Adriatic assets

1 Oct 2005 by business traveller

Breakfast time at the hillside home of artists Rajko and Alison Radovanovic, and we're looking at the medieval hilltop town of Motovun peeking above a blanket of cloud. For the two artists – she British, he Croatian – this is an everyday spectacle, heralding another day spent augmenting their stone farmhouse. They moved here six years ago and use it as a base to run a range of activities, including a cultural tourism programme.

The Radovanovics are part of a new dynamic mood in Istria, the northernmost peninsula of Croatia, which has become a fast-growing European tourism and second-home zone. Croatia has seen a general upswing since its branch of the Balkan wars ended, and Istria, which borders on Slovenia, is benefiting from geographical proximity to Western Europe and a growing understanding of Croatia's regions.

"Istria is one of my favourite places," says Jonathan Oakes of tour operator Holiday Options, which is increasing its holidays to Istria and the nearby islands of Krk and Mali Losinj. "Food, culture, sea, the natural environment – it's got it all."

As I drive down the hill from the Radovanovics' house, it's easy to see why Istria is routinely called "the new Tuscany". Indeed, Istria (pronounced locally as "Istra") was a Venetian colony until the Napoleonic era, when it became Italian, before finally joining Yugoslavia in 1945. It still has an Italian feel with forested hills, hilltop towns like Motovun and Buje, and Venetian-style citadels like Porec and Rovinj, which project into the Adriatic Sea and are rich with Byzantine churches and Venetian campaniles.

The regional centre, Pula, has Roman remains including a huge coliseum, as well as a statue of James Joyce, who briefly lived here (and hated it, alas). And it boasts Tuscan-style gastronomy thanks to its forested, clay-soiled terra fertile in wild mushrooms, truffles, wild asparagus, vineyards and olive groves – the seedbed for a villa-culture-gastronomy tourism that is grabbing market share from Italy.

Curiously, Istria used to be big with British tourists, and charters used to come here from 15 British airports every year. "During the mid-1980s, Yugoslavia was at its peak with about 1.2 million British tourists," says Charles Emmett of Hidden Croatia, a three-year-old British company that is concentrating on the top end of Croatian tourism. "It was second only to Spain, and much of this traffic went to Istria, which was seen as a cheap and cheerful package destination, particularly around the seaside resorts of Pula, Vrsar and Porec."

The region dipped from 1990 onwards because of the break-up of the Balkans (the Balkan war did not intrude as far as Istria, although its hotels did take in refugees).

But since the war ended in 1995, Croatia's rise has been well documented: last year British visits jumped a phenomenal 38 per cent and Istria is a major beneficiary. "Of all Croatia, Istria has a good tourist plan," says Emmett. "It's way ahead: perhaps it's the Italian influence." Julia Berg, spokeswoman for the Croatian National Tourist Board adds that Istria is on the way up. "Dalmatia is saturated. Istria is the real boom area."

Another reason for Istria's new-found fashion status is that it's close to the EU countries of Italy and Slovenia, making two-centre trips viable. Croatia's hopes for EU accession in 2007 add more confidence, but Emmett still finds some British clients are resistant. "We still get asked if it's safe," he says. "There's a lack of geographical knowledge, and we have to reassure people."

Julia Berg adds that some car insurers still judge Croatia to be a war zone. "That deters British drivers, which is a shame, as Istria is only two hours longer to drive to than Tuscany." Another deterrent could be that Istria has no sandy beaches – but it makes up for it with clear, warm waters.

I arrived in Istria via Italy, flying with Ryanair to Trieste, a short drive away through the tip of Slovenia. There are other ways: Croatian Airlines flies to Pula Airport, which also receives charter traffic, and some visitors fly to Venice-Treviso by Ryanair or Easyjet, and then come over by boat (a day trip to Venice from Istria is about E45 return). But despite plentiful discussion about Pula Airport receiving low-cost carriers Easyjet and Ryanair, it may have to wait. "We're hampered by Croatia's lack of EU membership," says a spokeswoman for Easyjet.

The larger coastal hotels that sustained the previous generation of Istrian tourism are still in place. But the newer wave of higher-value tourism is led by an emerging generation of entrepreneurs – some being returnees from expatriate zones such as Australia and Argentina – using government-backed incentive loans to restore traditional farmhouses and create upmarket villa holidays, agri-tourism and boutique hotels.

"The trend is to build a quality rather than mass-market destination," says Josip Lozic, director of the Croatian National Tourist Board. "No large hotels have been built in the last 10 years. In Istria wine tours are being created, and old farmhouses have been restored by a younger generation who are growing organic produce." For instance, Istria hosts most of the 182 registered Croatian agri-tourism farmsteads. "There has been a rise in boutique hotels, small hotels with eight to 20 rooms," adds Lozic.

It is hoped this approach will encourage independent-minded visitors keen to engage with the local way of life. "The British tourists are appreciated for spending money in the community," says Emmett. "They're also starting to go into the interior of Istria, to the villages away from the coast." Jonathan Oakes agrees. "The market still wants sun and sea, but I think the next step will be inland Istria, just as happened with Italy."

I went to see Vina Kabola, a winery that has just been turned into a visitor attraction by owner Marino Markevic, and stayed in the Hotel San Rocco in the small town of Brtonigla. The hotel was set up last year by Tullio and Rita Fernetich as a boutique-style family hotel, with excellent Istrian food, 12 rooms, a sauna and pool.

