Distinguishing hyperbole from genuine promise can be difficult in the fast-growing market for holiday properties in Montenegro.

Some local real estate watchers, their spirits buoyed by growth rates as high as 200 per cent since 2004, no longer compare Montenegrin real estate merely to similar offers in neighbouring Croatia. Instead, they compare directly with Mediterranean region's most glittering resort destinations.

"Montenegro is small, and it lacks space for developers. As it moves towards the European Union, prices will go sky high. In Monte Carlo, one square metre of an apartment costs 100 000 euro," says Predrag Drecun, an economic analyst.

In fact, price parity with markets like Monaco's elite quarter is a long way off, Drecun acknowledges. His own projection foresees the price of a square metre of seaside residential property reaching between 7000 and 10 000 euro.

However, the fact that Drecun mentions Montenegro and Monte Carlo in the same breath is exceptional in itself. Half a decade ago, the former Yugoslav republic was still submerged in the complicated politics of its union with Serbia, mostly undiscovered by foreign property speculators.

Now with foreign buyers' rapid entry since 2004 shocking the scene, sellers, buyers and analysts are all scrambling to figure if and when the boom will end.

A survey by Colliers International shows that property transactions increased in volume by 400 percent over the past two years already, but most experts answer that there is plenty of room left to grow.

In exceptional cases, prices already exceed Drecun's projection. But entry level prices for residential space in coastal hotspots like Kotor, Budva and Herzeg Novi generally remain far below this level, from 2000 to 4000 euro a sq m, according to local agents. Before the last years' boom, a typical entry price was 1000 euro.

"Montenegro is very interesting in the long run, and it'll be increasingly interesting for investors in the next 10, 15 years," says Sasa Dedeic, chief of Interspar, a real estate agency.

Dedeic rests his forecast partly on a claim that "the quality of life in Montenegro will be better than anywhere else in Europe", predicated like many optimistic assessments of the market on the country's new integrationist path in relation to the European Union.

Such claims are supported by bullish analyses from outside, as well, such as a prediction from the London-based World Travel and Tourism Council (WTTC) that Montenegro over the next decade will experience the fastest tourist industry growth of any country.

Whether or not the EU angle bears itself out, Montenegro is now undeniably a spill-over destination for investment capital in booming real estate markets elsewhere in both western and eastern Europe.

The bulk of foreign demand seen since 2004 has originated in the United Kindom, Ireland and Russia - all markets where property values are trending upward sharply - and there is no sign of a slowdown.

According to the finance ministry, foreign buyers in 2006 spent 750 million euro on purchases of land and apartments, a figure equal to 45 per cent of Montenegro's gross domestic product.

Vera Kirovic, owner of the V&K Svetionik estate agency in Bar, the largest coastal town, says prices for land change "literally by the hour".

Such rapidity of growth is driven by a shortage in supply, with views and access to the seacoast proving the most powerful driver of demand. In and around Bar, land prices go as low as 10 euro a sq m for inland property outside the area covered by the official urban plan. For land near the sea, prices go up to 350 euro.

For new apartments, prices rise further to 2500 euro, Kirovic says.

In prime markets near the sea, such as Sveti Stefan, land prices go as high as 450 euro a sq m, according to the Colliers International survey.

Sasa Vukicevic of Dream Property Montenegro, an agency that serves mostly British clients, likewise points to a huge disparity in seaside and inland prices, which he says reflects the aims of English buyers.

Even as coastal prices rise rapidly, land in villages on the slopes of mountains like Rumija and Lisinja starts at just five euro a sq m.

Domestic price pressure from the coast has been quicker to spill over into Podgorica, the capital, where a square metre of residential property now hits the market at between 1700 and 3000 euro.

Despite the remarkable price growth seen to date, buyers still run risks. Lawyers specialising in real estate issues warn that Montenegro, sometimes despite appearances, remains a hornets' nest of complicated property issues. Naive entrants sometimes get stung.

"Any purchase of a property may turn out to be a double-edged sword, which is why additional checks are needed," says Dedeic, the Interspar chief.

"A buyer can purchase a holiday house somewhere only to find out that the municipal detailed urban plan designates the location for a hotel or an office building," he says.
Aleksandar Djurisic, a Podgorica lawyer who represents foreign buyers, cites a long list of potential pitfalls: sellers who lack paperwork proving ownership, unresolved disputes within restitution processes not yet run to completion and questions regarding inheritance proceedings before the courts.

"Professional legal aid is needed from the very beginning. If all the checks are done well, there will be no negative consequence for an investment," Djurisic says.

Nedjelko Rudovic is BIRN`s Montenegro co-ordinator. Balkan Insight is BIRN`s online publication. www.birn.eu.com