August 15, 2011 / 12:07 PM / 6 years ago

Could a Croatian island be a canny buy right now?

<p>Boats travel near a Croatian island in the eastern Adriatic sea August 12, 2011.Matko Biljak</p>

TROGIR, Croatia (Reuters) - Stipe Marusic hardly looks like someone who owns an Adriatic island. Yet the unemployed 40-year-old Croatian sailor and his two brothers are selling one for big money.

"It belonged to my great-grandfather and in a way, we are sorry to sell. But we are all seamen, the companies we worked for have gone bankrupt, we are unemployed and we have no other choice," Marusic said while showing off his island, Srednja Kluda, in the Trogir archipelago just north of Split.

The asking price for the shrub-covered island of some 2.4 hectares (5.9 acres), with a small stone house in the middle, is 1.05 million euros ($1.49 mln).

"There is interest, we have one serious buyer, but the bureaucracy is slowing us down," Marusic said.

His story sums up the complex situation in a country which emerged from communist Yugoslavia in 1990 and is due to join the European Union in 2013.

Croatia only opened its real estate market to foreigners in 2005 and two beautiful islands were quickly sold. The government then banned any new building on small uninhabited islands, saying it wanted to preserve them "for agriculture and organised visits."

The ban dampened investor appetite for many of the 1,200 or so islands scattered across the spectacular eastern Adriatic. Meanwhile, Croatia recovered from the 1991-95 independence war and has once again become a popular summer holiday destination.

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<p>A Croatian island is seen in the eastern Adriatic sea August 12, 2011.Matko Biljak</p>

"Our islands are cheaper than those in Greece, our sea is one of the most beautiful. There are a lot of potential VIP clients from business, sport, showbiz or royal families but they give up because of the building ban," said Jasminka Biliskov of Biliskov Nekretnine, a leading Croatian real estate firm.

She said many celebrities who cruise the Adriatic in the summer, including Princess Caroline of Monaco and Formula 1 boss Bernie Ecclestone, were initially keen but lost interest.

Furthermore, before any island is sold the owner has to offer it to the government, which has pre-emptive buying rights. The government, strapped for cash, will almost invariably pass up the chance, but the process can take around six months.

"Most investors who look into Croatia get disappointed," said Chris Krolow, chief executive of Private Islands Online, a Canadian-based agency that sells islands globally and is offering four in Croatia.

"Why look at Croatian islands when you cannot build a house or develop a property in a way which would make it financially viable?" Krolow told Reuters by telephone.

Most small islands have been used for olive groves and vineyards and as grazing land for sheep, prized for particularly delicious meat thanks to their diet of sea-salted herbs. They are now largely abandoned and uncultivated.

The government, which faces a general election in December, has so far not indicated it may scrap the building ban. But Biliskov, whose agency is offering 15 islands, said the ban could be lifted in the future and value can only go up.

"I think now is the right time to buy. Once we join the EU, I think the government will do like in Greece, where building is allowed but strictly controlled.

"Of course, in that case the price will be much higher so I would say that buying an island now is a good and safe investment," Biliskov said.

Reporting by Zoran Radosavljevic; Additional reporting by Igor Ilic, Editing by Barry Moody and Paul Casciato

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