Similarly, the restaurant scene is growing. In the course of a week, I went to several fine restaurants representing the two key culinary themes of Istria: land and sea. In Porec I ate exquisitely served Kvarner shrimp risotto at the chic new Sv Nikola restaurant, while inland at Buje I went to Konoba Morgan, offering a Tuscan-style menu of wild boar and polenta. Istria's wines, which largely consist of the white Malvasia and red Teran varieties, are also impressive. "The quality of the wines is improving by the year and the presence of truffles is attracting high-quality chefs from all over Europe," says Emmett. The downside is that these tartuffes cause a certain amount of strife, as well they might at E3,000 a kilo. No wonder a good truffling dog is prized and truffle smuggling is big business.

So is anything holding Istria back? Emmett says that there are not enough properties, particularly on the upscale villa side. "I've been talking to the tourist board, as there aren't enough of them for the British market who like purpose built Algarve-style villas," he says. "Nor do they necessarily understand that we like a swimming pool." Emmett is working with a property investment group with a view to building more of this kind of property.

However, Andrew Hillyard of Vintage Travel – which debuted in Istria last year with nine villas – declares himself happy. "We're marketing 12 this year and expect to put on 16 to 18 in 2006," he says. "In fact, we're focusing on Istria rather than the rest of Croatia because access is a little less restricted: you can come via Slovenia and Italy. Plus the quality of the houses we've found is superb and most are locally owned. Istria is surprising our clients very pleasantly."

Those wishing to buy their own houses in Istria will no longer find bargains – except perhaps on the east coast – but they will still find good value in relation to more developed parts of western Europe. "We've noticed that Istria is the current focus of the Croatian property market," says Matt Havercroft, editor of A Place In The Sun magazine. "It's a kind of Tuscany-by-the-sea, but prices are still well below what they would be in Italy, and you've got a wonderful coastline, which attracts the sailing crowd. Plus Istria is a kind of cross-roads of Europe, so people get the benefit of living in Croatia, while they are close to other countries and their airports."

The villages and towns in inland Istria certainly have charm, each with stone houses, a wayside Catholic shrine and a memorial to the Yugoslavian partisans. The Radovanovics showed me inland Istria, where evidence of renovation was rife in the stone houses with traditional turquoise shutters. "I'm afraid the British are a bit late for the bargains, as the Germans, Austrians and Italians have beaten us to it," says Alison Radovanovic. "Since we bought (six years ago), house prices have tripled or quadrupled and everybody wants a ruin to renovate.

"But I hear more English voices than ever and you can find tumbledown stone cottages for €60,000 – although you'll probably have to put three times more into it to get it ship-shape." She also warns that you might not be able to find the perfect stancia (estate). "The British tend to like private houses and there aren't that many of them, as the towns aren't built like that," she says. Julia Berg adds that you can find one to two-bedroom apartments for €44,000 and stone cottages for about €200,000 in Istria.

So Istria is still viable and is yet to reach the heights of Dubrovnik and its environs, which is now a property hot spot. But Alison Radovanovic says that prospective buyers should tread carefully, as some Istrian properties are subject to restitution claims  (having passed through Italian hands) and then state ownership as part of Yugoslavia. "Buying here is not necessarily an easy process," she says. "Any buyer should get a house with clear papers and make sure it's completely cleared by land registry. I've heard of one property with 53 'owners' and recently, an Austrian man rebuilt a stone house only to have it bulldozed because of planning problems."

Given the complications of Croatia, the Radovanovics offer a hand-holding service. "You need a damn good lawyer, and to be careful of estate agents," says Alison. "The process is complicated, and not for the faint-hearted. You certainly don't want three guys from Argentina to suddenly come back and say, 'This house belonged to us 80 years ago'." Havercroft reiterates that it's essential to check the deeds. "There's a lot of Croatian families who believe they have passed on a property to someone else," he says. "We've had readers who have encountered problems with title deeds. And I would definitely advise a buyer to get a translator, check agents fees up front and make independent choices. We've heard of estate agents recommending a solicitor for the buyer who also acts for the vendor."

There are other complications to buying in Croatia: namely that in order for a foreign national to buy in Croatia, they will need to be cleared by the Ministry of the Interior, akin to the UK's Home Office. This process can take from six months to a year, although Havercroft says that it is a formality that only exists to weed out those with a criminal past. As far as renovation goes, building regulations are strict. "Water is the main problem," says Radovanovic. "Some of the villages don't have mains water." Remember that connections will be made in months, rather than weeks, and for now you can forget about ISDN lines.

Strictly speaking, under Croatian law, a mortgage isn't allowed for foreign nationals; nor is it permitted to rent unless you have residency. The second way is company ownership, but renting your property may be difficult. Even then, says the website Croatia Holiday and Home – from where you can order the book How to buy property in Croatia (£14.95) – there are tax complications that could make it unviable.

The good news is that from next April a Self Invested Personal Pension (SIPP) will render payments towards purchasing Croatian property tax-deductible, which will make any income and capital gains generated by the property tax-free in the UK. Research the details, as the fund has limited flexibility – and as ever, go in with your eyes fully open. But above all, enjoy Istria – a part of Europe that is once more the subject of British attention.

Fact box

Croatian National Tourist Board in the UK tel +44 (0)20 8563 7979, croatia.hr

Rajko and Alison Radovanovic; tel +385 526 64026, email [email protected]

How to buy property in Croatia

tel +44 (0)1202 259155, www.croatia-holidayandhome.co.uk 

Hidden Croatia tel +44 (0)871 208 0075, www.hiddencroatia.com

Holiday Options tel +44 (0)870 420 8372, www.holidayoptions.co.uk

Vintage Travel tel +44 (0)845 344 0460, www.vintagetravel.co.uk

Getting there: London-Pula 

Croatia Airlines (+44 [0]20 8563 0022) offers a once-weekly direct flight from Gatwick. Alternatively, the same carrier offers a limited number of connections via Zagreb with departures from Heathrow. There are no business class through-fares. Return fares in economy class typically start at £265.

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