Small country, big future

©AFP

The official announcement came in October 2006. Gold tycoon Peter Munk would invest half a billion dollars in Tivat, a coastal area in the tiny Adriatic country of Monte­negro. The project, called Porto Montenegro, would turn a former 24-hectare former naval ship repair yard into a luxury marina with world-class hotels, retail facilities, a 14-hole golf course, yacht moorings and luxurious homes. A year later, no more details have been released but, according to local agents, construction could start soon and prices might eventually rise to a staggering €15,000 per sq metre.

The speculation has added to the buzz surrounding Tivat and the Kotor Bay region of Montenegro, setting it apart from the rest of the formerly war-torn and still poor country. With stunning scenery, including a winding coastline cut with fjords, and historic towns, monasteries, castles and villas reflecting ancient Venetian hegemony, the area is starting to lure celebrity visitors such as actors Jeremy Irons and Sophia Loren and model Claudia Schiffer. And wealthy property buyers, mainly Russians and Scandanavians, have been piling in, boosting prices by an estimated 20-30 per cent in the past two years.

“There isn’t really a price index yet and it is more based on potential than on actual value,” says Caroline Hollingworth, a property specialist who lives in neighbouring Croatia and speaks the local languages. “There is a sense that that buyers would pay anything [in these areas of Montenegro]. The Russians in particular have poured money into abandoned castles and old Venetian-style ­villas [and] they’ve brought them back to their former glory, setting the ground for a high-end property market.”

Britons seem to be following, increasingly favouring Kotor Bay over more expensive destinations in Croatia. Rightmove.co.uk, a UK property website, reports a 45 per cent increase in searches on Montenegro over the past year.

Prices for old apartments within the walls of the United Nations Education, Scientific and cultural Organisation-protected and tourist-infested town of Kotor, which stands at the foot of the Lovcen massif and right at the edge of Kotor Fjord, can reach up to €4,000 per sq metre. Even more exclusive and expensive is the Unesco-listed medieval village of Perast, where Serbian footballers and local celebrities hang out. “With just 300 or so houses, it is very difficult to find property there,” Hollingworth says. “Most of the people, just hang on to their houses.”

Outside Kotor town and Perast but still near the bay, prices for new apartments range from €2,500 to €3,500 per sq metre. A detached four-bedroom villa with swimming pool by the coast can cost up to €1m. But the average price of homes in the area advertised on Rightmove is €280,000 and traditional houses in need of renovation can be had for less. In Stoliv, a fishing village with clean beaches, cobbled streets and chestnut trees, Canary Royle Property services is selling a three-storey old stone house 80 metres from the water for €160,000. New developments are reasonably priced too. In the village of Dabrota, Future Properties is marketing San Marco, 32 traditional-style apartments starting at €102,000, and in Stoliv it has the Waterfront, a group of 48 luxury apartments including moorings priced from €169,000.

UK-based Ray Calder is so confident in the appeal of this part of Montenegro that he recently teamed up with friends to buy a block of 13 units at the Waterfront, paying more €1m. “I will sell or rent most of the flats and keep one for myself; I’m planning to spend some quality time there with my family,” he says. “This is one of the most stunning countries I have been to so far. There is so much to do in terms of outdoor activities and sightseeing.”

So far, Kotor Bay has been the main focus for second home buyers, while Tivat, a decaying industrial port town, and nearby villages, have lagged. “Despite the knock-on effect of the Porto Montenegro marina [plans], most of the area is pretty industrial and run down,” explains Henry Sherwood of Future Properties. “It doesn’t have the charm of the eastern and western side of the bay [though there are] still some unspoilt spots by the coast.”

Prices reflect this with three-bedroom sea-view villas in the villages of Krasici and Bjelila on Tivat Bay starting at €230,000 and a seven-bedroom house on 620 sq metres of land in medieval Lepetani, a ferry stop, listed at only €280,000 through Golden Terraces. “But even here prices are rising fast,” Hollingworth says.

Supply constraints are one reason why local agents expect Montenegro’s market to develop quickly. The country is similar in size to the US state of Connecticut and, according to Sherwood, the government has become “very strict” about granting planning permission in a bid to enter the European Union.

Membership to the organisation would come on the heels of independence from Serbia, which Montenegro declared in June 2006 with a popular referendum. This followed two decades of economic depression triggered by the violence surrounding the break-up of the former Yugoslavia.

In spite of local optimism, the legacies of war and communism are still palpable. Power and water cuts, lack of direct flights and inaccessible roads remain a problem and, for most Montenegrins, quality of life is still poor. Legitimate title deeds might also be a problem for property buyers because “during the first world war Montenegro experienced heavy migration to the US [and] there is a risk that a distant cousin or relative may claim back land or old properties,” Hollingworth says.

But the country seems to be heading in the right direction. The World Bank has developed a four-year strategy to help shore up public finances, strengthen social services and carry out environmental clean-ups, paving the way to EU accession. The government has, in recent years, raised a substantial amount of funds through foreign institutional investors. A land register office and good local solicitors can help navigate house purchases. And local officials say that low-cost airlines will soon start flying into the airport at Tivat.

According to industry estimates, Montenegro’s travel and tourism market is expected to grow by 9.9 per cent a year between 2006 and 2015, faster than any other in the world. And with high-profile developments such as Munk’s rising on the coast locals are exceedingly bullish. “Montenegro has a balanced mix of buyers – investors and those buying holiday retreats,” Sherwood says. “You can’t flip properties here. It is more of a long-term type of investment – another sign of stability.”

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Local agents

Future Properties, tel: +44 (0)207331 4300; www.futureproperties.com
Porto Montenegro, www.portomontenegro.com
Hollingworth, tel: +44 0845456 7737; www.hollingworthandassociates.com
Golden Terraces, tel; +44 01302365 656; www.goldenterraces.co.uk
Canary Royle, tel: +44 (0)844 477 1885; www.canaryroyle.com
Rightmove, www.rightmove.co.uk