Adriatic allure

The word on the street is that Montenegro is the next 'big' place for investing. But with EU membership some way off, what are the risks of buying in this beautiful land? Ginetta Vedrickas reports

Emerging markets are the buzzwords for overseas property investors and the latest country under the spotlight is Montenegro. You could be forgiven for not knowing exactly where this country on the Adriatic coast of the Balkan peninsula is, but its combination of beauty, the speculation that it may join the EU in the next few years and of course attractive property prices are proving to be a draw for many.

Dobrica Ilic has just launched the first Montenegrin agency with a UK base, Montenegro Living, and was taken aback by the interest his stall received when he exhibited at a recent property show: "Mine and the Croatian stalls were the busiest there." Ilic already has a long list of clients who are preparing to visit the country with a view to buying. He believes they will be pleasantly surprised by what they find, particularly in comparison to Croatia, which has seen high price rises in recent years. "Property in Montenegro is about a third cheaper than Croatia," he claims.

Brian Jackson is one prospective investor about to visit Montenegro. "I travelled in this area years ago and found it to be very unspoilt and beautiful compared with other destinations." Montenegro may be virtually virgin territory for British buyers but historically many German, Russian and Austrian buyers have invested there. As for locals, Ilic points out that while they prefer direct coastal locations it is still possible to buy in the surrounding hills for far less. The company has a range of properties in all kinds of locations including a 60m2 house in Herceg Novi on offer for £14,500 or a house in the established seaside resort of Budva at £25,300. For Jackson, location is a prime consideration: "It is still possible to buy on the frontline overlooking the sea, whereas in many countries this is now impossible."

Jackson has researched his subject thoroughly, both by looking on the internet and attending property exhibitions in the UK. Does he feel that there is any risk attached? "Yes, I do think that this is riskier. The land registry is obviously not as it is in this country and there are issues with title. But if you take the right precautions by using a good solicitor and checking that they are listed with the bar, I think you can avoid any risk."

Historically, Montenegro has attracted high-profile celebrities. Sophia Loren, Elizabeth Taylor and Richard Burton were apparently regular visitors, and Jackson hopes to capitalise on future holiday markets: "It think that tourism there is really about to take off."

But not everyone believes that buying in Montenegro is such a good idea. Toby Stone of investment company Bristol and Stone feels that while some Baltic countries such as Estonia, where he owns property, is a relatively safe investment, some markets are more difficult to predict: "It's just too early for somewhere like Montenegro."

Adrian Medd of the Federation of Overseas Property Developers, Agents and Consultants (Fopdac) thinks that countries like Montenegro do not provide British buyers with the kinds of safeguards they take for granted: "Only buy there if you don't mind losing your money. It's a bit like gambling on the horses." Medd cautions that, although these countries may at some point become EU members, buyers cannot expect the same kinds of protection they are used to in the UK. "These kind of safeguards take time to evolve, they certainly won't happen straightaway."

Dobrica Ilic's parents-in-law, Jonathan and Kate Ferrier, live in Oxfordshire but decided to buy a Montenegrin holiday home 18 months ago. "I discovered that I loved the place," Jonathan, a retired GP, says. The Ferriers bought a large, four-bedroom house surrounded by mountains and overlooking the fjord of an Adriatic inlet for just £40,000. "That was incredibly cheap but we later found out that the house had not been properly registered so I think the owner wanted to get rid of it quickly to someone who didn't know." Ferrier is now in the process of registering his house and he describes the buying process as "incredibly straightforward and very easy ... It's a bit like the French notary system. The lawyer draws up a contract for buyers and sellers to sign in the courthouse, which is legally binding. Should anyone back out they lose their 10 per cent deposit."

Ferrier has since bought a beautiful plot of land, complete with an earthquake-damaged farmhouse, which he hopes one day to restore for his own use. He is considering buying other properties, too. "I think prices will definitely go up. It's such a beautiful place with over 200 miles of coastline. If you just go one kilometre inland, property is extremely cheap and you can put in your own swimming pool."

So far, few foreign buyers have bought near Ferrier's property but he expects an increase as word gets out: "Getting there has become so much easier now that British Airways have started their regular flights to Dubrovnik, which is just a short drive over the border." Ferrier also believes that, along with Croatia, Montenegro may apply for EU membership in 2007, which will certainly drive up prices: "You get the feeling that everything here is opening up."

Montenegro Living: 00 44 (0)208-407 0740; www.montenegro-living.com

Fopdac: 01223 514 241; www.fopdac.com