Real estate companies are starting to cash in on the booming Croatian property market. From Istria in the north to Dubrovnik in the south, foreigners are beginning to buy flats, houses, villas, even islands — and prices are starting to rise.

Buyers include Slovaks, Germans, Italians and Russians, but during the past year it is the British who have been number one customers.

Prices have gone up between 20 and 50 per cent during the past 12 months, depending on where the property is. But it's still a lot cheaper than equivalent places in Western Europe. There are also a number of islands for sale. The cheapest is £275,000."

The rich and the glamorous are also said to be making the most of the coast. Steven Spiel-berg, Michael Douglas, Gwyneth Paltrow and the Sultan of Oman have all recently sampled the clear waters, the relatively unspoilt coastline and the low prices.

It is no longer a secret that Croatia is beginning to threaten the sunshine supremacy that Spain, Italy and France have long enjoyed. But what about taking that ultimate step and actually buying something? With prices on the up and up it looks like a good time to invest. But how easy is it to buy? What are the pitfalls? And has that war really ended?

"The war ended eight years ago," says Noel Page, a retired chartered accountant from Tunbridge Wells who has bought a three-storey house next to the sea on the island of Korcula. "It's just a shame that people in the UK simply can't get it out of their minds."

He bought his property, which has a decent-sized garden and terrace, three years ago. The house has three bedrooms, three bathrooms and three kitchens. I lost count of the number of balconies looking out to sea — which is all of 30ft away down a short flight of steps. Price? £125,000.

"The only negative is getting here," he says. "Because of poor connections between flights and ferries, you can't do it in a day. But that's just this island — the mainland and some other islands have better connections."

But it is an important point. When Italians, Germans and Hungarians descend on Croatia and its islands, especially in August, forward planning becomes an art in itself. Being 21st in the queue for the last ferry of the day, when it takes only 20, is no . But, as you quickly learn in Croatia, patience really is a virtue. Relax, sit down, drink some of the country's beautiful wine and remember that tomorrow is another day.

For all that, Croatia has the infrastructure: airports at Zagreb, Split and Dubrovnik and even on the island of Brae. A new motorway is being built from Zagreb to Dubrovnik. And the country is looking to please its western neighbours as it strives to become a member of the European Union, probably in 2010.

Moreover, your money really does go further here. Take the island of Brae, a short ferry ride from Split and famous for supplying the White House in Washington with marble. A renovated stone house with four bedrooms, garden, terrace overlooking the sea, two parking spaces and a couple of minutes' walk from the beach costs £150,000. Oh yes, you also get a fair-sized garden complete with lemon, olive and pomegranate trees. Or if you fancy doing a bit of renovation yourself, why not buy a three-storey old stone house, 200 yards from the sea with terrace and wine cellar, for £40,000?

Prices on the island have risen by about 30 per cent in the past 12 months but there is real value. It's a great investment.

There are no legal obstacles to British people owning property in Croatia but permission has to be granted by the Foreign Ministry. It is usually a formality but can take six to 12 months. The process can be quicker by first setting up your own company. This gets round the permission — but can set you back £2,800 (although most of this money remains in your account as "starting capital").

"I bought the house in my own name," says Noel Page, who worked in Zagreb for four years before retiring and buying his house on Korcula. "But I am thinking of transferring ownership into a company name. This would make it easier to deal with bills, because it is easier to have a local bank account, own a car and so on. These things can be difficult otherwise. Everything has to be cash — which is a bore."

There is no doubt that the Croatian property market is on the up. The question is whether the country will be able to absorb all the foreign interest without losing its reputation as one of Europe's most unspoilt tourist destinations.

[K Club Property Venture] [Eastern Europe] [Croatia] [Bulgaria] [Requirements (Draft)] [Property Indicators]