Montenegro’s residential property prices continue to rise, buoyed by recovering domestic and foreign demand, improving construction activity, and a robust economy.
During the year to Q2 2023, the nationwide average price of new residential dwellings rose by 9.09% to €1,500 per square meter (sq. m), following y-o-y increases of 6.01% in Q1 2023, 20.5% in Q4 2022, 10.47% in Q3 2022, 11.52% in Q2 2022, and 3.77% in Q1 2022, according to figures from the Statistical Office of Montenegro.
However, when adjusted for inflation, new residential prices actually increased by just 1.5% y-o-y in Q2 2023. The wide disparity between the nominal and real figures is due to surging inflation, which rose to a record 17.5% in November 2022. Inflation eased to 7.9% in September 2023, but remains far above the average rate of 1.5% in the past eleven years.
On a quarterly basis, the average price of dwellings rose strongly by 11.86% (10.06% inflation-adjusted) in Q2 2023.
Montenegro’s house price annual change
Demand continues to recover, especially from foreign homebuyers. In the first eight months of 2023, foreign direct investment in real estate rose by 5.41% to €296.81 million compared to the same period last year, according to the September 2023 Bulletin of the Central Bank of Montenegro.
Residential construction activity is rising. During 2022, the total number of dwelling permits soared by 232.2% y-o-y to 2,156 units while the floor area of permits increased by 240.4% y-o-y to 136,558 sq. m, according to figures from the Statistical Office of Montenegro. Then in the first half of 2023, the number and total floor area of dwelling permits rose further by 33.5% and 39.5% y-o-y, respectively.
Montenegro’s housing market is expected to continue growing in the medium term, supported by its recovering tourism and continued economic growth.
The overall economy continues to grow, albeit at a slower pace. The International Monetary Fund (IMF) expects Montenegro’s economic growth to slow to 4.5% this year – not significantly different from the World Bank’s forecast of a 4.8% expansion but down from 6.1% growth in 2022. The European Commission’s forecast is more conservative, projecting the country’s real GDP growth to be 3% this year and 2.9% in 2024.
Local house price variations
Residential property prices in Montenegro vary considerably, depending on location.
In Podgorica, Montenegro’s capital, the average dwelling price rose strongly by 13.5% to €1,581 per sq. m during the year to Q2 2023, according to the Statistical Office of Montenegro. The most expensive housing in the capital city can be found in Podgorica I and Podgorica II, which include the districts of Preko Morace, Block 6, and Gorica.
- In the coastal region, which has one of the most expensive housing in the country, dwelling prices averaged €1,413 per sq. m in Q2 2023, down by 4.1% from the previous year but still one of the highest prices recorded in recent history.
- In the central region, the average dwelling price rose by 16.9% y-o-y to €714 per sq. m in Q2 2023.
- In the northern region, the average dwelling price surged by 39.9% to €1,280 per sq. m over the same period.
Residential construction activity continues to rise
During 2022, the total number of dwelling permits soared by 232.2% to 2,156 units from a year earlier, following an annual decline of 50% in 2021, according to figures from the Statistical Office of Montenegro. Likewise, the floor area of permits issued also increased by 240.4% y-o-y to 136,558 sq. m in last year.
Residential construction activity continues to recover this year. In the first half of 2023, the number and total floor area of dwelling permits rose further by 33.5% and 39.5%, respectively, as compared to the same period last year.
In the second quarter of 2023, the number of permits issued for residential buildings rose by 74.8% y-o-y to 582. Over the same period:
- Residential buildings with one dwelling: permits dropped 45.2% from a year earlier to 23
- Residential buildings with two dwellings: permits were unchanged from last year at 18
- Residential buildings with three or more dwellings: permits doubled from a year earlier to 527
- Additions (extension): permits increased 40% y-o-y to 14
Residential developments in Podgorica
Several residential projects are being or have been built in Podgorica in recent years. The City Quarter, located in the immediate vicinity of Delta City shopping center, is the largest mixed-use complex in the capital. Twenty buildings are built, offering almost 1,250 housing units to prospective homebuyers.
