Author Leaonne Hall is an expert on the overseas property market and has written extensively for a number of newsstand titles. She previously produced three editions of the Red Guide to Buying Property in Eastern Europe, and has been writing in detail on the individual markets since 2003.
Victim of much conflict over the years, today Montenegro is an independent Republic and one of Europe’s smallest, being roughly the same size as Wales. Offering one of the best investment opportunities, Montenegro packs a punch when it comes to appreciation, with average annual growth rates of 25%.
Why buy in Montenegro?
Montenegro burst onto the property scene back in 2004. While it’s now politically back on its feet, there are still many question marks over the economic stability and levels of corruption, which Montenegro is working on rectifying in order to secure EU membership, estimated for between 2010 and 2015.
The tourism market is leading the country’s renaissance. Prior to the Balkan conflict, Montenegro was a popular tourist destination with some serious gliterrati sunning themselves on the sandy beaches, Sofia Loren, Richard Burton and Elizabeth Taylor among them. With tourism predicted to increase by an average of 9.9% per annum between now and 2015, Montenegro is tipped to be the biggest growing tourist market in Europe – good news for its economy and any potential investors.
Affordability is a major plus in Montenegro, and despite mass media interest, prices start as low as €70,000, with the undeveloped Adriatic coastline still offering returns of between 20–30% on your investment. Since 2004 it is estimated that around 1,000 British and Irish investors have bought property in Montenegro and thanks to the burgeoning property market and huge levels of interest shown by foreign buyers, the tourist industry has experienced massive growth. It is believed that the high appreciation rates are set to continue, especially as the country is still in the very early stages of a property boom.
Investors are also attracted by the low rate of property tax, which is currently 2%. Rental returns are also promising as the country offers a year-round lettings market, especially as eco-tourism continues to blossom.
Now that the government have removed obstacles for foreign homebuyers looking to purchase a home, this has actively encouraged investment from overseas. Economic growth is also underway, with massive EU funding overhauling the antiquated infrastructure and economic growth sitting at a respectable 4.3%. However, this is not a market for the cautious as the property market is not fully legislated, and while a land registry exists, it is hard to track down a property title.
It’s not just the investment opportunities that are worth writing home about. Montenegro is just as beautiful as its Croatian neighbour, and with a coastline of 293.5 km – 73km of which is beach – sapphire blue seas, fjords, alpine mountain ranges and sparse, arid plains, the diversity of this beautiful country is dizzying. This varied geography also supports a wide array of flora and fauna, while the country boasts the UNESCO World Heritage sites of Durmitor and Tara River Canyon – the second deepest canyon in the world – and the old city of Kotor, plus a plethora of historic and cultural towns and monuments.
Politics and economy
Defined as a ‘democratic, welfare, and ecological state’, following a referendum in May 2006, Montenegro voted overwhelmingly to become an independent Republic. Currently, the elected President is Filip Vujanović and the Prime Minister is Željko Šturanović.
The property market has responded well to independence despite fears that the economy may be weakened as a result. By resolving their political future it seems to have in fact strengthened the market, following years of economic failure under Milosevic. An economic boom is currently underway with legal, tax and banking regulations being tightened in anticipation of securing EU membership, while foreign investment into the property market and a healthy growth in tourist income is helping to bolster the economy. Despite using the euro Montenegro is not a member of the eurozone, but adoption of the currency has helped to stabilise the runaway inflation rates that were previously being experienced.
Large-scale foreign investment and EU funding are helping to rebuild and develop what is essentially a very small economy, with a GDP per capita of $3,800 (£1,930). With 50% of the economy privatised and the government aiming to diversify the economy into new markets, Montenegro introduced a series of reforms between 2002 to 2006, aiming to modernise the Montenegrin economy. These include the increase in economic freedom, the reform of public administration and reduction in corruption, as well as the protection of property rights. Consequently, there seems to be no reason to question Montenegro’s ability to become the economic equal of Hungary and Poland.
Geography and climate
Montenegro is situated in the southern Adriatic and covers less than 14,000 square kilometres. Bordering Croatia, Serbia, Bosnia and Herzegovina, and Albania, the country runs from the mountainous peaks of its southern borders to its four-mile-wide coastal plain, which is abruptly interrupted by Mount Lovćen and Mount Orjen, before plunging into the Bay of Kotor.
The county boasts a number of notable geographical features, such as the eight-mile Velika Plaža Beach in Ulcinj; Lake Scutari, which has a surface area of 243 square kilometres; Kolac peak, which is 2,528 metres in height; and the Tara River Canyon, which plunges to a depth of 1,300 metres. Montenegro also has four national parks: Durmitor (390 square kilometres), Lovćen (64 square kilometres), Biogradska Gora (54 square kilometres) and Lake Scutari (400 square kilometres).
The Mediterranean climate ensures warm summers and an average of ten hours of sunshine a day, with temperatures sometimes reaching 30°C, while the winters are cool. Inland, the winters are colder and the summers warmer, while in the mountains, winter temperatures can get as low as –6°C.
