Montenegro is a country of paradoxes

July 11, 2014

Montenegro is a country of paradoxes

Montenegro puzzles you at first glance. Look closely at the map, there is only one, or may be two roads in the whole country! There are no industrial facilities and the capital city of Podgorica may be easily driven through by car in a half an hour, even on a weekday, as there are no any traffic jams – that is the local "business activity". Why, then, are real estate prices on the Adriatic coast 2.5-3 times higher than the ones on the Bulgarian seaside, 2 times higher than in Turkey and 1.5 times higher than in Greece and Cyprus?

This paradox cannot be explained by any rational arguments. And yet seaside apartments and homes in mountains in Montenegro have been bought and are still purchasing by the Russians and the Europeans. However, today's buyers are not the ones who "bossed" in Montenegro until 2007; they made an agio and inflated prices up to the skies... everything was so wonderfully promising then, but those customers weren’t followed by others, equally active and ready for anything. But still, apartments on the Adriatic coast have almost kept the price, even in times of crisis and the sales are not stopped. Realtors are still not happy – but that is mostly a force of habit.

Montenegro is a country of paradoxes | Photo 1 | ee24

Give the way to the middle class

There are not too many grievances actually. A slump of quantity of tenants in late spring made everyone worrying as well as did a growth of failure of seaside housing reserved in advance – in both in the private sector and in hotels. According to market operators, it were at least 30% less tourists in early June than in the same time of last year. But the situation is leveling today, the tourists arrive and the demand for renting out increases. Although realtors consider that this is still less than it used to be in the past years.

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"The activity of the Russians decreased, if compared with the last year. But at the same time not the cheapest offers are in demand"
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"The activity of the Russians, or the Russian-speaking if saying precisely, has declined if compared to the last year. But at the same time not the cheapest offers are asked for and purchased. Last year demand was focused either on super-cheap apartments or on the expensive ones, ie, the middle segment (from €100,000 to €200,000) was almost missed. Today the demand is aimed at the middle and lux segments. Moreover, the massive demand in a whole has decreased, it was noticeable in spring real estate exhibitions above all", says Natalia Dyukonova, Managing Partner at Invest Montenegro and my guide in Montenegro for a few days of June.

People, purchasing expensive objects, are generally fewer than those who can afford a cheap apartment on the sea. "The situation with Ukraine and the temporary fall of the ruble, impacted, of course, the massive demand recession. And there is another important point. Everyone was waiting for the release of the new Foreigners Act, which was supposed to contain information about obtaining a residence permit for the property purchase for a certain amount in Montenegro. This law should have been accepted in early June, but was postponed till the end of 2014 or beginning of 2015," says Natalia.

Montenegro is a country of paradoxes | Photo 2 | ee24

The Russian approach

The long-awaited residence permit law, if it really comes to light, will definitely spur buyers. All those, wishing to settle "among the Black Mountains", enjoyed the legislation loyalty of young country five-seven years ago and then immigration authorities tightened the nuts: now those who don’t have residence permit, may stay in the country less than 90 days in half. However, the visa is still not needed. But migration services won’t give residence permit just for beautiful eyes: an operating firm is obligatory to have.

By the way, there are many interesting business projects "with the Russian face" appeared recently in the coastal areas, primarily in the field of tourism and entertainment infrastructure. "Montenegrins are lazy and conservative. Do you see that boaters at the dock? They are offering boat trips and fishing. They used to sit there ten years ago, and they still sit today and do you think that anything has changed? No-thing! And then the Russians came. And new options have appeared: boat trip and yacht tour for families, small and large companies, etc. If it’s a fishing – so it’s fully equipped. And if you go fishing in the sea with the locals, so you should bring all the necessary staff; not every tourist is ready for it," explains Natalia the difference in business approaches of "the Russians" and "the locals" on a particular examples.

Besides the sea cruises, the Russians, settled in Budva, offered new tourist routes – hiking in the mountains and river tours, that are also in demand. And they always invent something new for children and adolescents – both for the season visitors and those living permanently as well.

Montenegro is a country of paradoxes | Photo 3 | ee24

The market is alive

While looking from the Russia, it seems that private investors have long forgotten even to think about buying in Montenegro and local realtors and developers have stopped working. They don’t almost come to the exhibitions nor publish advertising in the Russian media ... The country is not popular from a purely philistine position – that is a true. But coming here, you’ll find exactly the opposite picture. Life is going on a full speed and all the roads are covered with billboards advertising apartments and villas; realtors are running to meet with visitors, but the most important illustration of the lively market are the new projects developing and finished all along the coast (on the Budva Riviera, in the Bay of Kotor, Herceg Novi and Tivat).

"The most expensive options of Budva Riviera are located in Budva, near Sveti Stefan or Reževići, if we talk about the development of luxury complexes. But there is an infill lux buildings development – these are villas, located mainly in coastal areas of the Bay of Kotor, on Luštica Peninsula, on the Budva Riviera or in Bar. However there are also many middle-class quality projects," says Natalia.

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"They start and proceed building all around the Montenegro"
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Construction of the popular Porto Montenegro complex is proceeding in Tivat. 

A construction of a huge Luštica Bay complex is launched on the peninsula Luštica: several houses have been already built and construction of marina berth is started.

A huge complex of villas and six-star hotel One & Only have been recently built in Kumbor (District of Herceg Novi).

A several high-end apartment complexes have been recently built in the Bay of Kotor, there are also options in Kostajnitsa and in Dobrota. The Lavander Bay complex is proceeding in Morinj.