Other residential developments include the New City Quarter (with 12 new residential buildings); Ljubovic (developed by GradnjaPromet consisting of around 170 apartments); two new residential developments at the Old Airport; a mixed-use development in Block X (developed by Normal Company consisting of 142 residential units); and a 420-unit residential building in Block VII, also developed by Normal Company.
What’s growing? The coast!
But what attracts foreign investors is actually the coast. Coastal areas, particularly Kotor, Tivat, Budva, Herceg Novi, and Bar have seen significant developments in recent years, especially before the pandemic, with numerous apartment buildings and several large-scale projects, according to CBRE Montenegro.
Residential properties in coastal cities cost an average of €1,413 per sq. m. in Q2 2023, according to figures from the Statistical Office of Montenegro. But in popular resorts, real estate prices can go higher.
- In Budva Riviera, residential properties are sold for €1,700 to €3,500 per sq. m for flats, €3,500 to €6,000 per sq. m for luxury apartments, and €3,000 to €10,000 per sq. m. for houses, cottages, and villas.
- In Bar Riviera, prices range from €1,400 to €3,000 per sq. m for flats and luxury apartments and €1,200 to €3,500 per sq. m for houses, cottages, and villas.
- In Bay of Kotor, prices range from €2,000 to €3,500 per sq. m for flats, €3,500 to €8,000 per sq. m for luxury apartments, and €2,500 to €3,000 per sq. m for houses and cottages, and €4,000 to €7,000 per sq. m for villas.
They are very attractive to tourists because of their beautiful sandy beaches and nightlife, so there are a lot of new large-scale developments such as:
- Porto Montenegro is a large-scale development in the coastal town of Tivat, in the Bay of Kotor.
- Portonovi is a new luxury resort in Kumbor being developed by Azmont.
- Dukley Gardens, a high-end project in the Zavala peninsula, recently officially opened.
- DOMXXI is another high-end residential development in Budva, near Budva Old Town.
- Bečići is one of the most popular coastal tourist resorts in Budva. This tourist complex is currently undergoing major developments.
- Boka Bay, high-end residential units are under construction - a luxury tourist destination, with extensive high-end amenities.
- Luštica Bay is a large-scale complex in the northwestern Traste Bay in Tivat.
Montenegro’s charm attracts foreign buyers
To some extent, Montenegro’s coastal property market fluctuates with the fortunes of Russia’s economy - i.e., with the price of oil!
It’s a scene of glitz and glam, not subtle, but in your face.
Budva is a charming coastal resort and Venetian port-city, with sandy beaches and a diverse nightlife, and is the center of tourism, accepting well over half a million visitors annually. The larger Budva area had the most expensive housing in Montenegro, with prices currently ranging from €1,400 to €2,800 per sq. m.
The marvelously beautiful adjoining village of Sveti Stefan was a famous resort between the 1960s and 1980s, visited by celebrities like Orson Welles, Elizabeth Taylor, Sophia Loren, Princess Margaret, Carlo Ponti, IngemarStenmark, and Kirk Douglas. Now after the war, it is back, with an Aman resort.
The major foreign property buyers in Montenegro include Russians, Serbians, and British buyers.
“The rugged beauty of Montenegro continues to attract high-profile visitors, including Michael Douglas, Catherine Zeta-Jones, Madonna, and The Rolling Stones,” says Glenda Lazare of overseas investment specialist company Key Universal. “It is being tipped as the next Monte Carlo.”
With the easing of pandemic-related restrictions, demand for Montenegro’s coastal properties is gradually rising again. During 2022, tourist arrivals in the country rose strongly by 30.7% y-o-y to 2,183,975 visitors, following a huge 276.3% growth in 2021. Tourism was almost nonexistent during the onset of the Covid-19 pandemic, with arrivals plummeting by 83.2% in 2020.
Despite the recent surge, it remains below the record-high 2.65 million arrivals registered in 2019.
