Adriatic Braced for Property Boom

Cash-rich foreigners are rushing to buy property on the beautiful Croatian islands, which could soon become some of the most fashionable holiday destinations in the region.

Since Croatia's property market was opened to foreign investors, interest has been rising in all the coastal towns and cities - but the islands are attracting the keenest interest.

The country was shunned in the early Nineties while war raged through the former Yugoslavia, but since peace returned in 1995 the coastline has attracted increasingly high-profile summer guests. These include European royals, fabulously rich American businessmen such as Bill Gates and screen stars Sharon Stone and Clint Eastwood.

In socialist Yugoslavia, overseas visitors were not allowed to own or buy property without special dispensation, such as when the late President Tito permitted his British friend Sir Fitzroy MacLean to purchase a house on the island of Korcula.

Croatia's independence led to most of these barriers being removed and foreigners are now free to buy land - including entire islands if they so wish. "Interest is quite considerable," said Ivica Vulic, owner of the Split-based estate agency Broker. "However, there are a number of problems, especially over planning permission."

Any would-be landowner will need a lot of money in the bank. Daksa, which lies close to Dubrovnik, is being marketed for almost four million euros - just over four million US dollars. Another islet on the Pakleni Otoci or Infernal Islands near Hvar is going for 2.3 million euros.

The Zadar archipelago contains both the most expensive and the cheapest islands, where the price of a square metre ranges from five to 60 euros. Skarda and an islet between Pasman and Kornat are going for 50 million and half a million euros respectively.

Croatia boasts more islands than any other Mediterranean country except Greece. Apart from their natural beauty, they are isolated and sparsely populated. In all, 125,000 inhabitants are scattered across 48 - some 670 are deserted.

Steady depopulation has hit the archipelago hard. Brac, one of the largest islands, has only 13,000 inhabitants today compared to 23,000 a century ago.

A turn of the century increase in wine tax levied by the then Austro-Hungarian rulers drove many islanders overseas. With post Second World War industrialisation yet more moved to mainland cities and towns in search of jobs.

The growth of tourism in the Sixties halted the trend but could not reverse it. The islanders - who were by then heavily dependent on mass tourism - suffered a further economic blow with the outbreak of war in 1991.

Although most of the old prohibitions have been removed, outsiders still face hurdles when buying land in Croatia. On most islands, conservation laws dictate that landowners may only use existing properties and repair them if necessary. New builds are not allowed, with the exception of a few, such as Obonjani in the Sibenik archipelago.

Ivo Milatic, assistant minister for public works, reconstruction and civil engineering and head of a department in charge of developing the islands, makes it clear that he does not want to encourage their large-scale transfer into private hands.

Local people are divided over the prospect of having wealthy foreign neighbours, with sceptics complaining that they will not have Croatia's interests at heart.

Such fears would seem to be groundless, as only a handful of privately-owned islands are likely to go under the hammer. Many of the most attractive, such as the Kornati archipelago, belong to national parks and cannot be sold.

Goran Vezic is a journlaist with the independent news agency Stina in Split.