Update No: 111 - (25/08/06)
Montenegro is a splendid place, just south of Croatia on the
Adriatic with magnificent mountain scenery. It has a great future as a tourist
centre. It may even have huge oil reserves offshore, a secret better kept until
after recently-declared independence in July.
On May 21st, Montenegro voted to break up its union with Serbia, thus becoming
the world's newest independent state. Montenegrins were asked if they wanted to
end their loose union with Serbia, set up in 2003 to replace Yugoslavia. As many
as 55.4 per cent of voters said 'yes'. The pro-independence bloc needed 55 per
cent of the votes cast to ensure victory.
The hope, held both by locals and by foreign investors, is that independence
from Serbia, leaving that country's political isolation behind, will increase
Montenegro's access to foreign funds.
Montenegro has few scruples about financial matters. Monte Carlo is bone fide by
comparison. It is a potential Liechtenstein; it just has to declare itself a tax
haven and it would become a magnet for funds fleeing to the Balkans. Perhaps the
Russian investors busy 'buying it up' have just that in mind? They have shown a
predeliction for exporting their money to small 'Orthodox' destinations. Cyprus
the great beneficiary in the 1990's being the most famous, but now in the EU
having to behave itself, in terms of money laundering, etc.
And then there is the tantalizing prospect that it has oodles of oil off its
coast in the Adriatic. Oil reserves there were reported in the late 1990s as
being of the order of one billion barrels, little has been heard of the matter
since, but now that the political issue is resolved…… perhaps a Kuwait
rather than a Liechtenstein is emerging?
The US Agency for International Development and European Agency for
Reconstruction are major contributors of infrastructure-related aid. The EU
beckons as the ultimate destination.
Rehn holds separate talks with Djukanovic, Kostunica
EU Enlargement Commissioner Olli Rehn held separate meetings with the Prime
Ministers of Montenegro and Serbia in late May, focusing on the outcome of
Montenegro's independence referendum and the stabilization & association
negotiations with the European Union.
Montenegrin PM Milo Djukanovic went to Brussels for talks with Rehn and the EU
foreign policy chief Javier Solana. High on the agenda of the talks with EU
senior officials were the results of the referendum in Montenegro, when the
Montenegrins voted to split from Serbia.
Shortly after the vote, the EU said it would respect the will of Montenegrin
citizens, noting that it will open separate negotiations with Podgorica over the
stabilization and association agreement (SAA).
Parties square off for poll
Seven political coalitions and two individual parties will run in
Montenegro's 10th September parliamentary election.
The election is the first since the tiny republic voted for independence and
separation from Serbia in the May 21st referendum. Prime minister Milo
Djukanovic's Democratic Party of Socialists will retain its current coalition
partner, the Social Democrats, possibly adding the Croatian Civic Initiative
(which represents minority Croats.)
Nine pro-Serbian parties, headed by Socialist People's Party (NSP), which
opposed Montenegro's independence, have split into two coalition groups, and
there are several coalitions of small, marginal parties.
Only the recently founded Movement for Change (MC) and the Democratic Union of
Albanians (DUA) will run alone for the 81-seat parliament. The MC, headed by
economist Nebojsa Medojevic, last month transformed itself into a political
party from a popular non-governmental organisation (NGO), the Group for Change.
Pro-European, it is seen by political analysts as potentially the strongest
challenger to Djukanovic's rule.
The NSP coalition, headed by Predrag Bulatovic, is seen as another serious
Ethnic Albanians account for about five per cent of Montenegro's 620,000
population and their votes are likely to be won by the DUA.
Hungary OTP submits binding bid for Montenegro's Crnogorska komercijalna
Foreigners are showing a renewed interest in Montenegro now that it is
independent. The Hungarians in particular envy it its coastline on the Adriatic,
its possible oil reserves and the new élan it has acquired from independence.
Hungary's OTP Bank announced on August 18th that it has submitted a binding bid
for the purchase of a majority, at least 80.0% shareholding in the Montenegrin
Crnogorska komercijalna banka AD (CKB).
Currently CKB is the most dominant player of the Montenegrin banking sector; its
market share exceeds 43%, in line with its total assets reached 303.7 million
Euro at the end of 2005.
"OTP Bank's binding bid contains the price and the draft sale and purchase
agreement, as well. The binding bid was submitted after OTP Bank's acquisition
team, together with the legal advisor Berecz&Andrékó Linklaters and
financial auditor Deloitte Touche Tomatsu carried out a due diligence on CKB,"
OTP said in a statement on the website of the Budapest Stock Exchange (BSE).
Much more foreign interest can be expected from further afield.
