July the 1st, 2022 - Germans have been purchasing Adriatic property en masse, and then renting it out. While this trend is less than satisfying for many Croats living on the coast themselves, the Germans engaging in this are getting quick returns on their investments this way.
As Morski writes, more and more Germans are snapping up Adriatic property along the Croatian coastline and then renting it out. Two such Germans sat down to talk about their experiences with builders, taxes and processes.
Jens and his family from the German state of Baden-Wurttemberg have fulfilled their dream by purchasing Adriatic property. They now own a luxury villa with pool and gorgeous sea views. It all started with a joint holiday of his family and his sister's family in beautiful Istria. They really liked this region, but the rent for a large enough and well-equipped villa with a pool was quite high. When they started calculating the figures, they decided it would be more worthwhile for them to own their own house. They searched for a long time, but couldn't find something they loved, writes Deutsche Welle.
Eventually they discovered a beautiful construction site on the edge of a fishing village in the south of Istria with a magnificent view of the sea, and they decided to build their own house. "It was simpler than we thought it would be," said Jens, 53. He says the price of construction materials is about the same as it is over in Germany, but that labour is still significantly cheaper. As such, last year they finished building their villa with a pool, and this year they already have their first paying guests coming.
In order to facilitate it all, they took out a construction loan in Germany and they plan to repay it by renting the house out during periods when they aren't using it themselves.
An interesting tax model
Oliver, 55, from Bavaria, decided to "build, not rent" using the same model.
''It was actually somewhat accidental. From Italy we went further towards Istria and there we saw some truly beautiful cities, the crystal clear sea and stunning clean beaches. That immediately won me over,'' recalled this German. After that, he went on, they spent a couple of years in the south of Istria and decided to buy a house there. But they, like Jens' family, couldn't find anything suitable, so they decided that it was better for them to build their Adriatic property from scratch as well, and do it all according to their own personal wishes and needs.
A few years ago, they found a large construction site, and the original intention was to build their Adriatic property for their own needs. But on a plot with a fantastic sea view, the construction of a larger facility ended up being planned.
I asked the salesman, "What am I supposed to do with a family of three on 500 square feet?" and he said, "Well, build some apartments and rent them out!" And so a larger building was created in which his two-level private apartment with an imaginatively decorated pool and three other apartments for rent are all located.
''I founded a company in Croatia and thus got back 25 percent of the VAT when building the facility,'' he explained. He already has a company in Germany for the sale of machines for industrial plants, so he then started selling through his Croatian company.
''Everything we did through Croatia, all the way to the motor boat that belongs to the company, these are definitely some interesting tax models,'' said this German entrepreneur.
He admits that renting out purchased Adriatic property is worthwhile, but added: "In the meantime, it has become difficult to rent something out in Croatia if you don't have a swimming pool, because the offer is very large. And really, all over Istria, a bit like like mushrooms after the rain, it's mostly luxury villas with swimming pools that keep on popping up, despite the drastic increase in construction costs. A pool has become important if you want to make a good living," Oliver explained.
Most of the foreign buyers in Croatia are German nationals
Jens and Oliver are just two of thousands of Germans who own real estate across the Republic of Croatia, and there are more and more of them coming and doing the same every day. According to recently released data from the Tax Administration, foreigners bought 9,514 Croatian properties last year, up 50 percent from a year earlier, and this still isn't the complete data for that period. Germans, Austrians and the neighbouring Slovenes buy the most. Real estate sales to German citizens rose by as much as 70 percent last year.
Many foreigners buy for their own needs, but there are more and more of them who come and invest their money in this way. Renting out Adriatic property has obviously become a lucrative business in Croatia, and after the coronavirus crisis, tourism is finally booming again, rental costs for both apartments and houses are rising, and taxes are relatively favourable for foreigners as well.
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