Move over Croatia, Montenegro is the new star attraction in the Balkans. Minty Clinch finds plenty of reasons for it to shine

In the ongoing battle for the title Jewel of the Balkans, Montenegro may emerge as the ultimate winner. The prize: wealth-generating ribbon development along 190 miles (300km) of spectacular Adriatic coastline. The seeds are there. Near the lively rampart town of Budva, an army of labourers in red overalls works under floodlights on a monster high rise. In March, the site was virgin hillside; by next month it will be welcoming French tour groups. Meanwhile, bargain-hunting Britons are buying up rentable holiday property in the sun. A one-bedroom apartment with a large balcony and views over olive groves to the sea? £30,000. A beachside period house in need of repair with an acre of land? £60,000. Once the seeds have germinated, Albania will have the only undeveloped coastline between Nice and Greece. As yet, it takes an intrepid traveller to risk its particular brand of poverty and politics.

In the ongoing battle for the title Jewel of the Balkans, Montenegro may emerge as the ultimate winner. The prize: wealth-generating ribbon development along 190 miles (300km) of spectacular Adriatic coastline. The seeds are there. Near the lively rampart town of Budva, an army of labourers in red overalls works under floodlights on a monster high rise. In March, the site was virgin hillside; by next month it will be welcoming French tour groups. Meanwhile, bargain-hunting Britons are buying up rentable holiday property in the sun. A one-bedroom apartment with a large balcony and views over olive groves to the sea? £30,000. A beachside period house in need of repair with an acre of land? £60,000. Once the seeds have germinated, Albania will have the only undeveloped coastline between Nice and Greece. As yet, it takes an intrepid traveller to risk its particular brand of poverty and politics.

Montenegro already has many key holiday ingredients, with more in the pipeline. It is cheap and cheerful, a small scruffy country reluctantly linked to Serbia after losing its independence when the Balkan cake was re-sliced at the end of the First World War. Some 70 years later, it failed to regain it when Yugoslavia tore itself apart following the death of Marshal Tito. As is often the case with small countries dominated by large aggressive neighbours, regaining statehood is tricky: landlocked Serbia has a lot to lose.

Nevertheless, Montenegro is determined to find its own identity in the 21st century. It proudly offers world runner-up statistics, of which the most striking is the second-tallest population, after an African tribe. Many of the men are indeed imposingly tall and ruggedly male, with chiselled features and fierce fighter's eyes. The older ones are formal and stately, with bushy moustaches and neat outdated clothes. The young ones swagger around in slightly menacing quartets, smoking and laughing as passers-by edge off the pavement to let them through.

Unlike Serbia, Montenegro has already adopted the euro, but prices are still very low, a situation that is unlikely to last much longer. By any standards, Sveti Stefan, an island small enough to be a single property joined to the mainland by a causeway, is one of the world's most spectacular hotel sites. Built after the Second World War as a tourist flagship in a peaceful fishing village, the existing complex had its golden age in the 1950s and 1960s. The top billet was room 118, a two-storey villa with its own garden and swimming pool. "This place could tell a lot of stories," said Diki Kazanegra, the manager at the time, showing me the bedroom once occupied by Princess Margaret and Lord Snowdon, Elizabeth Taylor and Richard Burton.

Tito, a lover of fine wines and beautiful women, was another regular and Charles and Di planned to spend their honeymoon there until a press leak triggered a security alert and a switch to the royal yacht. In those days, guests got what they asked for regardless of cost or inconvenience. Fresh dromedary milk for the King of Mongolia? No problem. Diki was on the case immediately. In 2005, you can stay in 118 with your family or friends for €1,500 (£1,000) a night, or more modestly in one of 117 regular rooms, but come October, the hotel will be razed to the ground and re-built as a 45-suite Aman resort in time for a grand opening in 2006.

Where there's brass, there's golf and, sure enough, Montenegro's first course will be in business next spring. Lake Skadar, 40km inland from Sveti Stefan, is a bird sanctuary, inhabited by the country's talismanic Dalmatian pelican, and a national park, but that hasn't kept the bulldozers out. The Skadar Golf Club, located at Virpazar at the end of a new tunnel that reduces the journey from the coast to 15 minutes, is an ambitious real-estate project, using British designs and money. By March 2006, there will be an 18-hole course, a hotel and 80 villas - £65,000 for two bedrooms, buy now while stocks last - with a further 18 holes planned for 2008.

Skadar is one of the largest lakes in Europe, a magically tranquil place where small boats chug around among great stretches of water lilies. Wannabe Monets set up their easels on the shore, especially near Rijeka Crnojevica where a picturesque triple-arch stone bridge crosses the lake at its narrow end. The sanctuary is home to 270 varieties of bird, their meal tickets guaranteed by 40 varieties of fish. The Stari Most, a friendly lakeside restaurant in Rijeka Crnojevica owned by the former footballer Nikola Jovanovic, majors on carp soup, grilled carp and eel risotto: don't miss it.

Provided you're prepared for long white-knuckle rides, you can drive round most of Montenegro in a day. The mountainous interior is accessed by roads that wind up from the narrow coastal plain where the majority of the 660,000 inhabitants live. The scenery is a tangle of dramatic chasms and cliffs and raging torrents. For people staying on the coast, visiting the Tara Gorge, the star attraction in the north of the country near the Serbia border, requires at least 10 hours on the road. But the white-water rafting, a derring-do joyride between the 1,300m sheer rock walls of the world's second-deepest river gorge (after the Grand Canyon), is a must-do adrenalin adventure.

The road to Tara from Budva takes in the new capital, Podgorica, a spacious but bleak Communist bloc administration centre, and the old capital, Cetinje, a fortress town which repelled the Ottomans in 1692, 1714 and 1785. The coastal towns are more popular, especially the walled fortress port of Kotor, a Unesco World Heritage site. The triangular old town is a warren of squares connected by narrow unnamed alleys accessed through three massive gates and surrounded by 30m ramparts. The car-free streets are dominated by ducal palaces and churches, the most imposing being St Tryphon's Cathedral. Consecrated in 1166 and extensively reconstructed over the centuries, it is an outstanding example of Romanesque architecture, with an added Baroque element thanks to the belltowers that were built after the 1667 earthquake destroyed the west front.

Budva, a few kilometres down the coast, is less of a museum and more of a resort. Again the old town is surrounded by impressive walls, but the long waterfront is part harbour and part esplanade. Water taxis buzz back and forth to Sveti Stefan and rival beach hotels carrying customers for the fish restaurants along the front. The catch of the day is good quality, fresh and simply cooked, the local Vranac red wine is a steal and no one suggests you should leave before midnight. Or necessarily before dawn.

Give Me The Facts

How to get there

The writer travelled as a guest of Inghams (020-8780 4433; www.inghams.co.uk) which offers seven nights' b&b at the Hotel Sveti Stefan from £598 per person, based on two sharing, including flights from Gatwick to Dubrovnik and transfers.

Further information

National Tourism Organisation of Montenegro (00 381 81 235 158; www.visit-montenegro.com).

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