Montenegro, once the playground of celebrities like Richard Burton and Sophia
Loren, is attracting attention because the no-frills airlines are thought to be
coming soon. Already the scenic port of Kotor, just south of Dubrovnik, has all
but been taken over by Germans, Italians and, most recently, Russians.
The Russians are coming to town, including Luzhkov
Montenegro's first five-star hotel has opened its doors on the outskirts of
the Budva holiday resort on the Adriatic coastline. The Russian owners have
spared no expense in the luxury refurbishment of the once rundown Hotel
A few kilometres to the south, another Russian investor has bought the Hotel As.
An establishment promising the ultimate in accommodation is in the making,
including a spectacular underwater restaurant. Parts of the hill abutting the
hotel are to be blasted to make way for the building works.
"The Russians are coming," is the order of the day in Montenegro and
its northern neighbour, Croatia. Money is no object to these new investors, the
real estate agents say. "If you've got it, flash it," is the motto.
A Russian investor has demanded a change in the local building regulations on
the Croatian island of Mali Losinj so that he can extend his hotel to 2,100 beds
from the current 1,200.
In Herceg Novi at the entrance to the Bay of Kotor in Montenegro, a Russian
consortium has bought a vast property of 100,000 square metres in a prime
location. The property is on the Lustica peninsula, which used to be a military
zone covering 36 square kilometres and has thus not been developed for tourism.
These top holiday locations have drawn the attention of well-to-do Russians in
particular. According to media reports, Moscow Mayor Yuri Luzhkov has bought
more than 12,000 square metres for 4 million Euro. A short distance away,
Russian cosmonaut Alexei Leonov also owns property.
Russian money has helped drive real estate prices ever higher. In the
Montenegrin city of Tivat, residential property now costs up to 1,200 Euro a
square metre - this when the average monthly income is a meagre 200 Euro. In
other towns prices as high as 2,000 Euro per square metre have been attained for
This does not appear to deter the richest investors, who arrive at Montenegro's
two airports in private jets, according to locals.
Nobody knows precisely how many properties are now in the hands of Russian
investors; often the ownership is difficult to ascertain, as the trail leads
through accounts and companies all over the world.
Western diplomats have warned that money from suspect sources is being
"laundered and parked" in the region. They note that Croatia and
Montenegro hope in the relatively near future to become members of the European
Union, and in Montenegro the euro is already the currency in use.
Russian investments in Montenegro are, according to this view, now so large that
they could undermine the tiny country's independence. Often it is plain for all
to see that the Russian owners are scarcely interested in the tourist trade.
At Petrovac, in the far south, Russians bought the Hotel 4th July and left it
standing unused for four years. "They are simply waiting to launder their
dirty money," a restaurant owner in the area says.
The flood of money from Russia has also meant a change in the origin of the
guests in many Adriatic resorts. Russians currently set the tone, rather than
Germans, Austrians or Britons.
The following, indeed, indicates the rich property opportunities opening up for
Montenegro: Independent and in demand
By Eric Jannson, International Herald Tribune
Crammed onto a narrow crescent of land beneath the sheer cliffs of Boka Kotorska,
Europe's southernmost fjord, Montenegro's ornate city of Kotor hides behind a
fortress wall six centuries old.
But, even as Montenegrins celebrate their recent vote to become the world's
newest independent nation, a foreign force is streaming across the border from
Dubrovnik, Croatia, making a beeline for the fjord and marching in past the
winged lion of Saint Mark, a sculpture in stone that stands by Kotor's gate.
Following a flurry of rapturous reports in the media, property shoppers from
Britain and Ireland are arriving in droves to scour the Boka Kotorska area for
affordable coastal villas.
"Driving around the Boka bay after flying into Dubrovnik fairly takes the
breath away, and many come with the hype given by media hell bent on selling
Montenegro as a destination where property on the sea can be bought cheap,"
said Robin Gellately-Smith, a property manager and architectural expert for
Total Group, a Kotor-based real estate agency.
But if there ever was such a thing as a discount villa in Montenegro, there are
none any more. Decrepit stone ruins on hillsides overlooking the Boka Kotorska
still can be bought for as little as 20,000 Euro, or US$25,760, but
modernization is expensive and difficult.
And, while the country's nascent property market is not yet indexed, most local
real estate agents say prices have risen 50 to 60 per cent or more in the past
Prospective buyers are better off shedding unrealistic price expectations and
searching instead for genuine quality around the fjord, Gellately-Smith said.
