Sales tax: Five percent

Capital Gains Tax: 25% but not payable on properties sold after 3 years.

Inheritance Tax: Five percent

A progress report by the EU executive due for Tuesday will encourage the two Balkan nations to join the EU in January 2007, but it will propose the tough entry conditions on the newcomers.

The mixed message from Brussels reflects widespread public unease about further enlargement of the 25-nation bloc.

The conditional sanctions are meant to reassure critics of enlargement who say the countries are too poor, corrupt and weak to cope with EU membership, officials say.

Anti-government rallies in Hungary, as well as the break-up of a coalition government in Poland, have raised concerns over the admission of east European countries.

The commission may consider excluding Bulgaria and Romania from some EU policies unless they meet reform targets laid out in the report.

Jose Manuel Barroso, European Commission president, and Olli Rehn, EU commissioner for enlargement, will visit Bulgaria and Romania on Tuesday and Wednesday to explain the EU recommendations.

The EU executive cites “a number of areas … where the commission will initiate appropriate measures to ensure the proper functioning of the EU, unless the countries take immediate corrective action”, the draft report said.

Those include corruption and organised crime, especially in the case of Bulgaria, weak courts and state administration and insufficient food safety standards.

Historical wave

Nevertheless, the two countries will receive a boost on entering the EU bloc. Both are expected to sustain their already impressive growth rates, bring in foreign investment and encourage tourism.

Traian Basescu, Romania’s president, said: “Only with this will the biggest historical wave of EU enlargement be completed – a direct consequence of the collapse of communism.”

By raising the possibility of withholding some membership benefits if the two countries are not up to scratch, Brussels is also seeking to smooth ratification in national parliaments that have not yet approved the accession treaty, notably Germany.

Rehn decided that delaying membership until 2008 would humiliate the countries and prompt an anti-EU backlash. It would also reduce Brussels’ leverage with Bucharest and Sofia.

EU diplomats say that after the entry of Bulgaria and Romania, the rate of expansion will slow.

Croatia is next in line.

Source: aljazeera.net

By Stryker Mcguire
Newsweek International

A year and a half ago, Erich Schmidt had a bright idea. “Why pay other people to rent a house for holidays,” he thought, “when I could just buy a place myself?” So it was that the London recruitment consultant ended up with a vacation retreat in Croatia. Embroiled in a war for independence between 1991 and 1995, Croatia and its stunning Adriatic coast have only recently become safe havens for investors like Schmidt. He found a seven-bedroom stone house on the island of Brac for €230,000, a bargain by British standards.

Today he would not consider selling it for less than half a million. And he’s snapped up seven more properties in Dalmatia that he rents out to holidaymakers.

Schmidt is but one of a growing cohort of Europeans who are buying second homes in other countries. The trend is particularly pronounced among northern Europeans looking for a place in the sun. Along the Mediterranean “sun belt,” stretching from the Greek islands to southern Iberia, second homes make up 10 to 15 percent of total national housing stocks. The strongest markets are, unsurprisingly, France and Spain, the world’s first and second largest tourist destinations. But demand is so strong (and the investment prospects so promising) that the hottest hot spots today are countries like Croatia and Bulgaria. “The growth has been so spectacular that it’s difficult to chart,” says Sébastien Duquesne of UCB International Buyers in Paris.

The days are long gone when owning a vacation home was only for the rich. Lifestyles once reserved for the glitterati have been democratized. Caxton FX, a foreign-exchange company in London, estimates that 750,000 Britons now own second homes on the Continent. The typical London cabdriver is likely to own a place in Spain. The same is true of a German teacher or a Belgian middle manager, though the destinations may vary. Prosperity has more than trickled down: with per capita GDP in Western Europe rising by 50 percent over the past decade, the effect on second-home purchases has been marked. Caxton estimates that the market has grown, on average, 16.2 percent annually since 2001. Brits, Germans, the Dutch and others bought 80,000 to 100,000 second homes in Spain last year and 45,000 to 60,000 in France, according to UCB.

Ireland offers perhaps the most startling example of how rising prosperity has transformed the second-home market. According to the Organization for Economic Cooperation and Development, the Irish have become the second wealthiest people in the world, after the Japanese, largely on the strength of rising property values. In 2005, UCB reports, Irish buyers acquired between 7,000 and 12,000 second homes in France and Spain. For a nation of only 4 million, this is a whopping statistics. (Buyers from Germany, population 82 million, acquired between 17,000 and 24,000 homes in the same two countries.) Roughly half those purchases would be considered “speculative”-”bought, in other words, purely as investments rather than for personal use. And what’s true of the second-home market for Dubliners is true for Europeans generally.

