Montenegro is a market 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 sites; and, most of all, mile after mile of beach.

In the 1960s and 70s Montenegro’s up-market 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 the country 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, and visitor numbers are expected to rise by an average of 9.9% every year between 2006 and 2015. Montenegro is now becoming a regular feature of holiday programmes and travel supplements - many industry professionals privately consider this one of the best opportunities around.

Montenegro’s direct competitors are probably Turkey, Bulgaria, Croatia, Italy and the Mediterranean Islands. Cheaper than other Adriatic States, but with more Olde Worlde charm, better year-round 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.

Economic Overview

The republic of Montenegro severed its economy from federal control and from Serbia during the Milosevic era and continues to maintain its own central bank, uses the euro instead of the Yugoslav dinar as official currency, collects customs tariffs, and manages its own budget. The dissolution of the loose political union between Serbia and Montenegro in 2006 has led to separate membership in several international financial institutions, such as the IMF, World Bank, and the European Bank for Reconstruction and Development. Montenegro is also pursuing its own membership in the World Trade Organization as well as negotiating a Stabilization and Association agreement with the European Union in anticipation of eventual membership. Severe unemployment remains a key political and economic problem for this entire region. Montenegro has privatized its large aluminium complex - the dominant industry - as well as most of its financial sector, and has begun to attract foreign direct investment in the tourism sector.

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 under way 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.

The country is steadily getting richer, and 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.

Why Invest in Montenegro?

• Average of 47.5% capital appreciation in 2004 (government statistics)
• Steadily growing property market
• Low Taxes and Fees
• Montenegro uses the Euro so transactions are easy, as is repatriation of funds
• EU Accession expected in 2007 along with all associated benefits
• Top 10 holiday destination in the World
• 11 blue-flag beaches
• Politically and economically stable
• Tourism increasing by 50% per annum
  
  

Hotspots

A new wave of buyers has explored Montenegro after crossing the border from Croatia. This has tilted the property market towards the north of the country and particularly towards Kotor Bay. Situated on the Adriatic Coast in the west of Montenegro, Kotor Bay is one of the most stunning natural bays in Europe and was designated a world heritage site in 1979. The region
has long been a favourite with the rich and famous, and its popularity has been growing steadily since the resolution of the Yugoslav conflict in the 1990s.

The area has recorded rental growth of over 100% in the last two years, with 100% occupancy during high season in good quality developments. Infrastructure improvements in the region include a highway and a number of marinas and should cause demand for well-serviced properties to shoot upwards, with corresponding rises in prices.

Kotor is a UNESCO World Heritage Site, a medieval fortress city, which makes it more than just the usual beachfront resort. After rising by up to 50% in the last two years, property prices here are now directly comparable to Croatia. Herceg-Novi, Budva and Bar are also popular resorts.

Budva is a walled town placed just outside Sveti Stefan. The town is frequently compared to Dubrovnik for the pale stone and the town walls and is surrounded by 24 miles of beach. This area around Budva and Sveti Stefan is the most intense area for development throughout Montenegro.

Opportunities for capital appreciation are now better in the south or inland at mountain and lake resorts. Development is likely to run south along the coast before moving inland. A good bet is Ulcinj, which has 8 miles of beach and prices which remain good value. Finally, for something different, Cetinje is the traditional capital and cultural centre of Montenegro. Now a university town, property can be picked up cheaply and rented to students.

Legal Costs & Implications

• Legal fees amount to around 1% of property purchases

Taxation

• Income tax is graduated depending on income, top level is 22%
• No Capital Gains or Inheritance Tax
• Property purchase tax is 2%

Ownership Structure

Property can be purchased on a 100% freehold basis

Purchase Process

As with most European countries, the purchase process is in two stages; signing the contract and taking legal possession of the property, and then making sure that the process is duly recorded at the land registry. The process is remarkably straightforward, Montenegro uses the Euro, and except for public land such as parks and roads there are no limits on the property in which foreigners can invest. Like close neighbours Slovenia and Slovakia, Montenegro has computerised the registration process. From beginning to end, registration is unlikely to take more than a couple of days.

The buying process is as follows: after agreeing a purchase price with the seller, a 19% deposit is standard. Should the buyer fail to hand over the balance of the purchase price by a set date the deposit is forfeited, but if the seller fails to complete the deposit is returned plus an additional 10% penalty fee. After the contract is drawn up it must be signed by both parties or by representatives with valid powers of attorney. The signatures must also be attested, purchase tax of around 2% of the property value is paid and the change of ownership registered with the land office.

There are no restrictions on foreigners buying in Montenegro and non-resident investors are given tax breaks. Assets from sale of property or other investments can be freely transferred out of the country.

Mortgage Info & Situation

Mortgages are beginning to become available in Montenegro from 50% to 70% loan to value.