With dramatic peaks and a 294-kilometre coastline, the southeastern country of Montenegro is fast becoming a popular destination with holidaymakers from all across Europe, a fact that Brits are rapidly catching on to. The Montenegrin government recently confirmed that Brits are the largest western holders of land and property in the country and with mortgages for specific developments now becoming available to foreign buyers and tourist numbers increasing at a rate of 17 per cent (source: World & Travel Tourism Council), it's perhaps not surprising that British investors are showing such an interest in the country's property market. "The last four years in particular has seen the Montenegrin property market become an extremely popular place to invest, with prices rising on average at over 30 per cent per annum since 2003," says  Caroline Hollingworth, Managing Director of Hollingworth & Associates.

Indeed, whereas there was only a handful of agents marketing property in Montenegro to the foreign investor three years ago, there are now 50 plus.  "It's an easy process to buy and sell property and now a lot safer than it was a matter of three or four years ago," says Richard Bannister from My Property World. "Unreliable lawyers and greedy agents have been found out and more honest, English-speaking professionals have taken over. It obviously helps that they all now have experience and understand what the foreign investor wants, how to go about the buying process and the rules and regulations."
The Montenegrin government also understands the importance of foreign tourism and investment and has created a 'Tourist Masterplan' which maps out the long-term national strategy up to 2020. This includes new marinas and resorts that will incorporate luxury golf courses and hotel complexes, offering overseas buyers promising investment opportunities.

However, the government is keen to ensure that the natural beauty that attracts so many visitors and property investors to the small country of Montenegro is not compromised by over-development, and has laid down regulations that could see property prices soar as demand outweighs supply in the coming decade. "I believe prices will increase at around 10 to 15 per cent per annum over the next ten years," says Bannister. In the current situation, however, there remains cheap property to be snapped up inland, around Lake Skadar and the ski regions of Durmitor and Kolasin. Herceg Novi is also good value for money due to its proximity to main-access airport Dubrovnik in Croatia and good rental outlook.

With budget airline flights from the UK to capital Podgorica soon to be announced, property around this area is also likely to be in high demand in the near future. For those who have a bit more money to invest in the Montenegro property market, Bannister states that "old stone properties on the water in Boka Bay and around Budva or Petrovac are the premium properties and, as they are unique, have the best chance to make the most money through strong rental." New marinas and a golf course are also being built around this area. Hollingworth believes that anywhere on the country's coast will appeal to foreign investors and more specifically notes the Lustica peninsula, the Ulcinj area, and the ski resorts of Kolasin and Zabljak as having good investment potential. "These areas are all beginning to develop useful new infrastructure, amenities and are increasing accessibility," she says. Montenegro's property market is almost entirely fuelled by the tourist industry, which is why potential holiday rentals are proving so popular with overseas investors. "The country offers very few large commercial purchases and doesn't offer the 'blue chips' the same budget HQs and logistics factories ripe for low-cost redevelopment that Romania or Poland have provided," says Hollingworth. "Montenegro is developing into an exclusive holiday centre."

Buying process in Montenegro
Once a price has been agreed on a property in Montenegro, a deposit is paid and a pre-contract signed. When all searches are complete, the buyer and seller sign the final contract before a notary public and, where the change in ownership is then registered.
A purchase tax of 2 per cent on resale properties and 17 per cent on new builds is payable on real estate. This is calculated on the Montenegrin Inland Revenue's valuation.
Further expenses to the buyer of Montenegrin real estate include the lawyers and notary public's fees (usually 1 per cent) and the estate agents fees (usually 4 per cent).
An increasing number of UK lenders offer mortgages on Montenegrin property and mortgage lending is also becoming more widespread in Montenegro, with loans usually from 50 to 70 per cent of the property's value.
The UK has a double taxation treaty with Montenegro which means that tax is paid in to one country or the other, but not both.
Capital gains arising from the sale of property are treated as income. However, properties owned for a minimum of three years prior to the sale are exempt from this.
Inheritance tax and gift tax on property are at levied between 1 and 30 per cent.
Foreign nationals living temporarily in Montenegro are considered non-residents and taxed only on Montenegrin-sourced income, including rental income.
Foreign nationals who have a permanent home in Montenegro, or who spend more than 183 days in the country per calender year, are classed as residents and are therefore taxed on their worldwide income in Montenegro.
British passport holders wanting to stay in Montenegro for longer than 90 days must apply to the Ministry of the Interior for a temporary residence permit.

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Article published July 2007