Tourism continues to recover this year. In August 2023, arrivals in Montenegro rose by 6.3% y-o-y to 240,754 visitors, following a whopping 37.8% increase in the previous month. Foreign visitors, who accounted for about 92% of total visits, were dominated by those coming from Serbia (19.6%), followed by Bosnia and Herzegovina (7.2%) and France (6.1%).
About 83% of tourists stayed at seaside resorts while around 9.4% lodged in the capital city. Budva, Herceg Novi, and Ulcinj had the most visits in August 2023.
There are no restrictions on foreigners buying property, except for land, which can only be purchased by foreigners through a company. After a building is constructed, ownership can be transferred to individuals through a simple procedure.
In 2015, the federal government passed a law allowing foreign homebuyers to obtain a residency permit in Montenegro upon purchase of a property, regardless of its value, according to Ivana Vukicevic of property firm Montenegro Prospects.
The Russians remain the biggest foreign homebuyers in Montenegro, despite sanctions
Despite the sanctions imposed by Montenegro on Russia related to its war on Ukraine, the Russians remain the biggest real estate investors in Montenegro. From January to May 2023, Russians spent a total investment of €52.5 million. Of this, about €28.9 million, or 55% was spent on buying real estate – making them the biggest foreign investors in the housing market in the country.
“Russian investments involved investments in companies in Montenegro or their purchase, the purchase of real estate and so-called inter-company debt, in other words, companies from Montenegro borrowing money from companies from Russia. According to official data, the majority of investment was in buying real estate in Montenegro,” the central bank told the daily Pobjeda.
Russians are mostly interested in villas and apartments on the Adriatic coast, according to local real estate agent Maja Radunovic.
“Most of the Russians are buying or renting real estate in the coastal towns of Bar, Herceg Novi, Petrovac, and Budva. These coastal towns were popular among Russians in previous years, and there are also Russian communities in those towns,” said Radunovic. “If the war in Ukraine and Western restrictions on Russia continue, we could expect interest in buying property in Montenegro to increase even more.”
Other foreign homebuyers in Montenegro come from the United States, Canada, Turkey, Serbia, UAE, Ukraine, Britain, Western Europe, and China, among others.
Russian nationals bought about 100,000 real estate properties in Montenegro between 2005 to 2010, according to estimates. Leading Russian daily Novaya Gazeta previously claimed that more than 40% of Montenegro properties are owned by Russians. However, in recent years, the number and the value of properties being bought by Russians have dropped significantly after the close ties between the two countries deteriorated.
In 2014, Montenegro backed the sanctions imposed by the United States and European Union on Russia for its unilateral annexation of Crimea. Their relationship was further strained after Montenegro accused Russia of sponsoring a coup attempt in 2016 to overthrow the pro-Western government and stop it from joining NATO. Montenegro joined the alliance on June 5, 2017.
Then on March 7, 2022, Russia added Montenegro to its list of enemy states, after the latter joined tough EU sanctions on Russia over its invasion of Ukraine.
Mortgage loans for foreigners
It is not easy for a foreigner to get a mortgage in Montenegro, though it is possible. Non-residents can get mortgages from a limited number of banks with a loan-to-value (LTV) ratio of 50% of the value of the real property, with maximum terms of up to 25 years, according to Dream Estates Montenegro.
However, mortgage lending does not apply to all types of real estate, but only to newly-built houses from large developers. However, there are exceptions if the property is located in a developer complex accredited by the bank.
