"The last four years 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.

The process of buying Montenegrin property has become considerably less problematic for the overseas investor since the introduction of foreign mortgages on certain developments and increased legislation to protect the foreign buyer.

 "It's an easy process to buy and sell Montenegrin 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 Montenegrin property buyers promising investment opportunities.

However, the government is keen to ensure that the natural beauty that attracts so many visitors and Montenegrin property investors to the small country is not compromised by overdevelopment, 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 Montenegrin 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, Bannister states that "old stone properties on the water in Boka Bay and around Budva / Petrovac are the premium Montenegrin 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.

The Montenegrin 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."

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Article first published 10th July 2007