Property Investment Case Study: Bosnia and Herzegovina (TPI-BK-001)
Introduction:
Bosnia and Herzegovina (BiH) is a west Balkan country with 4.2 million inhabitants in an area of just over 51,000 square kilometres.
Bosnia is the central and northern region of the country and Herzegovina is the entire southern region of the country.
The first Guidebook on BiH came out in 2005 by Tim Clancy-in his introduction he says:
“In a country that has for so long been used as a pawn by its larger and more powerful neighbours see it as no less than a miracle to find the warmest, most hospitable people, I have ever come across. I am touched every time I walk into a village and I am treated like a king. I have learned, through the darkest of times here, of the great power of the human spirit. It is this spirit of freedom, community, family and diversity that marks the true character of this country and its people…
I don’t have any doubts that every traveller here will feel at home and be pleasantly surprised by the stunning nature and the friendly people.”
Buy the Guidebook by Tim Clancy
http://www.bradtguides.com/?page=shop/flypage&product_id=107
Bosnia and Herzegovina is made of two Entities, the Federation of Bosnia and Herzegovina and the Republika Srpska, and the self-governing district of Brcko, under the sovereignty of the central state government. Bosnia and Herzegovina is a parliamentary democracy and the Dayton Peace Agreement includes the Constitution in force. Bosnia and Herzegovina is made of two Entities, the Federation of Bosnia and Herzegovina and the Republika Srpska, and the self-governing district of Brcko, under the sovereignty of the central state government. Bosnia and Herzegovina is a parliamentary democracy and the Dayton Peace Agreement includes the Constitution in force. The Bosnia and Herzegovina state-level government was granted limited powers under the Dayton Peace Agreement. Progressively, this government is taking up more responsibilities.
Bosnia and Herzegovina has a bicameral parliament comprising the House of Representatives and the House of Peoples, two-thirds of the members of which are elected from the Federation of Bosnia and Herzegovina and one-third from the Republika Srpska. Bosnia and Herzegovina has a rotating, collective, three-member presidency. The Council of Ministers comprises ten of them, one of whom is appointed chairman (prime minister) for a four year term. The entities have also their own governments, and cantons within the Federation have also powerful local governments.
The main political parties are: Party for Democratic Action (SDA), Croatian Democratic Union of Bosnia and Herzegovina, Serb Democratic Party (SDS), Party of Democratic Progress (PDP), Social Democratic Party (SDP), Party for Bosnia and Herzegovina (SzBiH), Party of Independent Social Democrats (SNSD).
http://europa.eu.int/
This site will only deal with the 10 cantons or regions of the federation of Bosnia and Herzegovina and not with the regions controlled by Serbia (Republika Srpska)
What about the war?
An inevitable, yet an increasingly out of date question, was best answered by Lord Ashdown when he launched the BiH tourism initiative in May 2004 “ he stressed that Bosnia was a stable country with a stable currency and low inflation, he also emphasized that most Westerners felt safer walking the streets of Sarajevo than in their own country. Fielding the expected question on landmines, Ashdown pointed out that landmines had not stopped countries like Vietnam – or Croatia – from becoming tourist destinations. A large proportion of the country had never been mined and he declared that Bosnia-Herzegovina was a year from becoming “mine-safe”.
EU Membership
The Thessalonika EU meeting in 2003 set the groundwork for BiH to join the EU, saying “they would join once they met the criteria”
Failure to hand over war criminals to cooperate with the Hague Tribunal is potentially the biggest stumbling block to Bosnia and Herzegovina’s future within the European Union and the North Atlantic Treaty Organization.
In March 2005 Paddy Ashdown (High Representative for the Implementation of the Peace Agreement on Bosnia and Herzegovina) said the “Republika Srpska- (part of BiH), had transferred five major war crimes indictees to the International Criminal Tribunal for the Former Yugoslavia in the last two months, compared to the almost 10 previous years when they had not transferred a single one”.
The European Union Enlargement Commissioner has made it clear that the other cardinal issue for progress is police restructuring.
Bosnia expected to start talks in November 2005 , which marks the tenth anniversary of the signing of the Dayton peace agreement that ended the country’s civil war in 1995, but the progress has been hampered by internal political squabbles over police reform and the cooperation with ICTY.
This was refused at the meeting in October.Bosnian majority Muslim leaders accused their colleagues in the Serb entity, Republika Srpska (RS), of holding the entire country hostage for refusing the EU concept of reform which would eliminate entities’ police and create a unified force at the country level.
At the time of writing the timetable for EU membership is unknown.
Currency
The Central Bank’s adoption of a currency board in 1997 guarantees that the local currency (the Convertible Mark KM) is fully backed by hard currency (Euros) or gold. The currency board mechanism fixes the exchange rate at approximately 2 KM to the Euro. For investors, this ensures currency stability and convertibility. The currency board mechanism has also minimized inflation. In 2003, inflation countrywide was 0.6%, a rate that has remained stable in 2004. Central Bank reserves have risen steadily, registering 3.3 billion KM in 2004.
