Tunisia has opened up to overseas investment in the past decade and now it's easier to buy property there, writes LAURA LATHAM

NOT SO LONG AGO few people would have considered investing in Tunisia, a country many associated with cheap package tourism. While the smart set flocked to Morocco for weekend breaks and snapped up ruined riads for renovation into boutique hotels, Tunisia looked on like a poor relative.

In terms of lifestyle, however, Tunisia, with its lively mix of North African and European-influenced culture, has as much to offer as Morocco.

Its long, sandy coastline is punctuated by busy resorts and pretty fishing villages, while its cities are developing at breakneck speed yet offer ancient medinas and other historic sites.

What Tunisia also has is some of the cheapest property in the Mediterranean region. Coastal apartments can be picked up for less than €50,000 (property prices are usually quoted in euros in Tunisia) and city centre investment property starts at €100,000, while historic dars, the equivalent of Moroccan riads, are available from as little as €10,000. However, until 2006, when the government relaxed laws on overseas ownership, getting a foothold was almost impossible.

In the past decade Tunisia has opened up considerably to overseas investment and trade. Recognised as one of the most moderate Islamic states, the country is now embracing modernity.

The government is investing heavily in some of the best IT and communications networks in the region; it recently entered the Open Skies agreement to admit a wider volume of air traffic; and, later this year, it will open Enfidha airport, the largest in Africa.

Significant interest from international developers has also led to plans for several multimillion-dollar “mega projects” involving facilities for business, leisure and residential resorts that will change the country.

These include Century City, an over 2,000-acre mixed-use community in the suburbs of the capital, Tunis; a financial services hub in the Raoued area of northern Tunisia; and the “Dubai-style” International Riviera project that will create a vast tourist complex in the beach resort of Monastir.

“There has been a re-evaluation of the infrastructure in Tunisia,” explains Najib Gorgine, economic counsellor to the Tunisian embassy in the UK, “and the pace of construction and development has been very fast in terms of new highways, bridges and harbours; all the necessary structures Tunisia needs to grow”.

With this has come the opening up of the property market to overseas investors. “Prior to 2006 it was very difficult for non-nationals to purchase,” says Gorgine, “but the process has been simplified and I believe there are plans to make it easier.”

Buyers need permission to purchase from local authorities, which can take anything from six months to a year to gain. However, Gorgine says this is now usually a formality and the purchase can go ahead in the meantime. Because Tunisia was a French protectorate until 1956, the legalities of the sales process are similar to those of France and contracts are in French or Arabic.

Many international buyers are regular visitors and seek holiday homes on the Tunisian coast, particularly in the tourist resorts of Hammamet, Sousse and Monastir. However, with 6.3 million visitors annually, the cheap and cheerful nature of these destinations is being addressed.

“Tunisia has always gone for quantity of tourists,” says Gorgine. “Now it’s aiming to increase quality.” Initial projects to spruce up Hammamet include Yasmine, a swanky new marina and residential development, plus plans for upgraded hotels and restaurants to attract a more monied clientele.

Meanwhile, International Riviera developer, BW Group, is focusing on turning Monastir into a glittering leisure destination.

The new airport at Enfidha, near Sousse in the north-east, is also creating a flurry of property and land purchases near cheaper resorts such as Hergla and Nabeul.

Along this coast prices vary from studios at upwards of €34,000 and two-bedroom apartments from €64,000 to three-bedroom villas with pools and gardens from €130,000.

Estate agent Adel Benna, of The Tunisian House in Nabeul, says there is rampant appreciation in the region, with increases of 15-25 per cent per annum and evidence of gazumping for the first time. “Prices are rising not only because there are more international buyers moving into Tunisia but because there is a high level of local investment,” he says.

“The dinar is a closed currency, so Tunisians can’t take their money out of the country and are choosing to buy property instead.”

Benna says the government’s development plan is also focusing attention on other areas of the country. He considers the charming fishing village of Bizerte, on the north coast, for example, a prime investment spot. It has already attracted a major hotel and resort brand, though Benna is not at liberty to disclose which.

As with many of Tunisia’s small towns, Bizerte’s old quarter is an enticing warren of crumbling, traditional homes. “Property in Bizerte costs a fraction of what it does elsewhere,” says Benna. He believes the town’s fortunes could follow Sidi Bou Said, a pretty, renovated village on the north coast that has become desirable and expensive.

Benna also believes there is a great deal of untapped potential in the historic Arab dars, which, like Moroccan riads, are built as a series of rooms clustered around a cool central courtyard. “In less well-known towns you can buy dars in need of renovation from about €9,000,” he explains.

Such properties tend to be unpopular with Tunisians, who prefer new homes. This means three-bedroom dars in need of updating can be bought, even in popular coastal towns, for between €55,000 and €100,000. In Tunis the cost would be closer to €200,000.

Tunisia is also drawing buy-to-let investors, who are keen to cash in on the influx of local and foreign workers following big business to the capital. As a result, prices in Tunis have been rising an average of 10 per cent per annum for the past three years. The main hub is the new waterfront suburb of Les Berges du Lac, site of embassies, the Tunisian stock market and multinational companies such as Siemens, L’Oréal and BP. Prices here average €1,100 a square metre.

Developer Ahmed Nhadir says the area is attracting investors who are avoiding the crisis-hit European and Middle Eastern markets. He says low prices plus the demand for quality rentals is giving early investors average yields of 6 per cent.

Tunis estate agent Salma Jedidi also says she is getting more enquiries from overseas, predominantly from France, Italy and the United Arab Emirates. “You can easily compare Tunisia with many European countries in terms of the quality of facilities and lifestyle,” says Jedidi, “but at the moment it’s still very cheap to invest.”

Jedidi, like almost every observer of the market, denies the country might be in a bubble. “The government is evolving projects over 10 years, rather than rushing them and I think the market for property will continue to rise. I am confident the economic crisis will not come to Tunisia