Things have slowed down a great deal in Montenegro since the global financial slowdown began. There has been a severe reduction in the number of buyers in the market, and the country’s economy is shrinking. But it “couldn’t have come at a better time” according to Montenegro architect Robin Gellately Smith of Kotor based Total Group.
Robin explained How Montenegro’s slow planning approvals process, which was a source of developer’s anger a few months ago is now viewed by many as their saviour because:
“Most [developers] would have found themselves in a bit of bother if everything had gone ahead as planned. They would be in financial difficulty with a built, or partly built, project and no buyers. ‘Off plans’ with some of the units pre-sold would come to a stop as contracts to complete on already sold units could not be finished. As it is most of our clients are merely in a land bank holding situation and can wait for better times.”
This is why prices on off plan properties in Montenegro are still at the heights they climbed to on the back of massive land-price increases between 2006 and 2008: because developers are simply waiting for better times; they have no need to drop prices to achieve off plan sales.
Robin also told me about how Montenegro’s mountainous terrain means there is a fight over developable land in sought after areas. This was confirmed by Richard Thomas, who recently bought a villa in Montenegro, he said:
“Being nearly 100% mountains — especially near the coast apart from in the very south — there is very little land for development available which keeps prices high.”
If development can be kept under control this will give property in Montenegro’s most beautiful locations an air of exclusivity, and could eventually lead to them commanding prime property prices when the recovery is well underway.
Robin also believes that the downturn has been good for the country as a whole, because it has given the industry time to take a step back and observe the progress made so far and how to move forward for the best:
“The rush for a more coherent countrywide planning policy and Detailed Urban Plans has eased. There is a more relaxed and we hope to get it right atmosphere at the moment. Property values have stabled. Building costs are inevitably coming down. Proposals to make it easier for foreign investors to own property in their own name will be made law. In fact, this downturn couldn’t have come at a better time,” explained Robin, before closing with a prediction for the future of the Montenegro property market:
“I think land prices will drop over the next year and by Q4 of 2009 we will see a bit of vitality back in the market. At least by then we will be in a better position to assess risk and see where things are heading.”
I concur with Robin’s overview of the Montenegro property market:
The continued global economic slowdown will start to affect the Montenegro economy as a whole and put increasing pressure on developers, even if they are only holding land-banks. It is not unlikely that they will try to liquidate some of their land assets. Because developers will likely be affected at the same time, a lot of land could come onto the market in a short period of time, which will put downward pressure on prices.
If this happens as other global economies are starting to recover, at the end of 2009/beginning of 2010 then overseas investors could once again breathe life into the Montenegro property market; by buying land and launching new developments.
Therefore the downturn will be shown to have indeed come at just the right time; for partly completed off plan developments would have been nowhere near as attractive to the newly revitalised overseas investors.
Liam Bailey is a well known expert on overseas property, more recently he has also became known as a respected source of information and opinion on the UK property market, and the director of PR and SEO services company, Write About Property. The website also has a large and growing database of property articles, on overseas property and UK property.