For the working classes on up, says Caxton CEO Rupert Lee-Brown, “the whole thing is suddenly within reach.”

He means that literally. With relaxed immigration and border controls under the Schengen Agreement of 1985, says Iain Begg of the London School of Economics, “we became much more inclined to regard ourselves as citizens of Europe. That made it more attractive to wander across borders.” Wireless communications and high-speed Internet connections have made staying in touch easy. No-frills airlines have made wandering cheap, and their rapid expansion both feeds off and fuels the second-home market.

Ryanair and easyJet flew 67 million passengers last year and plan to open 58 new routes around Europe by the end of the summer. It’s no coincidence that a major advertiser on the Ryanair Web site is Majestic Worldwide, a resort developer offering properties in Spain, Portugal, Croatia and Bulgaria. Majestic consultants will happily meet arriving passengers at the airport and give them a tour of homes for sale.

The second-home market is growing with such astonishing speed that it’s hard to keep up. Prior to 1990, only a small number of Germans owned second homes in Sweden, for example. By 1991 the number had reached 1,500; it now stands well over 10,000. In France, 14,000 homes were sold to foreigners in 1994; the number was 75,000 in 2005. In Spain: 35,000 in 1997; 135,000 in 2005.

Today the Czechs are big buyers in Slovenia, one of the most naturally beautiful of European countries. Russians are buying in the architecturally renowned Baltic beach resort of Jurmala, Latvia. Newly independent Montenegro, once the playground of celebs like Richard Burton and Sophia Loren, is attracting attention because the no-frills airlines are thought to be coming soon. Already the scenic port of Kotor, just south of Dubrovnik, has all but been taken over by Germans, Italians and, most recently, Russians. So many Brits congregate in Portugal’s Algarve that British political parties solicit contributions there. So many non-Gaelic speakers have invaded Ireland’s Gaeltacht “the Irish-speaking regions” that linguistic preservationists are worried. Such is the wildfire-like spread of European second-home ownership that the really cutting-edge destinations, such as Morocco (20,000 to 25,000 in 2005) and Turkey (10,000 to 15,000), are at Europe’s farthest fringe, if not outside it.

The Brussels bureaucracy that so many Europeans love to hate is one of the great driving forces behind the boom. Aside from facilitating travel and allowing Europeans from one country to buy property in another, the EU has doled out hundreds of millions of euros in “structural funds” – money that goes to new members for infrastructure improvements. This largesse has transformed countries that once lagged behind their neighbors. In Spain and Ireland, EU funds turned patchy roads into sleek superhighways.

The makeovers, coupled with natural advantages like climate, have had a huge impact. In Spain, the number of second homes has increased by at least 75 percent since 1986, when the country became a member of the EU. Though the EU can’t yet dictate the weather, perhaps similar benefits will accrue to newer members like Poland. Warsaw and Gdansk are already attracting buyers, helped by generous home loans for foreigners – 2 percent interest, no money down.

It’s tempting to see the second-home phenomenon as the European Dream come true. As Germans buy property in Ibiza and Swedes in Provence, some speculate, a sort of United States of Europe will come into being. But that’s probably unrealis-tic. Across Europe, even as second-home ownership has soared, so has anti-EU sentiment. The drivers behind second-home ownership are personal; they’re about family, fun and potential financial gain.

Six years ago Nick Ford, 45, a former bond broker in London’s financial district, moved his family of six to Locarn, in Brittany, in search of “quality of life, less stress and simply because we wanted to live in France.” A decade or two ago, he says, “we would have been an oddity.” But no more. Today he’s a real-estate agent who sells about three homes a month.

Such transitions are not always as smooth as the Fords’. “For 90 percent of the Brits who come here, language is a problem,” says Ford. “It can be isolating,” he adds, often accompanied by feelings of depression or boredom. Yet that, too, is changing as whole towns essentially become transplanted communities. “There are luxury developments in the Algarve where you would be hard-pressed to hear a non-English or -German accent from a resident,” sniffs an Anglo-American businessman who lives in London and owns a second home in Tuscany. Indeed, the latter region is often called Chiantishire, for the number of Brits who holiday there. In some places, a new cultural stereotype has taken hold – “the Ugly Second-Homer. These closed-in communities, says the businessman, “are usually attached to new golf courses and inhabited by the same bankers and industrialists from the City of London who see each other at work 11 months of the year. Then in August they all troop off on British Airways to Faro, in Portugal, to sip vinho verde by their pools.”