History and culture
Montenegro was the only Balkan state that managed to ward off the Ottoman forces between the 14th and 18th centuries, and was instead ruled by the prince-bishop of Cetinje from 1482. Prior to WWI, two Balkan Wars occurred, starting in 1912 and resulting in Montenegro doubling the size of its lands, gaining much of the defeated Ottoman Empire. On the side of the allies during WWI, Montenegro was occupied by Austro-Hungarian forces, and following a vote in 1918, the country was united with Serbia. This resulted in a mass uprising by the pro-Independence party which was eventually crushed in 1924. The end of WWII saw the creation of the Socialist Federal Republic of Yugoslavia, comprising some six republics including Montenegro; this lasted from 1945 until 1992. The federation was dissolved in 1992 following the bitter Yugoslav wars of the 1990s, resulting in an alliance with Serbia which lasted from 1992 until 2006. Although Montenegro disassociated itself from Serbia during this period, it wasn’t until May 2006 that it officially declared itself an independent state.
Culturally, Montenegro is a rich country. With UNESCO World Heritage sites and a number of historic towns from pre-Romanesque, gothic and baroque periods, Montenegro has been shaped by a variety of influences, such as that of the Orthodox Southern Slavs, Central Europeans, and seafaring Adriatic cultures, most notably the Italians.
There are a number of sites of significant interest in Montenegro, including the numerous religious monuments found along the Adriatic coastline, such as the Cathedral of Saint Tryphon, the 800-year-old basilica of St. Luke, Our Lady of the Rock and the Savina Monastery.
As with many Eastern European countries, there is also a strong folk culture, with traditional music and dance – such as the Oro, a circle dance – playing an important part in Montenegrin life. National costume was also worn daily and in battle until recent decades, but it is rarely seen today.
Montenegro is a real ethnic blend, and most religions coexist quite happily and with no signs of antagonism. The majority of Montenegrins are of a Serbian Orthodox religion (65%), but there are also a significant number of Roman Catholic and Islamic communities. Staggeringly, some churches actually have two altars with Serbian Orthodoxy and Catholicism celebrated simultaneously.
Travel and tourism
Montenegro has been listed as the fastest-growing tourist economy according to the World Trade and Tourism council, and 2005 saw tourist figures increase by 17%, with a 47% increase in international visitors. Before the war, the country was a tourism magnet with half a million foreigners visiting the country annually. While Montenegro is far from once more reaching these levels, it has still witnessed huge growth since 2004, with the average tourist figures hitting 150,000 per annum and many travel agents once more offering holidays to the country. Thanks to the huge levels of publicity the country has received from overseas investors, growth is guaranteed, especially as stability is again returning to the region. While the infrastructure far from caters for tourism, with few luxury hotels, this lack of development is in many ways a good thing, leaving the stunning beauty untouched. It is to be hoped that this will continue, especially as the government has committed to protecting the environment.
The infrastructure has been vastly improved thanks to EU funding, but there is still a long way to go, and while there are currently no budget flights to Montenegro, it is only a matter of time before they start up. The country has two internatonal airports, at Tivat and Podgorica, and there are regular flights from Montenegro Airlines (www.montenegro-airlines.cg.yu) and Yugoslav Airways (www.jatlondon.com) from May to September. Many airlines fly into Dubrovnik and a popular way to reach the country is to fly into Dubrovnik and then travel across the border into Montenegro.
The cost of living
The cost of living in Montenegro from January 2004 to November 2004 was 2.4% higher compared to the same period in 2003, with retail prices increasing by 3.3%. Clearly, it still remains lower than in Western Europe, with a one litre bottle of water costing around €0.60, a bottle of wine from €2 to €5, and a bottle of beer merely 50 cents. A meal for two with wine can be as little as €20.
The Montenegrin Statistics Bureau reported that the cost of living rose by 6.7% during 2005, while the average net wage increased by 9% compared to 2004.
Food and drink
Reliant on meat and fish and heavily influenced by Mediterranean fare, dishes are full of flavour and most of the ingredients are organic, with fresh fruit and vegetables grown in most gardens. Bread is eaten with every meal and restaurants serve smoked meats and home-made cheeses. Much of the traditional fare mirrors that of the country’s Balkan neighbours, with stews, soups and hearty meat dishes central to the diet. Popular vegetables include stuffed peppers, sauerkraut, onions and beans, with a Greek influence evident in the presence of stuffed vine leaves and kebabs.
Beer is ubiquitous and extremely popular – and cheap! – while the local red wine, Vranac, is extremely drinkable. As for liquors, the national drink is a plum and grape schnapps known as Rakija.
Low prices, stunning surroundings and traditional stone-built properties are drawing many investors to Montenegrin shores and thanks to Montenegro’s birth as a new country in 2006, the ensuing stability has helped to render this tiny country all the more attractive. Estate agents have reported that since the referendum there has been a huge upturn in interest from the British market, although Germans and Americans have been investing here since the 90s.
Dubbed the ‘Jewel of the Adriatic’ a better description would probably be to label it a rough diamond, as only the more adventurous buyer should consider buying here, given the nature of the legislation system and the lack of security in the market. With regular water shortages and power cuts, plus a limited expat community, it is easy to find yourself isolated in a country where the culture is decidedly different. The issue of access – most people have to fly into Dubrovnik and then drive into Montenegro – means this is not a destination for those looking for an easy weekend getaway.