Importing and Exporting
In Croatia foreign purchasers experience problems importing furniture etc to finish off their properties, this is not a problem in BiH because of an autonomous preferential regime adopted by the EU in 2000. Bosnia and Herzegovina exports mainly to Italy, Germany and Slovenia. Bosnia and Herzegovina imports originate from these EU countries and, to a lesser extent, from Austria. Bosnia and Herzegovina exports are essentially base metals, wood and wood products, mineral products and chemicals. Imports include in particular machinery, mineral products, foodstuffs and chemicals
Roads
The building of the so-called Corridor Vc –a four-lane motorway from Budapest, Hungary to Ploce on the Croatian coast is the most exciting development, as this will open up BiH from the north and the south. Connecting Doboj, Zenica Sarajevo, Mostar this will create an investment opportunity for the length of the road.
It will also connect with Zagreb as part of the EU TEN programme.
The total length of roads is approximately 22,000 km, of which more then 3,700 km are arterial highways; approximately 4,100 km are regional roads; and approximately 14,000 km local roads.
Railways
The length of railway-tracks is over 1,000 km, of which more then 250 km are double track, and approximately 800 km electrified. Further reconstruction and upgrading, of the railway network is underway.
Airports
The airspace of Bosnia and Herzegovina (BiH) is of significant importance because of its location in the center of the European Civil Aviation Conference (ECAC) area with major trunk routes passing through it. In July 2004, BiH became the fifth country to ratify the Central European Air Traffic Services (CEATS) agreement, which creates a single air traffic control system for the upper airspace of eight central European nations.
There are four fully functional international airports, Sarajevo, Banja Luka, Mostar and Tuzla, although the Sarajevo Airport accounts for more than 90 percent of the total passenger and cargo traffic.
The airports are state-owned and managed by government-controlled companies. At present, there are no plans to either privatize the airports or to award concessions for their expansion.
Ryanair
There is a strong indication that a deal has already been agreed for Ryanair to fly into Mostar airport in 2006.
This is a fully fledged international airport and with its closeness to the Medjugorje, the world reknowned Catholic pilgrimage village, laying only 20 km west of Mostar, it is easy to see the attractiveness to Ryanair. It may commence with connections from Ireland but could hopefully extend to Stanstead.
Sarajevo airport
Fly Bosnia is to start flying between the United States and Bosnia and Herzegovina from summer 2006.
Fly Bosnia aims to fly twice a week starting from summer 2006. The ultimate aim entails flying to Sarajevo on a daily basis.
From summer 2006, Fly Bosnia will aim to offer two flights a week from the United States via Manchester and London Gatwick to Sarajevo
Where to buy?
Usually buyers fall into 2 groups: people who have fallen in love with a particular area of BiH following a holiday and people looking for investment opportunities.
I recommend combining both those traits, find a place that you like and would look forward to spending holiday time AND consider the investment aspects of your planned purchase.
You do not make money buying foreign property, you only make money should you come to sell. So ask yourself whether the property could easily be resold and to what market it would be aimed.
Once you have done the easy bit coming on holiday and finding the areas you like- then the usual investment rules can be applied:
- Closeness to airports and motorway links
- Closeness to tourist attractions-sea, lakes, mountains, culture, etc
With the high quality of skiing available in BiH an investment in a ski resort can be a good bet. Sarajevo and Travnik are both close to Sarajevo international airport and Kupres is close to Split airport and harbour.
BiH has 2 official national parks, Sutjeska (south of Sarajevo) and Kozara (north west of Banja Luka) with plans in operation to add Bjelasnica/ Igman (the ski resorts south of Sarajevo) and the Prenj-Cvrsnica-Cabulja(stretching from Mostar to Konjic-locally known as the Herzegovina Himalayas). Hutovo Blato Bird Reserve (just north of Neum and Blidinje Nature Park (west of Jablanica) also enjoy protection status.
Europe’s largest artificial lake-Buska- is north of Split and is the home of many water sports. Konjic is the white water rafting centre of Herzegovina, bird watchers head for the Bardaca wetlands and Hutovo Blato and superb fishing is available throughout the country but especially in Jablinica Lake, formed originally for hydroelectric dams , but now a tourist resort in its own right.
Thermal spas are found throughout BiH, notably in Teslic and Slatina.
Sarajevo has a long and rich culture as an important crossroads between east and west. It bills itself as a town with attitude with an exciting nightlife, café culture, fashionable shops and a thriving arts scene, best represented by the film festival.
Mostar is a stunningly beautiful place and deserves all the tourist attention it receives.
Old town Mostar and Sarajevo properties are rarely available. The diplomatic community rent in old town Sarajevo so whilst high rentals can be obtained the owners are unlikely to sell. As the international peacekeeping commitment reduces these will probably become more available.
One of the busiest towns in Herzegovina is Medugorje, due to catholic pilgrims visiting the site where 6 teenagers witnessed a vision of the Mother Mary.
Towns just inside the border and close to the Adriatic can be a good investment such as Stolac.
The area immediately north of Dubrovnik is a Serb controlled region of BiH.
BiH does have its own stretch of coastline at Neum-just 22kms long. This is a place for fun and sun not for culture. Property prices here are not at the Croatian levels either side of it.
There is very little of actual Croatia north of Dubrovnik as the BiH border is very close.
Small towns can be very accessible to Dubrovnik and Dubrovnik airport at a fraction of the prices in Croatia itself. For example you still get views of Cavtat from Ivanica in BiH.
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Report Compiled By:
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Report ref: TPI-BK-001
Date created: 26-03-2006