It would be unfair to lump all buyers into this category, of course. For one thing, many people love their second house precisely because it’s not just like home. “The first wave of English people revitalized the [Lot] region [in France],” says Hubert Patricot, a Parisian executive, who was born there and now owns a second home there himself. “They’re there to blend into the countryside, canoe on the rivers, hike, eat the local foods.” And clearly, in most places the infusion of relatively wealthy foreigners is welcome, especially in less-developed regions. “The local people welcome foreigners because they bring money,” says Boyko Borissov, the mayor of Sofia, Bulgaria. “I don’t see any clashes or obstacles.”

Particularly welcoming are would-be home sellers who’ve seen their properties rocket in value as Western bargain hunters head farther east. In the past year alone, prices in Bulgaria have climbed at least 25 percent while remaining among the lowest in Europe.

Derelict farmhouses in the mountains of Slovenia now carry for sale signs in English and Italian. Demand is brisk for stately apartments on the 19th-century boulevards of Budapest or homes close to Lake Balaton, long a favor-ite summer resort with native Hungarian holidaymakers.

A more serious concern about the second-home boom is the impact on the physical environment. Paul Adamson, the Brussels-based founder of E!Sharp magazine, which covers European affairs, has had a holiday home in Montauroux, in France’s Var region, for eight years. Over time, the look and feel of the place have changed, for better or worse. Where he once was lucky if he could find a copy of the International Herald Tribune, he now has a choice of all the London papers. But out his window, he said in a phone interview, “I can see a brand-new Four Seasons Hotel being built right now.” A looming hotel here and there is nothing compared with what’s happened in Spain. According to a Greenpeace report in July, overbuilding is turning the country’s 8,000 kilometers of coastline into a “deep ulcer.” In some areas, with three quarters of the shoreline fully developed, there’s simply not much coast left.

These are all problems Europeans must learn to live with. The second-home phenomenon is destined to mark the 21st century. After all, there was a time when the British, except the elites, didn’t travel abroad. The Victorian workingman got one week off each year and took his family to Blackpool. Then along came package tours and the possibility of a parole from gray skies. The percentage of Britons holding passports soared from 24 percent in 1984 to 80 percent today. Closed parts of Europe opened up, from Franco’s Spain to Eastern Europe and the postwar Balkans, and countries like Ireland and Estonia began experiencing a degree of prosperity that Greece, say, has never known. New technologies of travel and communications will only accelerate these historic changes. For ordinary Europeans, owning a second home will soon no longer be the latest hot trend. It will be a way of life.

With Karla Adam and William Underhill in London and Ginny Power in Paris

But with property prices touching 10,000 euros (7,000 pounds) per square metre in parts of Dubrovnik, the Adriatic city that is 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 inside Dubrovnik’s medieval walls, where the price of a square metre 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 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 can spend up to 200,000 euros. 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 smoother access to the markets where 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.

FEAR OF FOREIGNERS

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 towards 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.

Several conservative parties are urging the government to ask Brussels to delay full market liberalisation 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 neighbouring 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.

Source: Reuters

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EastEuro Link is proud to invite you to its forthcoming international forum on real estate and construction for the region of Central and Southeast Europe. Following the successful concept of bringing together regional government representatives and key industry figures, this event is tailored to provide knowledge and tools.

the Second Annual Real Estate and Construction Conference for Central and Southeast Europe

REGION UNDER CONSTRUCTION

Hilton Hotel, Sofia, Bulgaria
31. March 2006.

www.realestate.easteurolink.co.uk

Hear the very latest about the real estate and construction industry development in Central and South Eastern Europe. Don’t miss the opportunity to meet CSEE key stakeholders and discover the long-term vision for this rapidly transforming region. The conference will provide a superb opportunity to gather information and build new business relationships with the key players in the CSEE market.

Who will come?

· High Government Officials

· International Real Estate and Construction Organizations

· Property Developers

· Project Managers

· Financiers & Lenders

· Portfolio and Fund Managers

· Lawyers in the practice of real estate and property development

· Investment Advisors and Consultants

· Hedge Funds

· Insurance Companies

· Investment Executives

· Regulators

· Prime Brokers

Key topics to be discussed:

· The Role of governments in real estate and construction development

· Market regulations and legislative development in CSEE

· Comparison of investing in commercial, residential, industrial and infrastructure sectors

· Comparison of investment opportunities in different CSEE countries

· Overviews of real estate and construction markets in the region

· Financing issues for investing in CSEE property markets

· PPP environment in CSEE

· Future trends in property development and investment in CSEE

Network with your peers, competitors and future partners at the leading event for those interested in meeting the key players in the local market.

