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Montenegro: Montenegro

Guide to the Risk and Opportunity Ratings

At the end of each country profile, we have given a risk rating and an opportunity rating. These ratings are a summary of our analysis indicating the levels of risk when investing in a market and the level of opportunity to profit from it.

The ratings themselves are simple. Both work on a scale of one to five. The opportunity rating is indicated by the $ symbol. A single $ equals a low opportunity whilst 5 of them ($ $ $ $ $) equals the highest opportunity ranking.

For risk we have used the * symbol. A ranking of * equals a low risk rating whilst * * * * * equals a high risk rating.

Introduction

Montenegro is one of those markets which is still exceptionally good value for money; more by accident than design. Property values are closer to those in Bulgaria than in neighbouring Croatia, but this isn’t because of any lack of attractions or natural beauty.

Montenegro may be one of the smallest countries in Europe, but it has mountains, lakes, pine forests, fjords, walled cities, world heritage sights; and, most of all, mile after mile of beach.

In the 1960s and 70s Montenegro’s upmarket Sveti Stefan Resort exerted a magnetic attraction on the rich and famous. Elizabeth Taylor and Richard Burton are said to have disturbed other guests with their arguing, whilst Sofia Loren gave the chef lessons in how to cook pasta.

This happy state of affairs persisted until the war in the former Yugoslavia. Montenegro itself never saw fighting, but visitor numbers plummeted. Only in the last two years has tourism in Montenegro returned to anything like the pre-war number of arrivals.

The nature of the market is also changing. Long a favourite of Italians, Germans and Russians, the Brits and Americans are now arriving in droves. English is widely spoken, and the beach resorts are being redesigned to attract wealthy high-end tourism comparable to that in Croatia or Italy.

The World Travel and Tourism Council now tips Montenegro as the number one country for tourism growth over the last ten years. Visitor numbers are expected to rise by an average of 9.9% every year between 2006 and 2015. Montenegro is now becoming a regular fixture on holiday programmes and in travel supplements. Many industry professionals privately consider this one of the best opportunities around.

Is this a good place to buy?

Montenegro’s direct competitors are probably Turkey, Bulgaria, Croatia, Italy and the Mediterranean Islands. Cheaper than other Adriatic states, but with more old world charm, better year around weather, and a more sensitive attitude to development than the Black Sea states, Montenegro has all the best ingredients of the European sun and sea destinations.

In 2005 the World Travel and Tourism Council identified Montenegro as the ‘fastest growing travel and tourism economy in the world’. The amount of construction underway is dramatic. Building projects include infrastructure improvements and the reconstruction of Montenegro’s tired Soviet era hotels. The rather decrepit, but beautifully set, island resort of Sveti Stefan has been bought out by luxury hotel group Aman Resorts and will be restored by 2006. Careful planning has, so far, helped Montenegro to avoid building the type of concrete jungle risked by the Black Sea states.

Montenegro has other advantages: the overspill of buyers from Croatia means that the property market is rising steadily. At present prices are rising most quickly in the north of the principality, but with only 290 kilometres of coastline the balance of supply and demand should favour early buyers and keep prices high.

Montenegro, now linked in a loose federation with Serbia, is also steadily getting richer. EU funding is being used for new roads and infrastructure. In 2004 Serbia and Montenegro was picked by the ‘Doing Business’ report as the single top reformer for cutting red tape and creating an attractive business environment. The report looked at topics such as the ease of registering property and the ease of finding credit.

This link with Serbia may make news in 2006. As part of the federation agreement after the break-up of the former Yugoslavia, a referendum will be held in 2006. The association is fairly weak as it is, Montenegrins run their own economy, use the Euro and are independent in matters of policy.

The signs are that after the referendum Montenegrins may go it alone. Independent from industrial Serbia, the principality will be able to concentrate on development as a tourism hotspot. Serbia’s EU bid has been delayed by suggestions of corruption and that war criminals are being protected. Should Montenegro separate from Serbia, they will have to restart the application process, but the process of accession should then be more straightforward.

Price History

Houses needing a significant degree of reconstruction cost from £20,000 ($35,000) to £30,000 ($52,000) close to the coast. New-build apartments start from a higher base, often costing £40,000-£50,000. To put the prices in context, apartments in Croatia are rarely available for less than £84,000. This kind of price also now applies in popular Kotor. The opportunity for capital appreciation in Kotor may now be past – and savvy buyers are advised to look south along the coast.

More pages

Page 1: Guide to the Risk and Opportunity Ratings
Page 2: Which type of property should you go for?
Page 3: Purchase process

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