House Hunting in ... Croatia

This eight-bedroom stone villa, built in 2005, was designed to house a large extended family or to function as an owner-occupied vacation rental. In addition to the owner’s two-bedroom unit on the second floor, the four-story structure has a one-bedroom apartment and five studios, each with a bath and a kitchenette. Made of gray stone, with a red-tiled roof, the house has a one-car garage and a gated courtyard with a swimming pool. The one-bedroom apartment is on the first floor; it faces the pool and adjoins an exercise room. The main entrance, which opens onto a patio with a tiled roof, is one flight up. It is reached via a stone staircase.

The entire second floor is taken up by the owner’s two-bedroom apartment. The kitchen has a cream-colored ceramic tiled floor and windows overlooking the patio (also called a gloriette). The wood cabinets are painted white, and the hardware is stainless steel. The living room has an oak floor and pale yellow walls mounted with contemporary rectangular light fixtures. A sliding glass door opens onto a balcony with stucco arches overlooking the garden and the Adriatic Sea. The master bedroom, off the living room, has orange lacquered closet doors. The adjacent hall bath has a tub with a hand-held shower nozzle. The bathroom, its walls lined with yellow and white tile, has a bidet. The other bathroom, near the front door, has a shower stall and glossy turquoise tile.

The property is on a hillside cul-de-sac 15 minutes north of Dubrovnik in the village of Zaton. A small downtown, within walking distance, has restaurants, shops, a newsstand and a post office. The harbor, where you can swim and moor a boat for the day, is a five-minute walk. For longer-term boat moorings, the marina at the Adriatic Croatia International Club is about 10 minutes away.

The property market in Croatia is “generally steady, but coastal areas have slightly picked up since August,” thanks in part to foreign buyers, said Ivo Perkovic, a sales agent for First Property Croatia in Split. Prices in some areas are still off as much as 25 percent from their 2007 peak; Mr. Perkovic believes prices have stabilized at this new lower level. He said that although interest among Croatian buyers was strong, high mortgage interest rates were impeding purchases. Foreign buyers almost always pay cash, he added, because banks in Croatia generally will not lend to them.

“Prices in Dubrovnik are the highest in Croatia,” said Tatjana Tosic, director of property marketing and sales for the Dubrovnik Sun Gardens Resort. And Mr. Perkovic says homes in move-in condition in Old Town Dubrovnik start at 3,000 euros per square meter (about $365 per square foot, at 0.76 euros to the dollar).

Ms. Tosic says prices in the Dubrovnik region can go as high as 6,000 euros per square meter. The home profiled here is priced at 4,375 euros per square meter.

Before the financial crisis hit Europe, Dubrovnik was a popular second-home destination for residents of Britain. There are still some British buyers, Ms. Tosic said, but now the market is dominated by expatriate Croats who want vacation or retirement homes in Croatia. There are also many buyers from former Soviet bloc countries like Russia, Ukraine and Kazakhstan, Ms. Tosic said.

Mr. Perkovic cited the area’s popularity in recent years with buyers from Germany, the Netherlands, Belgium, Sweden and Austria. He has also noticed an increase in the number of Americans, encouraged by a stronger dollar and a perception that property in Croatia will hold its value.

If a foreigner’s home country welcomes Croatian property buyers, Croatia will reciprocate. “This depends on bilateral agreements between Croatia and that particular country,” said Vedrana Kelleher, sales director for Savills Croatia.

“At this point in time, besides Croatian citizens, all citizens of E.U. can also buy without any restrictions,” she said.

Transaction costs include a 5 percent transfer tax paid by the buyer, and legal fees of about 1 percent of the purchase price, Ms. Kelleher noted. Legal fees cover the cost of obtaining government approval, which for American buyers is typically a straightforward process. Some agencies charge buyers a real estate agent commission of up to 2 percent, though Ms. Kelleher said that was not routinely the case.

Foreign buyers are urged to make sure the agent they use is licensed, as there are otherwise few legal protections, Mr. Perkovic said.

Real estate prices are advertised in euros, but the transaction takes place in kunas, according to Ms. Kelleher. The final exchange rate is determined on the day of sale.