Hidden Costs of Buying Real Estate in Croatia – What to Watch Out For?

Searching for your dream home may seem like an idyllic process, but the accompanying bureaucracy and unexpected costs can create a lot of stress. That’s why it’s essential to be well-informed about the entire process to avoid unpleasant surprises.

Before searching for and purchasing a property, you need to research the market and square meter prices in your desired area. After that, it’s necessary to define your budget. Therefore, in addition to the property price, we should also consider the additional costs, which we will outline in the following lines.

According to the Global Property Guide, additional or transaction costs in Croatia range from 6 to 9% of the property’s total market price. For comparison, transaction costs are lowest in Denmark and Iceland (up to 3%) and highest in Belgium and Russia (around 20%). Based on this data, we can say that Croatia sits right in the middle.

Transaction costs include the real estate transfer tax, notary costs, agency commission, and other expenses. Additional costs can depend on various factors such as the type of property (new build or resale) and the payment method (loan or own funds).

Real Estate Transfer Tax – How Much and When Is It Paid?

The real estate transfer tax is a one-time tax paid by the buyer, regardless of whether they are a Croatian citizen or not. In the Republic of Croatia, this tax amounts to 3% of the total purchase price. The notary reports the property transfer tax to the tax office during contract certification. Then, the tax office sends a payment slip to the buyer, which should arrive within thirty days of the contract signing. The buyer must pay the tax within two weeks of receiving the slip.

If the property is purchased from a developer or a company that is in the VAT system (usually a new build), this tax is not paid because VAT at a rate of 25% is already included in the purchase price.

Also, if the new owner decides to use the property for commercial purposes (such as tourist rentals), a tax refund may be possible.

Agency Commission – What’s Included and Who Pays?

Real estate agency commission and services from a real estate agency are not mandatory in the sales process but greatly simplify the process, making it much easier and less stressful.

Depending on agency policy, some include additional services that buyers would otherwise need to handle themselves. These include valuation services, legal services, notary services, translation services, and others.

Agency commission is not strictly regulated by law and depends on the agency, typically ranging from 2 to 4% + VAT. The commission is charged after signing and notarizing the sales contract.

Notary Fees and Contract Solemnization Costs

The notary charges for certifying signatures when concluding a sales contract, property ownership transfer, and court fees. Notary fees in Croatia are not as high as in some other European countries and rarely exceed €200.

There is a difference in additional costs depending on the payment method. If purchasing with a loan, solemnization fees (notarizing the contract) apply and are proportional to the loan amount.

Legal Services – Protection or Extra Cost?

Legal services are recommended in the buying process because buying real estate is likely the largest investment we will make in life and should not be left to chance. Legal services are included in some real estate agencies’ offers.

A hired lawyer can verify the legality and ownership of the property. They can also draft a pre-contract and contract of sale and submit the ownership change request. Legal services typically do not exceed 1% of the total purchase cost.

Documents requiring verification in the sales process include the land registry extract, building permit, occupancy permit, and energy certificate.

Other Costs

Property valuation for securing a loan is performed by a court expert appointed by the bank. The cost of a property valuation rarely exceeds €200. For foreign buyers, translation services must also be included. Registering property rights is also considered an additional cost. This is done by a notary and costs around €30. This service can also be performed by a lawyer, who then covers the cost.

Real-Life Example of Real Estate Purchase Costs

To summarize everything mentioned so far, the best way is to illustrate how these additional costs work in practice. For example, let’s take the purchase of an apartment in Split, an old building, priced at €400,000.

The 3% real estate transfer tax would amount to €12,000. The agency commission would also be €12,000. Legal fees at 1% would be €4,000, and notary fees approximately €200.

Considering all this, the additional transaction costs in this example would be €28,200 or 7.05% of the property’s total market value, which matches the data presented at the beginning of the article.

Conclusion

Buying real estate in Croatia is not just about finding the ideal location and negotiating the price – it involves a range of additional costs and administrative steps that can significantly affect the overall budget. Although these costs may initially seem hidden, they are all predictable if the buyer is informed and prepared in time.

From taxes, agency and legal services, to notary and valuation fees – each element plays a role in ensuring the legal security and transparency of the sale. Ultimately, with proper preparation and expert advice, the buying process can go smoothly and without unpleasant surprises.