Banks that offer mortgage loans to foreigners include Erste Bank, Hypo Alpe Adria, Societe Generale, Lovćen Bank, First Bank, NLB Banka, and Crnogorska Komercijalna Banka.
|HOUSING LOANS FOR FOREIGNERS|
|Erste Bank Montenegro||Lovćen Bank||First Bank||Crnogorska Komercijalna Banka|
|Loan amount||€10,000 - €400,000||€10,000 - €200,000||€5,000 - €100,000||€50,000 - €300,000|
|Payment period||Up to 20 years||Up to 10 years||Up to 25 years||Up to 25 years|
|Nominal interest rate||From 3.99%
|From 4.95%||7.99% to 11.49%||5.5% to 7%|
|Loan processing fees||Up to 1%||Up to 1.25%||1.5% to 2%||Up to 1%|
|Source: Savills Dream Estates Montenegro|
Mortgage rates increasing gradually
In September 2023, the average interest rate for new housing loans drawn from banks stood at 5.79%, up from 4.61% in the previous year and 4.21% two years ago, according to figures from the Central Bank of Montenegro.
Over the same period:
- Up to 1 year: 11.09%, unchanged from a year ago but sharply up from 3.5% two years earlier
- Over 1 year: 5.79%, up from 4.61% in September 2022 and 4.21% in September 2021
For outstanding housing loans, the average interest rate was 4.98% in September 2023, slightly up from 4.58% in the previous year and 4.6% two years ago. Over the same period:
- Up to 1 year: 6.18%, slightly up from 6.43% in September 2022 and 3.5% in September 2021
- Over 1 year: 4.98%, slightly higher than 4.58% in the prior year and 4.6% two years earlier
Rental market growing
Residential rents continue to increase, buoyed by robust demand. Currently, one-bedroom apartments in Montenegro rent for about €350 to €850 per month, and €500 to €1,000 for two-bedroom apartments.
Rents can go higher in Podgorica and other coastal cities, particularly Budva:
- In Podgorica, the average rent is currently €570 per month
- In the Bay of Kotor, the average monthly rent is €880
- In Tivat, rental rates are even higher at about €1,025 per month
- In Budva, residential properties are rented out for an average of €1,370 per month
Rental yields in Montenegro range from 5% to 8.2% in Q2 2023, based on a study conducted by the Global Property Guide in August 2023.
Montenegro’s tourism-reliant economy
The economy’s major growth driver is tourism. From 2013 to 2019, Montenegro’s economy expanded by about 3.6% every year, thanks to booming tourism, helped also by infrastructure projects such as the construction of the Bar-Boljare highway. Over the same period, tourist arrivals increased by an annual average of 9.2%.
However in 2020, tourism ground to a halt, due to the Covid-19 pandemic. Tourist arrivals plunged by 83.2% y-o-y to just 444,065 people in 2020, from more than 2.6 million arrivals in 2019, according to the Statistical Office of Montenegro. In collective accommodation (camping sites, tourist resorts, vacation facilities, boarding houses, motels, etc.), tourist arrivals fell sharply by more than 79% y-o-y to 268,878 people in 2020.
As a result, the overall economy contracted by a huge 15.3% in 2020, its worst performance in recent history.
During 2021, Montenegro’s economy bounced back strongly, registering real GDP growth of 13% - the highest rate among the six Western Balkan nations. The strong growth was driven primarily by strong private consumption and the gradual recovery in the tourism sector amidst the easing of pandemic-related restrictions. Tourist arrivals almost quadrupled in 2021 from a year earlier to 1,553,558 people – but still far below its pre-pandemic levels. Then in 2022, tourist arrivals rose strongly by 30.7% y-o-y to 2,183,975 visitors. As a result, the economy grew further by 6.1%.
However, the International Monetary Fund (IMF) expects Montenegro’s economic growth to slow to 4.5% this year – not significantly different from the World Bank’s forecast of a 4.8% expansion. The European Commission’s forecast is even more conservative, projecting the country’s real GDP growth to be 3% this year and 2.9% in 2024.
“Over 2023-25, growth in Montenegro is projected to average 3.1 percent, as private consumption growth slows, whereas investment is expected to provide marginally positive contributions to growth,” said the World Bank. “Tourism is likely to continue recovering in 2023 to reach its 2019 level, although deteriorating growth prospects in the EU and the region may have an adverse effect on both tourism and wider growth prospects.”