A complex with luxury apartments and a few villas appeared last year in the Reževići area.

The Soho Hotels & Resort construction is going on in Sutomore (the Bar Riviera).

Sales are opened in all these projects with the buyers being offered various payment and credit options.

Montenegro is a country of paradoxes | Photo 4 | ee24

Money and roads

But most of all projects – the nine are built in Budva. Perhaps, the most famous and prominent among them is Dukley – a huge complex located on the cape, just 20 meters away from the water, and it’s seems to be the most expensive one: its price per "square" has already exceeded €7,000. For many years, this building was just dull and unfinished despite the extremely profitable location (due to inactivity of Sergei Polonsky’s company – ee24.com), but now the new investor has appeared and sales are re-launched.

It’s generally believed that the main investments are focused in Budva and Kotor Riviera having cultural and natural color, conditions and infrastructure for yacht and ship mooring and the proximity of airports in Tivat and Dubrovnik. Tivat accepts more flights from Russia than Podgorica does, and time spent to get from Dubrovnik in Croatia to Herceg Novi is equal to the time, taken to get from the airport in Tivat. 

Although, to be honest, al the talks about distances and time scales in this country are seemed to be far-fetched. It takes less than half an hour by car along a good road to get from Budva to Tivat. Podgorica may be reached within an hour along a serpentinous road, with beauty views of Budva Riviera over a 1,000 meter height as a bonus. And Lake Skadar, that could be seen from a particular point, located quite high along the road, is right there, behind the next mountain.

Montenegro is a country of paradoxes | Photo 5 | ee24

If you go from Budva to Kotor, the road almost is over after turning to Tivat – or it rather, still is, but turns into very "Montenegrin" and largely suitable only to the locals. Tourists, following in Kotor, come from Tivat through a tunnel hewn in the mountain – and 10 minutes later you may start climbing along the walls of the famous fortress at the top, where not only the whole of Kotor city, but the entire Bay of Kotor are spread before your eyes. And those going to Herceg Novi, stop on the ferry, arranged in the neck of the bay and 20 minutes later, having spent €4.5 for the vehicle and passenger transportation, arrive on the other side of the bay.

Only the locals from nearest villages or desperate fans of exotic traveling come along the path encircling the Boka Bay shore. Pay attention to the road as it turns into a single lane! This means that you have to let pass to the counters in a more or less extensive areas, clinging to the rock. Counter’s flow, by the way, is on the edge of the shore, and there are no fences in some places. That is a pictorial reality. But the bonus in this case, would be stunning views of the opposite coast, the picturesque fishing villages, standing at the water's edge, with friendly taverns and little shops, as if appearing from the last century.

However, the word "picturesque" loses its force in this country: it is suitable for any segment of reality and therefore is completely out of its sense. It becomes gradually clear why do the tourists like coming here and why do not investors grudge money despite a fairly high price level.

Montenegro is a country of paradoxes | Photo 6 | ee24

It’s about indecent

For those coming to Montenegro from Russia and comparing it with Cyprus, Greece or Spain, the prices seem adequate. The same is for the Scandinavians. But if you come there straight from Bulgaria, the high cost of basic things seems indecent: the prices are almost twice higher if compared with the Bulgarian level. A black cherry in fruit street market, for example, costs 3.5. It’s the same 3.5 in Bulgaria. But these are levs. And in Montenegro are euros. Change rate is 1 to 2. All the same applies to coffee, sunbeds on the beach, lunching in a restaurant, buying of a pair of sneakers and mask for swimming. The season’s last story: one of the beaches in Budva raised prices for sunbeds and umbrellas up to €15 in order to clip an odd public.

The same manner may be applied when thinking about the real estate prices. Oh, no. If you are not a buyer, but just a leisurely sightseer, then talk about real estate prices in plenty fails. You won’t discover the price level for real estate in Montenegro, especially when it comes to luxury complexes.

"Not all the developers are allowed to voice prices without a particular reason. Even some realtors are reported the prices only after signing the contract, ie, it is considered as confidential information", says Natalia. "Of course, I reveal prices to customers, but I doubt if it’s worth calling them in vain."

Montenegro is a country of paradoxes | Photo 7 | ee24

However, we managed to find some information. Prices for apartments with an area of 71 sq. m in a residential complex Ksenija in Porto Montenegro start from €350,000.

They say in Soho Hotels & Resort that prices start from €99,000, but in reality, apartments, located on the seafront, cannot cost today less than €2,200 per sq.m.

Prices in the elite housing, generally, start from €5,000 per "square". Middle-class buildings, but located close to the sea cost from €3,500 per sq.m. Some apartments in the first line complexes of the Bar Riviera cost €2,500 per sq.m. There are no such prices on the first sea shore line in Budva and Kotor.

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"An immediate bargaining is indecent. But "secondary housing" price sometimes may be lowered by 10% or more" 
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Bargaining just after you said “hello” is indecent. It could be intuitively known, for example, that if there are only 1 or 2 apartments remained in the complex; the rates should have already been reduced. A "secondary housing" allows bargaining and prices in some case could be reduced by 10% and more.

"What are the people? If they find one example of prices reduced by €5,000-7,000, then they will insist on a discount, saying, it was you who said it will be provided. Cases differ: someone is willing to low the price for €10,000 while others will not give a dime. And bargaining is always specific, it takes place if the client is really interested," says Natalya Dyukonova.

Text: Julia Lozovskaya, especially for ee24.com