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Why invest in Istria?

Here are some useful information on the real estate market in ISTRIA, Novigrad and Umag in particular, and why invest in this market.

The real estate market in Croatia, and particularly in Istria (Novigrad and Umag), has been recently drawing attention of small and large European entrepreneurs due to low cost of labour in the construction sector and the sales margins, in a market where the demand of European investors has been growing.
Thanks to its landscape, Istria is often referred to as the new Tuscany by British buyers who, given their strong currency, have shown great interest in the Istrian real estate market.
These have been outrun by German and Austrian buyers, who thanks to the geographical location, reach the coast quickly both in summer and spring.
Italian buyers have also shown great interest in the real estate market in Istria, thanks to the above mentioned reasons, such as nature, sea, excellent food, hunting, but also the Istrian tradition and history that is very similar to the Venetian culture.
Another thing that brings the two cultures together is bilingualism (Italian and Croatian) present even in the Istrian schools..

The 50km long Istrian coast that stretches from Umag to Rovinj offers plots of different sizes and prices.
From 50.00 euros per square metre for plots with minimum distance of about 2 km from the sea, up to 1,000.00 euros per square metre for plots by the sea. The distance from the sea is what dictates the prices rather than the market price.
The buildability percentage of a plot intended for apartments for sale in Istria is on average a maximum of 40% of the surface area and in 90% of cases the maximum number of floors is three, in order to preserve the landscape.

For example, a 600 m2 plot would be enough to build a 500 m2 property on two floors, three at the most.

The price of construction of 1 m2 on a turnkey basis ranges from 500.00 to 700.00 euros depending on the finishing, the costs of design included.

The sale of 1 m2 on a turnkey basis ranges from 1,400.00 to 3,000.00 euros depending on the proximity to the sea and the finishing.

Open and semi-open surfaces, such as balconies and terraces (loggias) have a negligible cost of realization compared to the sales price, 0.50% and 0.75% of the price per square metre respectively.

This information shows high margins of realization as well as low realization costs compared to the Italian standards.
For example, if you want to build a new 500 m2 building, a small 600 m2 plot would suffice:

Plot price: 600 X 300 euro/m2 = 180.000
30% buildability x minimum 3 floors... 90% of the 540 m2 plot (we will use 500)
Construction cost: 500 m2 X 600,00 euro per m2 (average) = 300,000.00 euros

Total cost: 480.000,00 euros
Out of the 500 m2, ca 20% goes for common areas of the building: which leaves us with a net of 400 m2 for sale.
400 m2 / 8 = 50 m2 per apartment.
Costs of charges, connections and designs will amount to about 100.00 euros per m2.
100 x 500 = 50,000.00 euros

Total costs 530,000.00 euros

Realization 400 x 2,200.00 euro (average) 880.000,00
Gross income 880.000,00

Gross income: 880.000,00 - Total costs 530.000,00 euro = 350.000,00

530.000,00/100 = 350.000,00/X = 66,03%

The prices used in the example that refer to costs and realization are realistic and controllable.
We are not taking into account the possibility of adding parking space, land for the apartments on the ground floor and any underground storage spaces that would not affect the buildable square footage of the plot to the income. The plots by the sea are usually very attractive for big real estate projects; this is why they are usually large in size.
The selling price in Istria and in the whole of Croatia is calculated by multiplying the net square footage of the property (terraces and storage spaces 0.25% - 0.50% - loggias 0.75%) by the price of the finished m2 turnkey system, that is, including kitchen tiles, flooring, complete bathroom equipment, both external and internal fixtures. (to furnish)
The price of the properties is negotiated in euros but is paid in HRK (official Croatian currency), based on the official middle exchange rate of the Croatian National Bank on the date of payment.

The alternative to purchasing the land is to purchase a building to be expanded and restructured.
There are properties sold by private individuals, the price of the property in this case is unique. Of course, the cost of renovations and expansions can be lower than that of new construction, making the most of the specific feature of the Croatian construction market – cheap labour.
Buildings located in the historic centres of Istrian towns have also recorded an increase in sales prices because foreign buyers are very attracted by the possibility to own unique historic stone buildings.
In this case, an estimated price of a square metre (intended for renovation) in a historic centre varies from 1,000.00 to 1,500.00 euros per m2, and after renovation, it can reach 3,000.00 euros or more.

