Beth Kampschror of the European edition of the Wall Street Journal reported the following, 2nd August 2006, regarding the rise in interest and property prices in Montenegro. KOTOR, Montenegro -- Lunch could wait when David and Serena Rogers got caught up in the property boom in Europe's newest country.The couple had just looked at a tiny 60-square-meter house within this walled medieval coastal town when Mrs. Rogers caught what Mr. Rogers called "a sort of fever."
I being the wise head, said, 'Let's go have some lunch and think about it before doing anything rash,'" recalls Mr. Rogers, a U.K. entrepreneur who last year discovered the striking bay of Kotor, a fiord where mountains plunge into a clear blue-green sea. "She ordered her whatever, and then she suddenly said, 'I've got to go get it now,' and she ran there, offered them the full asking price, and she rushed back to the table before lunch had arrived."
Montenegro's property fever, fueled mostly by English, Irish and Russians seeking holiday houses and rental property investments, has been rising in the newly independent former Yugoslav republic. Prices on the 175-mile Adriatic Sea coast have increased nearly threefold in the past year. Montenegrin officials are scrambling to enforce laws regulating development to prevent what Foreign Minister Miodrag Vlahovic calls "the transforming of the whole coast into a giant piece of concrete."
Before wars in the 1990s shattered what was then Yugoslavia, this mountainous, Connecticut-sized republic on the Adriatic buzzed with nearly half a million tourists every year. Sophia Loren cavorted on the island of Sveti Stefan.
But as four other republics seceded from Yugoslavia -- three in bloody wars that left some 200,000 dead -- Montenegro stuck with Serbia and suffered crippling economic sanctions that turned its coastal jet-set playground into a smuggling haven for fuel and cigarettes. Then in the late 1990s -- as human-rights violations against ethnic Albanians from the southern province of Kosovo by Serbia leader Slobodan Milosevic's army triggered a 78-day NATO bombing campaign -- Montenegro leader Milo Djukanovic courted the West by steering his republic away from Serbia. After Mr. Milosevic's 2000 ousting, Montenegro remained in a loose union with Serbia until this past May, when Montenegrins voted by a slim margin to make their final break from Serbia.
Mr. Djukanovic is keen to attract foreign investment and tourists to the new state of just 650,000 people in an effort to counter a $430.4 million trade imbalance and nearly 28% unemployment rate.
At first, Montenegro faced an identity crisis. When Kotor-based realty company Dream Property Montenegro attended an exhibition to attract British and Irish buyers in London two years ago, "a lot of people approached me and said, 'Montenegro, where is that? Is that South America?"' recalls General Manager Sasa Vukicevic.
Foreign direct investment as a percentage of gross domestic product jumped to 23.3% in 2005 from 3.4% in 2004, with the biggest increases in the telecommunications and hotel sectors. Officials say it's impossible to measure the number of foreign property buyers, but realty agents are swamped. "It's 1,000% busier, and I'm not overreacting," says Mr. Vukicevic.
The government stresses streamlining the process for buying property, especially when compared with Croatia. Montenegro requires no permit from the foreign ministry and requires buyers only to sign a purchase contract, give a lawyer power of attorney and pay a purchase tax of 2%. The process takes a matter of days versus a year or longer in Croatia.
But as prices for houses and apartments on the winding, narrow streets of Kotor's Unesco-listed old town have jumped to €3,000 ($3,825) a square meter from €1,000 in the past 10 months, the government has started tightening regulations.
Kotor Mayor Maja Catovic, a descendent of a 400-year-old Kotor seafaring family who rides her bicycle to work and butts heads with other officials over enforcing littering and noise ordinances, estimates there are 400 illegally built buildings in her municipality. Officials are now deciding which will be torn down, at the builders' expense.
Another concern is that prices will be driven so high that only the fabulously wealthy can afford to buy in Montenegro.
For Mr. and Mrs. Rogers, the lunchtime rush was worth it. They paid about €80,000 ($102,008) for their small vacation home -- a price that would be unheard of this year. "We like Kotor so much that we wanted to have a stake in it," says Mr. Rogers. "I just hope that they will manage to maintain the quality level as it develops." | 