Montenegro's planners have earmarked the land bordering the butterfly-shaped
body of water for minimal development. In contrast, other sought-after
destinations along the Adriatic, like Sveti Stefan and Budva, show the scars of
illegal building that took place over the past 15 years. "Here on the Boka
bay, I think, is where the high-value holiday homeowner will find refuge,"
Two properties now for sale in the fjord area are representative of the best in
the local market.
One, a three-bedroom apartment inside Kotor's city wall, was sold last year to a
British buyer, David Rogers, a semi-retired luxury tour operator. He refurbished
the 140-square- meter, or 1,507-square-foot, apartment to a luxury standard
unusual for Montenegro and then put it back on the market at 360,000 Euro.
"That's a fairly senior price, but of course the apartment is big and we
have done it up - renovating, repainting, rewiring, everything. We haven't seen
anything else like it in Kotor. It's got high ceilings and a lot of light,"
The second property, two renovated 18th century villas being sold as a single
hillside complex, is priced at 1.9 million Euro.
With a total of four bedrooms and 2,000 square meters of terraced gardens, the
twin villas in Perast, near Kotor, occupy one of the fjord's most coveted
positions, with a clear view of two picturesque islands a short distance
"The Perast property is in perfect condition. It is by far the best thing
on the market at the moment," said Andrea Marston, general manager at Dream
Property Croatia & Montenegro, a British real estate agency that entered the
Croatian market four years ago and Montenegro two years later.
Echoing Gellately-Smith, Marston said the best properties in Montenegro would
not sell cheaply, especially because traditional stone buildings in good
condition - the kind most buyers want - are in short supply. "All the old
stone properties are being snapped up rapidly," she said.
Yet Marston said she expected prices to continue to rise in all segments of the
Montenegrin housing market for the next several years, basing her analysis on
the experience of neighbouring Croatia, which is a similar market in many
"Montenegro is not anywhere near the top of the curve yet. It is still
behind Croatia, and prices in Croatia are still increasing, a little bit slower
than they once did but not much slower," she said. "Montenegro will
catch up with most of Croatia, probably in five years, but it will not catch up
with Dubrovnik in the same time."
(The average price per square meter for properties on the Croatian coast is
1,500 Euro, although prices have gone as high as 5,000 Euro to 6,000 Euro in
Conscious both of fast-rising prices and the extraordinary natural scenery that
Montenegro offers, many buyers are choosing to develop one property with the
goal of turning a quick profit and buying another for personal use, local agents
David Sergeant, a publisher from London, is one such recent buyer. "Simply
stunned" by the natural beauty around the fjord, he said, he decided to
purchase, as an investment, an apartment in Kotor for 290,000 Euro and, for
personal use, a villa in the nearby village of Muo for 358,000 Euro.
"The fast-improving economic and political situation makes Montenegro very
attractive, not only as a destination to live in, but also it is a terrific
investment opportunity," Sergeant said.
What some potential buyers may not know is that this country of 630,000 people
is far poorer than most of the rest of Europe and, Gellately-Smith said,
weaknesses in its infrastructure continue to pose problems.
For example, water shortages, sometimes acute in July and August, may interfere
with the plans of many buyers, like Sergeant, to install swimming pools.
"There is plenty of water in Montenegro. It is a matter of getting it where
it is needed," Gellately-Smith said.
A final wild card is the Montenegrins themselves, Gellately-Smith said.
"They will not easily give up their land and birthright to foreigners
lightly. They have fought against all comers over the centuries to keep their
land from foreign occupation, including 500 years of Ottoman aggression,"
"Investors with money buying small houses in out-of-the-way stone villages
are bound to experience neighbour frustration as people see friends and family
move away to be replaced by wealthy foreigners, modernizing and building
swimming pools, only to use the building a few months of the year."
Possible ties with Iran
Iranian Ambassador to Belgrade, Morteza Mir-Heydari, met with Montenegrin
President, Filip Vujanovic, and several other high-ranking Montenegrin officials
in Montenegro's capital Podgorica, New Europe reported.
Mir-Heydari also met with Montenegrin Foreign Minister, Vlahovic, and discussed
possibilities for opening of bilateral ties, news reports said. High-level
Montenegrin officials, which declared independence from Serbia and Montenegro in
a referendum held on May 21st, voiced interest in establishing ties with the
Islamic Republic of Iran. On Montenegro's National Day, Mir-Heydari handed a
message from Foreign Minister, Manouchehr Mottaki, to Montenegrin Foreign
Ministry Advisor, Sedik Kalich, which referred to universally recognised
principles and Iranian foreign policy with respect to the right of states to
determine their own destiny. He also expressed his readiness to establish
political ties with Montenegro. Many countries have set up embassies in
Podgorica and signed protocols establishing political ties with the newly
independent Balkan state.