Croatia: Tourism with a Limp?

Croatia’s tourism industry is growing fast, and its daring Ten Year tourism plan, implemented by the Istria region (north-western Croatia), is starting to bear fruit. Accolades are already under the tourism ministry’s belt. But, Croatia has been continually shooting itself in the foot since early last year, giving tourism prospects a distinct limp!

---

Luxury villas, rented to foreign visitors, are integral to Croatia’s tourism plans. The government encouraged inward investment by promising, in law, special deals to foreigners who built villas. But now, an old law has been resurrected and forced on villa owners by the Office of Categorisation (Tourism Ministry). And it is causing havoc, especially at a time when Croatia is battling to be a part of the EU. Until a year ago, villa owners only had to apply for residential usage permits. In itself this was a long process (one villa owner told me he waited three years, from building foundations to obtaining the final permit) and many owners have already lost rental incomes for last year, because municipal authorities are so slow. All existing villas were ready to rent-out, and had bookings for 2008. Then, suddenly, a law passed in 1991 was implemented without warning. It requires them to apply for business permits as well. This has put an immediate block on rentals, causing extreme financial hardships for most owners, though the reason they built in Croatia in the first place, was the promise they would be treated well! In 2008, one local office advised it could take up to two years to obtain a permit. This means all rentals were on hold until permits were granted… a process that involves repeating the applications made for residential permits! On top of that, local offices did not know how to proceed, so they froze all applications. In late 2009, the situation is even worse, because permits are only for non-residential areas, and that is where most villas are sited. Everyone has been caught by this sudden imposition of a law that has never been used. Lawyers were unaware of it and argue that foreigners should not be penalised for what is now use-by-custom. Local offices had not heard of this ‘new-old’ law. They tried getting clarification from Zagreb, to no avail. When in Istria in 2008 it was suggested to me, by Croatians, that Croatia still suffers a communist frame of mind. Perhaps this is why the three Ministries I contacted refuse to answer! Again, when I went there in August 2009, the same comments were made. It was even suggested by a few that if owners can’t rent, and no-one wants to buy a rental property they can’t rent out – maybe it is a way for unscrupulous ministries to obtain properties without paying for them, or by paying rock-bottom unrealistic prices. Whatever the reason for such a weird and nasty law, it is affecting owners very badly. Several thousand villas still remain unrented. A luxury villa loses £2000 a week in the high season, and not much less the rest of the time. If they are not rented, there are no tourists in that locality. So stakes are high. Not only are rental incomes lost, but mortgages, maintenance, and other costs still have to be paid by owners. This has a knock-on effect, because anyone wanting to build or buy a rental villa in Croatia should now be very cautious, or lose money. The Croatian government now has a duty to work this out very quickly, or lose its investment credibility. Desperate owners, many of whom have sunk large sums into what they thought would be a combined retirement and income venture, are left high and dry. They have rented out through agents, but when visitors arrive, police come along and send them away, locking up the villas and placing prohibition orders on the doors, with yellow ‘do not cross’ tape! Owners then have to pay a hefty fine and promise not to rent out again. If they do, they risk an even higher fine plus prison. Some brave owners, defying Croatian authorities, have tried every angle possible to get things sorted out… from going to embassies, to seeing government ministers, to getting help from EU officials, but without success. The intransigence is without precedent and even Croatian lawyers are baffled by what is happening. Meanwhile, owners are left with villas they cannot rent, or even stay in themselves because of quotas on personal stays. And they are at a loss about selling, because few want to buy luxury villas if they can’t be rented! Local support businesses no longer have work, so the situation is harming everyone. Croatia is a lovely place for a holiday… but if you want to buy property, beware! Future investors in the Istrian region of Croatia are welcome to contact the author, who has intimate knowledge of the country. Barry Napier runs christiandoctrine.com. The Global Green Agenda’, Barry Napier. Published, Petra Press, 2009. For other anti-green books by Barry Napier contact the author: barry.napier@ntlworld.com

---