Back in 2001 the property market experienced an explosion in interest from foreign buyers. While there has always been outside investment and demand for property, this had generally been from locals and affluent Montenegrins living overseas. During the last two years, price hikes of 20% per annum have occurred, with some areas seeing 100% rises in a single year. Off-plan developments have sold out before the ground has even been broken, although the biggest demand is centred around stone-built, traditional homes situated on the coast.
The current environment is ideal for adventurous buyers, with a growing economy, low inflation rates and a massive upturn in interest from foreign investment and tourists. Prices currently remain low and the market is cheaper than other Mediterranean destinations and coastal countries in Eastern Europe – prices are 40 – 60% cheaper than in neighbouring Croatia. Property prices have risen significantly in Croatia over the past few years, with prices per square metre almost three times as high as Montenegro, whose market is expected to follow in the footsteps of Croatia.
With average prices ranging from £80,000 for an apartment to £150,000 for three bedrooms, you can pick up a renovation property for as little as £20,000, while a newly-built apartment will cost around £45,000, although in the more popular Bay of Kotor areas you are looking at more like £80,000. The best future growth is anticipated in the southern mountainous areas where it is expected that the winter sports industry will soon expand. However, the north is currently experiencing the best appreciation rates, with demand far outstripping supply, a phenomenon that is unlikely to change due to the limited space for expansion. The future looks good for the investment market, especially as the tax, legal and political situation is being made increasingly attractive for foreigners. Waterfront properties are especially set to see price hikes, with renovation properties more popular than new builds.
Where to buy
The government has an ambitious strategy of development for each Montenegrin region, including new marinas and luxury golf resorts for coastal areas and the transformation of an old navy base at Tivat into the largest marina on the Adriatic. All of this means the immature property market is poised to explode over the next few years.
The Budva Riviera
The coastal areas are seeing growth of 30% to 50% a year, with the narrow nature of the four-mile coastal strip protecting it from over-development, so property is in high demand.
The Budva Riviera – home to the famous picture postcard island resort of Sveti Stefan – is the tourist capital of Montenegro, being only 40 minutes from Tivat international airport. However, prices are much cheaper than northern Kotor, with a two- to three-bedroomed house costing around £85,000. Properties close to Budva’s 38km of sandy coastline – and around Becici, situated 2km from Budva – are expected to experience the best growth. Budva is regularly compared to Dubrovnik and this area has experienced the greatest development in Montenegro.
The Bay of Kotor
Well on its way to becoming a popular holiday destination, this is one of the more expensive areas in Montenegro. Situated in the country’s north, this is the area that has traditionally attracted the most foreign interest and investment. Rents have more than doubled in the last two years and this is a good area in which to invest in order to generate income from short-term lets. A three-bedroomed property will set you back more than £136,110, much higher than the Montenegrin average, reflecting the intensity of demand. Prices have risen by 50% in the last couple of years, putting property prices on a par with neighbouring Croatia. Being the closest area to Dubrovnik has also made Kotor a favourable location, not to mention the stunning coastline and landscape, and the fact that it’s a World Heritage site.
Herceg Novi is another popular resort where property can be picked up for around £80,000, while another future hotspot is the Lustica Peninsula, where historic Montenegrin renovation projects can be had for under £40,000.
Located right down on the south of Montenegro’s coastline, this small port town is close to the capital, Podgorica, and it’s becoming increasingly popular with foreign tourists. Prices are expected to rise significantly in the coming years, as the rentals market here is still in its infancy.
Currently you can pick up a two-bedroomed house for around £75,000 to £80,000, and this would let for around £306 a week during peak season.
Areas such as Lake Skadar – Montenegro’s largest lake and a haven for fauna and flora – and the northern holiday resorts of Bjelasica and Durmitor offer prices 200% lower than along the Adriatic coastline. With 60% of the country being mountainous there are also opportunities cropping up for ski resorts and these southern mountainous areas are destined to experience the best capital appreciation. Currently, it is uncertain whether permission will be granted for new builds around Lake Skadar, but there are a number of resale properties available. Nearby, the 350-acre Lake Skadar Golf and Country Club provides an exclusive residential development around a 36-hole golf course, and this is attracting much interest.
What to buy
Previously an upmarket area for investors, the country is aiming to continue in this vein, although the highest levels of demand are focused on the renovation properties and the old ruins, which can be picked up for as little as £15,000 – £20,000. While these will require a lot of work, they are also incredibly cheap.
However, the best bet for foreign investors is the newly-built development projects, many of which sell out before construction has even begun and which offer excellent appreciation rates and rental yields. Most newly-built developments are located along the Adriatic coast, with those in the closest proximity retailing at around €1,000 per square metre, dropping to €800 the further out you go. However, there were only a couple of decent developments last year, with more destined over the next couple of years, so you need to be quick.
There are also options for those looking to set up a business, with a number of bars, hotels and restaurants for sale, while further inland there are eco-tourism opportunities thanks to the fishing and skiing activities available.