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Free movement of capital, the real estate market and tourism: a blessing or a curse for Croatia on its way to the European Union?
[collection article]
Corporate Editor
Institute of Public Finance, Zagreb
Friedrich-Ebert-Stiftung Kroatien
Abstract This paper investigates how one particular aspect of the freedom of movement of capital – the right of EU residents to acquire real estate in EU member states – might shape Croatia's EU accession negotiations and affect its real estate market, the tourism industry and the national economy. It identi... view more
This paper investigates how one particular aspect of the freedom of movement of capital – the right of EU residents to acquire real estate in EU member states – might shape Croatia's EU accession negotiations and affect its real estate market, the tourism industry and the national economy. It identifies potential benefits and risks of unrestricted foreign investment in Croatian real estate, and attendant dilemmas for economic policies. The main conclusion is that Croatia stands to benefit in the long run from foreign investment in the property sector. However, a gradual approach to the opening-up of the real estate market to non-residents can be justified on a number of grounds. These include inadequate legislation limiting property speculation; potential spillovers of price increases from the market for secondary residences onto the local housing market (of which there is already some evidence); costs of the adjustment in the housing market and construction industry to a sudden large increase in demand for secondary residences; loss of competitiveness in the tourism industry if there should be violations of building regulations and the resulting overdevelopment of coastal areas; and macroeconomic pressures arising from large and sudden capital inflows.... view less
Keywords
EU; post-socialist country; international capital movement; foreign investment; market price; tourism sector; joining the European Union; real estate; market; economic impact; Croatia; capital movement; protection; national economy
Classification
National Economy
Economic Sectors
Method
descriptive study
Free Keywords
Croatian economy; European Union accession negotiations; new member states; free movement of capital; real estate market; housing prices; housing finance; secondary residences; travel and tourism; protection of public coastal domains; local government; capital inflows
Collection Title
Croatian Accession to the European Union. Vol. 3, Facing the challenges of negotiations
Editor
Ott, Katarina
Document language
English
Publication Year
2005
City
Zagreb
Page/Pages
p. 185-228
ISBN
953-6047-58-6
Status
Published Version; reviewed
Licence
Creative Commons - Attribution-Noncommercial-No Derivative Works