The country’s inflation eased to 7.9% in September 2023, from a record 17.5% seen in November 2022 and 16% in the same period last year, according to figures from the Statistical Office of Montenegro. Yet it remains far higher than the average inflation rate of just 1.5% from January 2010 to December 2021.
The labour market continues to strengthen. In the second quarter of 2023, nationwide unemployment stood at 12.9%, down from 15.5% in the previous quarter and 14.6% a year earlier. This was also far lower than the average jobless rate of more than 17% in the past decade.
The country’s fiscal deficit stood at 4.6% of GDP in 2022, up from 1.7% in 2021 but remains far lower than the shortfall of 10.1% recorded during the onset of the Covid-19 pandemic in 2020. Despite this, the government’s gross debt narrowed to 69.5% of GDP last year, sharply down from 83.3% in 2021 and a whopping 103.3% in 2020.
- Prices of dwellings in new residential buildings (Statistical Office of Montenegro): http://www.monstat.org/eng/page.php?id=320&pageid=320
- Russian Interest in Montenegrin Real Estate Spikes Despite Sanctions (Balkan Insight): https://balkaninsight.com/2022/07/07/russian-interest-in-montenegrin-real-estate-spikes-despite-sanctions/
- Russians “conquer” Montenegro (B92): https://www.b92.net/eng/news/region.php?yyyy=2023&mm=08&dd=09&nav_id=116504
- Property prices in Montenegro in 2023 (Tranio): https://tranio.com/montenegro/prices/
- Property prices in Montenegro increased by 7% in 2021 (Immigrant Invest): https://immigrantinvest.com/insider/real-estate-market-montenegro-en/
- Building permits and notification of building work (Statistical Office of Montenegro): https://www.monstat.org/eng/page.php?id=322&pageid=322
- Tourism (Statistical Office of Montenegro): https://www.monstat.org/eng/page.php?id=43&pageid=43
- Mortgage in Montenegro in 2023: how to get a real estate loan (Poradnuk): https://poradnuk.com.ua/en/mortgage-in-montenegro-for-ukrainians-in-real-estate-loan.htm
- Turizam/Tourism (Statistical Office of Montenegro): https://monstat.org/uploads/files/Bilten/2023/9/11.pdf
- Real estate investment in Montenegro (Immigrant Invest): https://immigrantinvest.com/real-estate/guides/monteneg/
- Gross rental yields in Montenegro: Podgorica and 2 other cities (Global Property Guide): https://www.globalpropertyguide.com/europe/montenegro/rental-yields
- Investing in Montenegro (Montenegro Guides): https://montenegroguides.co/business-finance/investing-opportunities/
- Arrivals and overnight stays (Statistical Office of Montenegro): http://monstat.org/eng/page.php?id=44&pageid=44
- Montenegro (International Monetary Fund): https://www.imf.org/en/Countries/MNE
- World Bank raises Montenegro’s 2023 GDP growth forecast to 4.8% (See News): https://seenews.com/news/world-bank-raises-montenegros-2023-gdp-growth-fcast-to-48-835991
- Economic Growth in the Western Balkans To Accelerate in 2024, Albeit Slowly and Unevenly (World Bank): https://www.worldbank.org/en/news/press-release/2023/10/19/economic-growth-in-the-western-balkans-to-accelerate-in-2024-albeit-slowly-and-unevenly
- Montenegro Shows Resilience Despite Slowing Growth and Continued Price Rises (World Bank): https://www.worldbank.org/en/news/press-release/2023/04/25/montenegro-shows-resilience-despite-slowing-growth-and-continued-price-rises
- Consumer price index CPI (Statistical Office of Montenegro): https://www.monstat.org/eng/page.php?id=26&pageid=26
- Labour Force Survey (Statistical Office of Montenegro): https://www.monstat.org/eng/page.php?id=22&pageid=22
- Bulletin of Central Bank of Montenegro September 2023 (Central Bank of Montenegro): https://www.cbcg.me/slike_i_fajlovi/fajlovi/fajlovi_publikacije/biltencbcg/2023/bilten_sep_2023.pdf