"Romania and Bulgaria are set to deliver some of the largest and fastest growth this years," says Neil Lewis, CEO of property analysts Property Secrets. "Even Poland, which has already seen fabulous growth over the last two years, will still achieve a price growth of around 10 per cent. This compares to a forecast of a small drop in prices in the UK of  -2 per cent and a larger drop in the Spanish cities of  -5 per cent.

But won't Central and Eastern Europe be affected by the global economic slowdown so recently predicted by Gordon Brown? It will, says experts, but the effects are likely to be mostly benign.

Robin Bowman, Property Secret's Editorial Director, said: "There are fundamental reasons why the key economies of Slovakia, Romania, Poland and the Czech Republic can ride out this global economic slowdown. Their economies are incredibly strong going into the slowdown and, although we will see a slowing of growth, it will not be excessive."

He continues: "This is exactly what many of the CEE economies need – especially Romania and Bulgaria. Basically, a slowdown was coming anyway. This way, it may well come before we see property markets, as well as whole economies, becoming dangerously overheated."

The impressive growth of Eastern European property markets in the last year are a measure of how much momentum there is in these economies. But with such a pace usually comes negatives, most notably inflation and current account deficits, which have to be financed somehow. That finance is likely to be increasingly hard to attract as investors look for safety, and one of the effects of this can be currency weakening.

This is good news for investors with euro- of sterling-linked mortgages. It also should not deter those who are thinking of investing in Eastern European property, as the European Bank for Reconstruction and Development has predicted that property growth in Eastern Europe wil still amount to 5.5 per cent in 2008 – that's in spite of the global credit crisis.

Already we have seen some of the effects of this as some CEE currencies have weakened - the leu in particular is down around 20 per cent against the euro in six months. If you're a Romanian with a euro linked mortgage, that can't help but hurt.

"Even a GDP growth rate of 5 per cent would be great so a forecast of 5.5 per cent is hardly a disaster," says Bowman. "Put it into context - let's be optimistic and assume the UK makes 1.5 per cent this year. What about the US? 1.5 per cent, 1 per cent? Anyone's guess really - but few would bet on much more. Germany, France - are they really likely to do better than 1.5 per cent? Italy will barely register any growth. And Spain's GDP growth rate is almost certain to plummet."

The EBRD also points out that Eastern European economies "are less vulnerable than other emerging economies because they benefit from the extra economic security offered by European Union membership. Investors assume greater risks than elsewhere because membership brings clear development perspectives and outside financial scrutiny."

So where in Eastern Europe should investors be looking to buy property? Poland and Romania are tipped as good bets by Property Secrets, but other investors advise looking at the often overlooked country of Montenegro.

Montenegro joined the EU's Competitiveness and Innovation Programme in March, and their membership will see the European Commission actively promoting innovation, entrepreneurship and growth in the country's small and medium-sized enterprises (SME's).

The European Commissioner responsible for the EC's industry and enterprise policies Gunter Verheugen, said Montenegro had affirmed its European aspirations by joining the CIP programme, and predicted positive thing for the country's economic future. He added: "Participation in CIP, and, in particular the cooperation in the new Enterprise Europe Network, which Montenegro has already successfully entered, will help Montenegro to increase the competitiveness of its enterprises, in particular SMEs,"

Montenegro property is also likely to benefit now that the government has relaxed the laws preventing foreigners from buying land in the country.

"Now that foreign entities can buy actual plots of land for development, I foresee possibly a Trump towers in Podgorica, maybe a Hilton, but definitely some of the major tour operators buying up land for development as tourism to the country increases as it has," says a representative from David Stanley Redfern. "If the global market slow continues, the developing world's most beautiful places, like Montenegro, Albania, and others will become even more popular with tourists because they offer cheaper holidays because of the low cost of living. It would be wise to invest in a property there and wait for the changes ahead."

David Stanley Redfern are currently offering off-plan apartments in Lustica, Zambellici, one of Montenegro's long popular coastal areas. The apartments, which all have sea views, start at £50,000. They have a communal swimming pool, fitted bathroom: electric water heater, wc, wash basin, shower, fully tiled walls, tiled floors and double glazed windows.
 
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Article first published 7 April 2008