For the latest information regarding list of speakers and agenda visit
www.realestate.easteurolink.co.uk

Exceptional promotional opportunities available now!

TO BOOK YOUR PLACE, please contact Ms Alexandra Z. at:

Tel:+381 11 328 6 515

Fax: +381 11 20 26 115

e-mail: alexandra.zivkovic@easteurolink.co.uk

All attendees at the conference will receive a FREE CD ROM of conference material containing ministerial presentations and other conference material.

www.PropertyandInvesting.com

Published: 23 November 2005

Stressful city-living, working all hours and having a young family is enough to make the hardiest of us dream of a total life change. For most of us it remains just a dream but Charles, 38, and Carol Southgate, 37, have exchanged their frenetic London lives for a more peaceful existence in a small fishing village on the Dalmatian coast.

The Southgates have two small boys, Thomas, aged three and Ben, aged one, and, until March this year, were struggling to juggle family life while working in the City as portfolio managers. Charles explains what prompted their radical move. “I’d been in the City for 15 years. It got to the stage where I realised that, if I didn’t change soon, I’d be there for the rest of my life, and I didn’t fancy trotting into the City each day aged 60.”

The couple’s long hours (they frequently worked 12-hour days) were bearable pre-children but afterwards they began increasingly to question their hectic lifestyles, despite being successful and living in a desirable part of London, “We didn’t want the children to grow up without knowing us because we’re both at work all day, every day,” says Carol.

After talking to a Croatian friend at work, Charles hatched an escape plan. “He was so enthusiastic about the country and the potential of its property market that we started to think that there had to be an opportunity out here for us.” The Southgates visited and quickly fell in love with the central Dalmatian coastline and decided to move permanently – and have started up their own property agency, A Place in Dalmatia. Initially drawn to the romantic islands which line much of the coastline, practicality soon won out, says Charles. “With small children your priorities change and you have to be within easy reach of things such as hospitals.”

The couple sold their “betwixt the commons” Battersea home and rented at first. They have now bought a 200-year-old, large, stone property overlooking the sea at Kastel Novi, one of a string of villages known as “kastela” after the small castles built as country retreats by Trogir nobles. They paid €300,000 (£200,000) and are busy transforming the period building into a five-bedroomed family home complete with pool, large kitchen and office space for their business. “We hope that it will prove to be a great investment and should even be worth 60 per cent more on completion,” adds Charles.

The stressful buying process has made them determined to offer a better service. “Information was dreadful and the agent we used didn’t seem interested in helping us, which has made us keen to use our experiences to provide something better, such as floor-plans for every property.” Most buyers head further south to around Dubrovnik or to Istria in the north, both of which have greater accessibility, but central Dalmatia is growing in popularity. This year British Airways introduced more frequent flights into Split, and now that Croatia has signed the Open Skies agreement in the run-up to EU accession, low-cost airlines will soon be able to operate.

So far, the couple have no regrets, their business is firmly established and their eldest child has settled at nursery school where he is the only British child: “He is picking up Croatian far quicker than us. Both boys love the lifestyle out here where they have more freedom and we have far more of a life-balance.”

Other British families are hoping to join them. Stephen and Helen Sullivan, both 34, from Glasgow are looking for a holiday home in the same area. “We’ve two small children and we love this area. It’s just so clean and relaxing when you get there,” says Stephen, who holidayed in Croatia as a child. He visited Dubrovnik, and Porec in Istria, but prefers central Dalmatia with its islands, mountains and national parks, “When you drive from Split up to Zadar it’s the most spectacular journey, with islands and the sea on one side and the mountains on the other.”

The Sullivans have narrowed their search down to the Unesco- protected town of Trogir, about 13 miles west of Split. They are searching hard for a house near the sea, which they can use out of season and let throughout the summer. “We all have Scottish skin so it suits us. We hope it will prove a good investment. Everyone is talking about Croatia, and, when they join the EU, there will be big benefits.”

Avatar International sell property throughout Croatia but its director, Amar Sodhi, warns that finding your dream-house can prove difficult. “Croatians don’t tend to move frequently like we do in the UK so you’ll usually find houses have belonged to the same family for generations, and there will often be one old lady living in a castle all alone.” Many of Sodhi’s clients are chasing the same types of property: period houses, as Venetian architecture is common along this stretch of coastline, or lighthouses and castles that are becoming ever harder to source. Sodhi advises looking along the lesser known islands and coastline as far north as Zadar, “If you’re willing to head further north there’s a much greater chance of finding your paradise.”

