This very promising situation came to a crashing halt in 1991 with the start of the war with Serbia.  Unlike neighbouring Slovenia which managed to achieve independence in a mere 10 days and with practically no damage to its infrastructure, it took four years before the war in Croatia finished. During this time, much of the country was well and truly trashed, including some of the jewels of the Adriatic, such as Dubrovnik.   It has been a decade since the fighting finished, during which time Croatia has been busy rebuilding, with the result that the country is now back to its former glory and tourists are returning to the country once again.  In terms of prosperity, Croatia is not far behind Poland, Latvia or Lithuania, and way ahead of both Bulgaria and Romania.   Saying this, however, Croatia is still not completely in the clear economically, with high unemployment and this is one of the main reasons why the country has so far not been able to gain entry into the EU, either in the first wave of expansion in 2004, or along with Romania and Bulgaria on 1 January 2007.  Chances are, however, that Croatia will be the next country to join, although it doesn’t look as if it is going to achieve this before 2010.

With EU entry so far away, you could be forgiven for guessing that property prices in Croatia would still be quite affordable.  But unfortunately you would be wrong – the country is already looking pretty darned expensive – especially on the best parts of the Adriatic Coast, such as Dubrovnik where the best property can go for as much as EUR8,000/m2.  Prices in the capital, Zagreb, are not nearly as insane as on the coast, but they are still well ahead of prices in the two EU newbie capitals, Bucharest and Sofia, being in the same region as the established Eastern European capitals such as Prague and Budapest.  There's still plenty of room for growth in the market, but it's unlikely to be as stellar as in some other markets.

Time for a joke: 

Q: What’s the similarity between Croatia’s best beachfront properties and sunloungers?

A:  The Germans grabbed them all while everyone else was still asleep.

Prices in the really desirable locations such as Dubrovnik are already very high indeed, having risen by another 20% in 2006.  It’s hard to imagine that prices can continue to grow at that rate for much longer.  However, with its long, long coastline and hundreds of little islands, there are plenty more locations to choose from and so, if you do your homework and find an area that is up-and-coming, then there are still likely to be good returns available.  One area which has been widely tipped recently is Istria, in the north of the country, which is being referred to as the new Provence or Tuscany.

Knight Frank were much more optimistic about Croatia’s potential in 2007 than we are, however, with an estimated growth this year of 12.5% - higher than all but four of the European countries that they cover.  Taking the country as a whole, perhaps they are right, but it’s unlikely that property in Zagreb or Dubrovnik are going to grow this fast.

If you are interested in buying in Croatia, keep an eye out for news regarding Croatia’s accession to the EU.  On past form, prices should start to rise between the time a firm date is announced until shortly after the country actually joins.

If the above has not put you off buying in Croatia, you have one major problem to solve and that is in the area of financing.  Although the locals have access to some decent mortgage products, it is illegal for the banks to offer these to foreigners.  In addition, mortgage brokers usually aren't able to offer financing for properties in Croatia.  This means that your only possibilities for financing are either going to be using your life savings or remortgaging your main property.

Formerly the star performer along the Adriatic, Croatia has had to play second fiddle in 2007 to neighbouring Montenegro, which has seen tremendous capital growth this year.  Certainly, if you are looking to make some quick cash, then perhaps you are going to be better off looking at Montenegro instead.  However, if you are looking for long-term profitability and are more conservative in nature, Croatia could be the better of the two markets for you because Croatia's tourist infrastructure is a lot more developed than that of Montenegro.

In summary, opportunities in Croatia are still out there.  You just need to look a little harder to find them these days.

Additional Background Information

Key Economic Data      Croatian Climate      Visitors' Guide

The above contains our thoughts on the current state of the market.  But, like any type of investment, there are no guarantees as prices are always influenced by a huge number of different variables.

You can keep abreast of developments in the market by checking out the articles in our News section where we’ve trawled the Internet for every story connected with property in Croatia so you don’t have to.  By checking the news reports regularly and thinking through the consequences of each piece of news, you should be able to get a good idea as to how quickly or slowly property prices in the market are going to rise in the near future.

The information in this section only tells half the story, however as only a small proportion of Croatian property news is translated in English, which means that the locals are getting a lot more useful information than foreigners are.

Investing in the wrong markets could make the difference between making tens of thousands and losing tens of thousands over the next few years.  If you’re seriously considering investing in Croatia, then you should think of subscribing to our Premium Service so that you can get all the breaking news from the market at the same time the Croatians are hearing it.

Click here now to get better informed.