On the ascent

Tucked on the Adriatic coast between Croatia, Bosnia-Herzegovina and Albania is Montenegro, a small country less than two-thirds the size of Wales and with a population of just 625,000. However, its landscape is varied, and within two-and-a-half hours you can drive from a beach on the south coast to one of the two ski regions in the north, Zabljak or Kolasin.

Despite Montenegro’s modest size, since it gained independence from Serbia in 2006 the government has attracted millions of euros’ worth of foreign investment, chiefly in high-end residential developments and hotels. International companies currently investing there include Qatari Diar, Banyan Tree, Aman Resorts and Socar (the State Oil Company of Azerbaijan). The World Travel & Tourism Council forecasts Montenegro to undergo a 9.4 per cent year-on-year rise in tourism for the next 10 years – more than double the world average.

Branimir Gvozdenovic, Montenegrin minister of sustainable development and tourism, says there is an emphasis on competing with Croatia and the rest of their neighbours in the luxury tourism sector: “Only seven years after independence, foreign direct investment has increased [to] close to €1bn, compared with €10m before.”

What is more, between 2007 and 2012 the government, aided by investment from the European Bank for Reconstruction and Development, injected €1.663bn into Montenegro’s infrastructure, which was in need of modernisation. Primarily, the road network is being improved as there are currently no motorways in Montenegro – to reach anywhere by car requires both time and patience.

However, it is an easy place in which to do business. The currency in Montenegro is the euro but, like Monaco and San Marino, it is not in the EU. Montenegro applied for EU membership in 2008 and, in 2010, was granted candidate status by the European Commission. Subject to fulfilling a number of criteria, Montenegrin officials hope the country will be accepted within a decade. “It may be a while before we become a member of the EU and Nato,” says Gvozdenovic, “but we believe that the good practices we are putting in place to enable this to happen will help to encourage tourism and further investment.”

It is also easy to buy property as there are no restrictions on overseas ownership and foreign investors are allowed to buy, sell and rent out property regardless of their nationality. The only legal requirement is that, if an owner chooses to rent out a property, it must be registered as such. Aleksandar Kovacevic of estate agent Foresight, an associate of Savills, says the economic crisis was not wholly a bad thing for Montenegro. “It has wiped out the crazy projects,” he says, referring to some over-ambitious developments that had been tabled before the crash. “Now only sensible projects are going ahead.” According to Foresight, prices in Montenegro dropped around 20 per cent after the crash, but since 2011 things have stabilised.

The southern town of Kotor, with its picturesque Old Town and historic city walls, attracts those looking for a tranquil destination. Kotor is just one of the mountainous towns on the shores of Kotor Bay, a jagged inlet of the Adriatic – the others are Tivat, Risan and Herceg Novi. To the east of the bay the land is flatter, where the Budva Riviera stretches down 22km of coastline and is home to 17 sandy beaches. Russians in particular like to holiday and invest in and around Budva, which is known for its nightlife. Along this coast, Socar has plans to develop the Orijen Battalion barracks and Qatari Diar has demolished the existing Blue Horizon Hotel to make way for a new five-star hotel.

But it is the northern section of the coast that is most sought-after as a tourism destination. The first upmarket project, Porto Montenegro, was launched in 2009 and has, to date, attracted €240m worth of investment. Built on the site of a former military base near Tivat, Porto Montenegro is now home to a marina, restaurants, shops and apartments. The Regent Porto Montenegro, a new five-star hotel and residences development, will open there in May 2014.

Other residential developments currently being sold off-plan include Sea Breeze and Lustica Bay. Sea Breeze is a three-acre site behind the village of Kavac, close to Kotor and Tivat international airport. Twenty-five three- and four-bedroom villas are being built on the hillside overlooking the bay. The first phase is priced at €2,200 per sq metre. “We came up with the product to fill the gap in the market,” says Milos Radmilovic, project manager for Boka Group, the company developing Sea Breeze. Villas there are priced from €399,000 to €1.1m, with annual communal charges set at around €1,500 to €2,000. Radmilovic anticipates prices to rise in the next phase to €3,000 per sq metre.

Lustica Bay is a huge €1.2bn project by Swiss company Orascom, and will feature hotels, private residences, two marinas and a golf course. In phase one of the project, two hotels and 177 residences are scheduled for completion by 2016; the whole development, which will encompass 6,800 sq km, seven hotels and 1,760 homes, should be finished by 2025. Prices range from €3,500 to €6,000 per sq metre.

A five-bedroom home for sale at €2.5m

There are also individual properties being built around Kotor and Budva by small developers. On the outskirts of the village of Krimovica, near Budva, there is a contemporary five-bedroom property with an open-plan living area and glass wall overlooking the sea on sale for €2.5m through Foresight. In Orahovac, the same agent is selling a three-bedroom villa with pool and sea views for €1.5m.

Mary Wilson was a guest of Boka Group

Buying guide

● Any nationality can buy a property in Montenegro without restrictions

● 7 per cent tax on rental income

● 3 per cent transfer tax

● Flat income tax and corporate tax of 9 per cent

What you can buy for ...

€500,000 A one-bedroom apartment at Porto Montenegro

€1m A three-bedroom villa in Dobrota

€5m A five-bedroom stone house with leisure facilities behind Budva

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