Monday, February 09, 2009
Montenegro Property Bubble Bursts
10 February 2009
BUDVA - An eerie silence prevails over dozens of construction sites on Montenegro’s coast after the collapse of a building boom fuelled by the Adriatic country’s independence.
On the cape Zavala, massive machinery has stood idle for several weeks at the construction site of the Mirax luxury holiday village, whose Russian investors have blamed the global financial and economic crisis.
Fresh construction sites have been abandoned and completed apartments await buyers in vain in the ex-Yugoslav republic of 650,000 inhabitants who were just becoming used to the sound of cranes and bulldozers.
Real estate trade has almost come to a halt, with agents struggling to sell the estimated 4,000 flats now on the market in the coastal tourist hotspot Budva, and 10,000 in the capital Podgorica.
Compared with 2007, the prices of flats along the Adriatic Sea coast have dived by around 50 per cent and are down 20 per cent in Podgorica.
In front of the municipal court in the coastal town of Kotor, where until several months ago people queued for hours for paperwork to seal property deals, there was no one waiting to obtain documents.
“I haven’t sold a single property for nine months, while during the real estate boom, I was selling eight per day,” said agent Dusan Stankovic.
Due to a lack of interest, Stankovic has closed down his Some Place Else agency in Kotor, whose UNESCO-listed old fort town made it popular among foreign buyers.
His agency dealt mostly with clients from Britain and Ireland, who during the 2006-2007 boom bought around 250 apartments from him in Boka Bay, the northernmost part of Montenegro’s small patch of coast.
“Now they want to sell the flats, since they have been burdened with loans they took putting mortgages on their overestimated properties in England,” Stankovic told AFP.
Although Stankovic said his colleagues dealing with Russian buyers might survive on the market, the agents warned these clients, who had a reputation for buying without even asking for prices, have also withdrawn.
The so-called “Russian invasion” increased the demand for property, and was blamed for exorbitant price rises.
Apartments and land were, until recently, priced from 3,500 to 10,000 euros ($4,500 to 12,800) per square metre. But in the past few months, a square metre in a Budva flat could only fetch 1,100 euros, while clients willing to pay up front might even pay 300 euros less.
The depressed property market has mostly halted construction, and the industry, which has played a significant part in the young nation’s economic growth spurt since independence in 2006, is faced with financial problems.
Global real estate agents Colliers International said it was ”not easy to give any forecast” on the future of Montenegro’s real estate and property industry.
“The main projects are only to be done and their realisation depends on recovery of the world financial market,” Colliers said in a statement.
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