Because of the huge interest foreign buyers have shown in typical Istrian stone houses in the region’s interior, these are difficult to find.
Numerous construction companies are in fact building new properties using the Istrian stone found on site for finishing, adding rustic touch to buildings, such as a fireplaces, vaults, stone walls, etc.
As for the price of square metre in this case, to purchase a building for renovation you will pay from 1,000.00 to 2,000.00 euros, reaching the selling price of 3,500.00 euros once finished.
Recommended investments. Apartments near the sea with town infrastructure, as opposed to that in small villages.
Villas and houses in the interior with large plots and swimming pools. European tourist agencies are focused on finding customers interested in renting during the period from April to October.

Both buildings and land have a lower cost in Dalmatia than in Istria, another area affected by real estate speculation, but for the time being the Istrian real estate market, specifically that in Novigrad and Umag, offers more guarantees. The geographical position, easily reachable by the Germans, Austrians, Slovenes and of course Italians, the green surroundings, the culture and culinary traditions are all attractive to small and medium European investors.

Purchase method

Members of the European Union can register in the land registry as natural persons through a normal sales agreement.

Through a simple sales agreement

A notary public, after having certified the agreement, enters it in the court records, registering the property right in favour of the foreign citizen.

The system recommended for someone who is interested in the property for personal use, has no speculative property interests and no intention to rent it.

  • Advantages: no additional costs other than that of the property, legal fees and 3% real estate transfer tax where applicable.
  • Disadvantages: none.

Through the establishment of a company

the same as the Italian s.r.l., the shares in the company are all owned by foreign citizens.
The company as a legal person is registered with the court as the owner of the property after having been notarized.

The system recommended for someone who will purchase the property for profit, e.g. for the purpose of reselling or renting it. The property could be used as the seat of the company for foreign citizens who intend to start a business activity in Croatia.

  • Advantages: recovery of PDV (VAT) 25% (monthly or quarterly paid back in cash to the account of the company, there is no tax payment at the end of the year as in Italy)
    In case of construction and furnishing, you can recover 25% of the costs of billable materials, installations and labour.
  • Disadvantages: the initial cost of setting up a company, management costs, such as an accountant. You need to take time to be present for the periodic closure of balances.
    Cost of setting up a company: about 2,000.00 euros depending on the members, the statute, the company name or names.
    Accountant cost, from 100.00 to 300.00 euros per month depending on the amount of accounting work.
    You need to take time to manage the company: at least once every three months for the quarterly closing of balances.
    The share capital that needs to be paid, which is available on the account of the company approximately 30 days upon the registration with the Chamber of Commerce and amounts to HRK 20,000.00, i.e. 2,700.00 euro, the minimum amount of share capital.


The property has a registration tax equal to 3% of the cadastral value (sometimes lower than the actual value).
There is no other annual property tax on the property.
When you purchase the property from an individual, you pay 3% real estate transfer tax calculated on the value of the property. When you purchase the property from a company, the 3% will not be requested from the buyer. The company selling the property has already paid taxes for construction to the Croatian state through VAT payments.
The transfer of water, electricity, utility charges and waste disposal is done immediately upon presenting the title deed to the relevant bodies.
The cost of utilities is estimated based of the average Croatian salary of 400 euros per month, therefore quite low for a European citizen.
The annual management costs of the property based on these charges are low, summer rental of the property would bring revenue of about 4%-5% per year of the cost of the property.
The market shows an annual increase in the value of the square metre in Istria of 5-10%, depending on the position and quality of construction and finishing.
The profits of a limited liability company are taxed with a percentage ranging from 12% for small businesses up to 18% on an annual basis, after having taken into account all the costs incurred and the depreciation rate ranging from 5 to 10% on an annual basis of all the goods purchased by the company. An unsold property brings no annual taxes to the company that owns it. At the end of the sales process, the activity is closed, calculated and taxed. Therefore, it is feasible to start a new activity before the last sale that would increase the budgetary costs and does not provide obvious profits.
Further taxation for shareholders' dividends amounts to 12% of the net corporate profit.

We hope this brief information can help you understand the investment mechanisms in the Croatian market whether you want to invest in a holiday home or apartments, as a small or medium-sized company.
Our agency can find properties or land, assist clients to set up a company, we can provide the clients with quotes from numerous construction companies (we are partners with a construction company based in Novigrad), design cost estimates and above all, where our interest is greater, we can manage the sale or resale of the properties built or purchased.
We are advised by and collaborate with Croatian technicians, legal advisers and notaries.
Thanks to our tourist agency, we can manage the summer rental of your apartments purchased as an investment.
For information purposes, the estimated summer profit on an apartment is around 4% of the value of the property.
Annual consumption expenditure is estimated based on the average Croatian salary, therefore low for a European consumer.
We remain at your disposal for any further information you may require or if you wish to come to Istria to get to know us and consider possible collaboration.