croatia now allows foreigners to buy lots and homes under the same terms as its own nationals.

Although the change is "not revolutionary," as one agent described it, it does ease the enormous amount of red tape a foreigner had to previously wade through to purchase a home in Croatia.

Fewer hassles for foreign buyers

"With fewer documents required under the new rules ... and lighter administration, we projected a five-percent growth of the market," said the head of the national property traders' organization, Dubravko Ranilovic.

"These expectations however need to be revised downwards due to the recession," said Ranilovic, estimating that the turnover could increase just before the summer season begins, but not in the medium term.

The forecast is in stark contradiction of widespread fear among Croats, who were worried that foreign buyers would literally snap up all the best properties on their 1,100-kilometer Adriatic coast.

Germans top list of foreign buyers

As of January, only 11,517 foreign citizens or firms owned property in Croatia. The list was led by 5,149 Germans, and then followed by 3,131 Slovenians, 2,187 Austrians and 1,358 Hungarians.

The figures were several times smaller than what the Croatian media had estimated.

"There is no danger of a sellout," property agent Jasminka Biliskov recently told the Jutarnji List news site.

The market has been "less than lively," while "the few rich buyers are like a drop in the sea."

After all, foreigners could buy land before, if they were from countries allowing Croats to do the same, or under elaborate, but possible, legal schemes involving foreign-owned brass-plate firms.

Demand down, but not property prices

"Those who wanted to buy, they did. Now that strong markets -- British, Austrian and German -- are in recession, I expect neither increased demand, nor higher prices," Biliskov said.

In spite of the lack of demand, prices remain unchanged -- from 3,650 euros per square meter for a flat in the top-resort Dubrovnik in the south, to 1,750 in Pula on the northern end of the coast.

So, unless Croats resign themselves to lowering their asking price or until foreigners start dreaming of vacation and retirement homes instead of worrying, there will be little turnover on the eastern shore of the Adriatic.

"Even those who were willing to invest in Croatian property are now going to wait and see where prices will go," said Vlatko Mrvoc, owner of a property firm on the Istrian Peninsula.