Montenegro: Overview
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Post-independence property boom in Montenegro
Two years after independence in 2006, Montenegro is in a midst of real estate boom.
Driven mainly by Russian and British buyers, real estate agents report price increases of more than 20% annually over the past two years.
Foreign investors are drawn to the Adriatic coastal areas, particularly the towns of Sveti Stefan and Budva. Some agents report that prices of coastal properties doubled within a year or two.
Government statistics show that out of the €900 million Foreign Direct Investment (FDI) Montenegro received in 2007, more than half went to real estate acquisition.
* Land titles can be problematic (especially property expropriated by the Tito regime from 1945 to 1980);
* Infrastructure is poor (swimming pools may lack water);
* Financing is difficult (most transactions are still done in cash and paid in full).
There are no restrictions on foreigners buying property, except for land, which can only purchased by foreigners through a company. After a building is constructed, ownership can be transferred to individuals through a simple procedure.
However, several politicians are concerned that foreigners are buying too many properties. A proposed law on the removal of restrictions on foreign ownership of property was withdrawn.
Foreign-ownership of property is also expected to be a thorny issue when Montenegro applies for EU membership.
RENTAL YIELDS
Coastal properties in high demand
Due to the recent surge in demand, prices of coastal properties in Sveti, Stefan and Budva are around €2,300 to €3,300 per sq. m. The price of a 120 sq. m. luxurious villa is around €396,000, according to Global Property Guide research.
New developments are changing Montenegro’s landscape with newly-built apartments dotting the countryside. Even agricultural farms near seaside towns are generating a lot of interest.
TAXES AND COSTS
Taxes range from moderate to high in Montenegro
Rental Income: Rental income is progressive, ranging from 15% to 23%, depending on the tax base.
Capital Gains: 15% tax is levied on the capital gains derived by non-residents, withheld at source.
Inheritance: Inheritance ax rates are 2% for second-degree relatives, 2.4% for third degree relatives; and 2.6% for other heirs.
Residents: Residents of Montenegro are taxed on their worldwide income.
BUYING GUIDE
Buying costs are low in Montenegro
Roundtrip transaction costs, i.e., the total cost of buying and selling a property, are around 6% – 8.75% of the property value. The buyer pays the transfer tax of about 3%. The agent’s commission ranges from 3% to 5%, usually paid by the seller.
The transaction cost on newly built property is much higher because 17% VAT is levied instead of the transfer tax.
LANDLORD AND TENANT
Tenancy laws
Research is ongoing.
ECONOMIC GROWTH
High hopes after independence
Montenegro (pop. 650,000) became independent in 2006, after 55% of voters opted for the dissolution of the Union of Serbia and Montenegro in a referendum. This followed a long but peaceful struggle.
Pro-independence Prime Minister Milo Djukanovic argued that association with Serbia hindered Montenegro from achieving its full potential. He hopes that his country will succeed in joining the EU before Serbia and Macedonia. Montenegro adopted the Euro as the official currency well before independence.
Djukanovic’s party won the first post-independence election, held in September 2006. He decided to retire in October that year after being president or prime minister since 1991. He was prime minister once more in February 2008 after his successor resigned.
His government has its hands full. Although the economy expanded by 7.5% in 2007, Montenegro is still one of the poorest countries in Europe with GDP per capita of just around US$3,800. The economy is expected to grow by 7.2% in 2008.
Unemployment was around 14.7% in 2007. Corruption, organized crime and the huge black market are other major issues that must be resolved.
RESIDENTIAL PROPERTY AROUND THE WORLD
Asia & Pacific
Bubble fears prompt foreign ownership limits in China
America & Caribbean
The slowdown of the U.S. housing market
Middle East and Africa
Bahrain is open to foreigners and sizzling hot
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| RESIDENTIAL PROPERTY FACTS | |
| Price (sq.m): n.a. | Rental Yield: n.a. |
| Rent/month: n.a. | Income Tax: n.a. Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income. |
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Roundtrip Cost:
8.3%
The total cost of buying and then reselling an apartment. Includes: * all transaction taxes and charges: * lawyers' and notaries' fees * agents' fees Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000. |
Cap Gains Tax: 0.0 Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation. |
| Landlord & Tenant Law: n.a. Rating is based on a detailed study of each country’s law and practice. | |
FEBRUARY 2008
JANUARY 2008
- Changes to Montenegrin property law - World of property
JULY 2007
- An Adriatic Stretch Is Awaiting Its Riviera Moment ? - New York Times
JUNE 2007
- Are you ready for the full Montenegro? - Telegraph UK
- Take a walk on the wild side - Guardian Unlimited
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