ECONOMY

Dubrovnik could be too dear for locals

DUBROVNIK, Croatia (Reuters) – With European Union membership looming, Croatia’s real estate market is booming as Europeans seek an affordable place in the sun and locals seek fast profits. But with property prices nearing 10,000 euros per square meter in parts of Dubrovnik, the Adriatic city that is the top destination for property-buying foreigners, the country’s authorities are facing calls to curb the invasion and ensure locals are not priced out of the market. «If you want to buy any property in the Dubrovnik city area, be prepared to pay at least 300,000 euros,» is one of the first things Slavica Gavranic tells her clients. That will fetch you an average-sized flat, possibly within Dubrovnik’s medieval walls, where the price of a square meter ranges from 4,000 to 10,000 euros. Outside the old walls, it varies from 2,500 to 5,000 euros. Gavranic runs Dubrovnik Sun, one of several booming real estate agencies. «Our clients are mostly English, Irish and Dutch,» she said. «We have a lot of foreigners who are making inquiries about what they can buy, saying they have up to 200,000 euros to spend. Our answer is simple, there’s virtually nothing you can buy for that money in the wider Dubrovnik area.» The potentially lucrative market has prompted a number of foreign-owned agents to open up businesses. «Foreigners have easier access to the markets that clients are mostly coming from, so they can more easily advertise themselves there. But Croats have a slight advantage as they know the market and local laws better,» she said. As prices skyrocket, and even neglected old stone houses sell for a small fortune, property owners have the chance to become wealthy. But the boom has raised fears that many Croats will be priced out of the market. As part of its move toward European Union membership, Croatia must open up fully its real estate market in 2009. EU citizens have the right to live and work in other member states. Fear of foreigners Several conservative parties are urging the government to ask Brussels to delay full market liberalization and also find ways of protecting Croatia’s unspoilt landscape. At present, citizens from most EU states can freely buy property in Croatia but face a complex bureaucratic procedure which can take two years or more. Croatia has also only recently started to tackle its muddled property rights, the legacy of 50 years of communist rule. In the past decade fewer than 4,000 foreigners have legally bought a house in Croatia, but many have found ways around the law, often by registering token firms in Croatia. Some observers estimate their numbers are actually 10 times higher. Zagreb moved to simplify property buying procedures last month by putting the Justice Ministry in charge of issuing permits. In spite of the public and media outcry, Gavranic says locals are often keen to sell their property. »Some want to renovate their homes, some need money for their children to get a better education, some sell what their families have owned for decades for existential reasons,» she said. And in spite of the attractiveness of Dubrovnik, the northern Adriatic’s Istrian peninsula or the capital, Zagreb, the rest of the country has yet to catch up. «We generally expect property prices to continue rising as Croatia nears EU entry,» said Darije Vladimir Josic from the Jadran Kapital real estate investment fund. Croatia started EU membership talks last October, with a view to joining about 2010. Observers say it is unlikely to be able to negotiate a delay in opening the real estate market, as defined in its associate membership accord. But, they say, the government might cite the discrepancy in purchasing power between EU citizens and Croats to invoke a safeguard clause, similar to that in neighboring Slovenia, which it can use for up to seven years after it joined the EU in 2004. Another possibility is to limit the sale of land along the coast or on the islands and to put in place strict planning laws to curb expansion, which apply equally to Croats and foreigners. «As long as you do not discriminate against anyone, it should be fine by Brussels,» said a source close to the government.