A Place in Dalmatia: www.aplaceindalmatia.com, 00 385 21 246 290. Avatar International: 08707 282 827, www.avatar-international.com

Buying tips

* Choose your area according to your needs; for example, airport access, out-of-season living, rental income.

* Be realistic about your budget. Make sure that you factor in renovation costs, taxes and fees.

* Decide whether you want to make a private purchase or buy through a Croatian firm.

* If you want to buy through a company, get this set up, along with a bank account, as soon as possible, preferably before going property hunting.

* Find a reputable agent that you can trust. Be wary of agencies that are not in possession of all the relevant paperwork and facts.

* Always ask whether the property has “clean title” and full permissions for any work done. This is absolutely essential.

* Don’t be surprised if the seller invites you to sit down with them for coffee, home-made wine or liqueurs.

Sale of property on the 1,000km coast and about 1,180 islands has risen rapidly over the past five years, the Croatian Chamber of Commerce says. The buyers are exclusively foreigners.

The sale is helping rebuild the economy of this nation of 4.5 million after the devastating war for independence in the 90s.

The prices of villas, and even devastated homes have risen an average 10 percent a year. The going price at present is between 2,500and 7,000 dollars per square metre of living space.

“The most wanted location remains Dubrovnik,” Dubravko Ranilovic, head of the real estate department of the Croatian Chamber of Commerce told IPS on phone. “There are wealthy people who do not ask the price, and pay whatever they are asked to. However, this is a limited market, and trends are hard to foresee, as there’s little new construction in the region.”

Dubrovnik, the mediaeval town on the far southeastern tip of the coast, is known as the ‘pearl of the Adriatic’. It has been the most popular target for tourists for decades.

The old town, with cobbled streets and ancient little houses, is bordered by a fortress protruding into the sea. The price of property within the town reaches 7,000 dollars a square metre. Outside the walls, it is about 4,000 dollars.

“Buying property here is a fantastic investment, as the prices in Dubrovnik have doubled in just two years,” Goran Pikunic from the local property agency Aedio told IPS. Almost 2,000 houses and flats were sold in Dubrovnik in 2004. Most buyers were British, Irish and Russians.

The central town Split on the Dalmatian part of the coast has also become popular with buyers. It is the point for ferry transport to faraway outlets.

Foreign real estate companies have now been allowed to open offices in Split. One of their first successful sales was an ancient villa on the tiny island of Ciovo for 800,000 dollars.

“The targets are the islands, particularly Hvar and its archipelago,” says Medenka Vidovic from the estate agency Cvjetni Dom (Flower Home).

Hvar, which also has a medieval fortress and cobbled streets, remains the second most popular vacation spot after Dubrovnik. Its group of seven Hell Islands so named after shipwrecks in the ancient past are now a treasure of the Dalmatian coast.

One of its islands, Pelegrin, was proposed to be leased to an Italian consortium on condition it invests 350 million dollars for six new hotels.

But although tourism is the strongest part of the Croatian economy, bringing up to seven billion dollars a year, the Pelegrin sale proposal brought public outrage. It is on hold for the time being.

“It seems we are now turning beauty into the beast with such sales,” Hvar resident Niko Miksic told IPS. “Who will remember we had wild, untamed nature here after giant hotels overrun the coast. Besides, it looks like we are selling to foreigners the last thing we have – our coast.”

The Croatian transition into a market economy was marked by the emergence of war profiteers under the late president Franjo Tudjman, who died in 1999.

Since then, Croatia has been slowly recovering from the shock of the ‘one kuna (local currency) privatisation’ under which people close to the regime bought profitable factories and firms for a symbolic sum of one kuna. Most of them are now business tycoons.

The growing sales on the coast, and the fantastic prices often quoted by the local media have brought property issues into focus. A survey by the Vecernji List newspaper and the real estate agency Infonekretnine showed that 74 percent of interviewees opposed further sale of coastal homes to foreigners.

Economists say the skyrocketing prices of real estate influence the price of new homes in inland Croatia as well, particularly affecting first home buyers.

“Young couples are becoming losers, because in some continental areas prices are now almost double of what they were a couple of years ago. This followed the coastal trend,” Vecernji List wrote.

Despite the public outcry and the effect on local property, real estate agents seem happy. Among their customers they name former French culture minister Jacques Lang, former top international official in Bosnia Wolfgang Petritsch, and United Nations representative in the region Carl Bildt.

They expect prices to double once Croatia joins the European Union by the end of the decade. (END/2005)