Montenegro's Residential Property Market Analysis 2024
Montenegro's residential property prices continue to rise strongly, despite stabilizing demand, falling residential construction activity, and the recent introduction of a progressive property tax.
Table of Contents
- Housing Market Snapshot
- Demand Highlights
- Supply Highlights
- Rental Market
- Mortgage Market
- Socio-Economic Context
Housing Market Snapshot
During the year to Q2 2024, the nationwide average price of new residential dwellings rose strongly by 21.4% to €1,821 per square meter (sq. m), following y-o-y increases of 30.95% in Q1 2024, 27.95% in Q4 2023, 24.56% in Q3 2023, 9.09% in Q2 2023, and 6.01% in Q1 2023, according to figures from the Statistical Office of Montenegro.
When adjusted for inflation, new residential prices were still by a huge 16.6% y-o-y in Q2 2024.
Quarterly, the average price of dwellings rose by a modest 3.7% (3.4% inflation-adjusted) in Q2 2024, in contrast to a q-o-q decline of 1.9% in the previous quarter.
The housing market remains robust, but prices and demand are expected to stabilize this year.
According to the Central Bank of Montenegro's 2023 Financial Stability Report: "Most of the real estate agencies (82.1%) estimated that the average price per square meter increased from 5% to 50%. The prevailing opinion among the agencies is that the prices will not change in the coming period. They also believe that the demand will not decrease but remain the same or even increase."
"During the year, demand was concentrated in apartments worth from 1,580 to 2,360 euros/m2. The most demanded apartments were in the wider center of the capital, as well as in cities in the southern part of the country," the central bank report added.
Montenegro's house price annual change
During 2023, foreign investments in real estate in Montenegro totaled about €463 million, up by 3% from the prior year. However, FDI in the country's real estate sector has been slowing this year, amidst the recent introduction of a progressive property tax. In the first eight months of 2024, foreign investment in real estate fell by 4.01% to €284.92 million as compared to the same period last year, according to the September 2024 Bulletin of the Central Bank of Montenegro.
"Starting January 1, 2024, Montenegro has introduced a progressive property tax, which significantly impacts the real estate market, especially in the premium segment. The new tax system includes a 3% tax for properties up to €150,000, a combination of fixed and percentage-based taxes for properties between €150,000 and €500,000, and a fixed rate plus a percentage for luxury properties above €500,000" said an article released by LAM-Estate.
"This change aims to generate more revenue from high-value property transactions while potentially stabilizing the market by slowing down speculative investments in luxury real estate," added the LAM-Estate article.
Despite the recent decline, the figures still surpass the pre-pandemic levels, which indicates that foreign investor interest in Montenegro remains high.
Residential construction activity is also falling rapidly. In the second quarter of 2024, the number of dwelling permits plummeted by almost 75% y-o-y to 148, following annual growth of 2.8% in 2023 and 232.2% in 2022, according to figures from the Statistical Office of Montenegro. Likewise, the total floor area plunged by 70.6% to 11,087 sq. m in Q2 2024 from a year ago.
During 2023, the country registered another robust economic growth of 6% from a year earlier, following annual expansions of 13% in 2021 and 6.4% in 2022, amidst the continued recovery in tourism. Tourist arrivals surged by nearly 20% y-o-y to 2,613,306 visitors last year.
However, the International Monetary Fund (IMF) expects Montenegro's economic growth to moderate to 3.7% this year. On the other hand, the World Bank and the European Commission are even more conservative, both projecting a real GDP growth rate of 3.4% for Montenegro this year.
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 11.5% to €1,763 per sq. m during the year to Q2 2024, according to the Statistical Office of Montenegro. It was the ninth consecutive quarter of double-digit y-o-y price growth. 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 €2,107 per sq.m in Q2 2024, up by a whopping 49.1% from the previous year and the highest price level recorded in recent history.
- In the central region, the average dwelling price rose strongly by 34.5% y-o-y to €960 per sq. m in Q2 2024.
- In the northern region, the average dwelling price was more or less steady as compared to a year earlier, at €1,200 per sq. m in Q1 2024.
Demand Highlights:
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 €1,500 to €3,000 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."
When pandemic-related restrictions were eased, demand for Montenegro's coastal properties started to increase 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.
Then in 2023, tourist arrivals rose further by 19.7% y-o-y to 2,613,306 visitors - at par with the pre-pandemic levels seen in 2019. Likewise, overnight stays reached 16.34 million last year, up by a whopping 31.5% from the prior year.
Yet tourism seems to be stabilizing this year. In the first nine months of 2024, the number of tourists who visited Montenegro reached 1,226,499 people, slightly up by 0.3% from the same period last year. Foreign visitors, who accounted for about 90% of total visits, also increased by 0.9% y-o-y to 1,102,982 over the same period.
In September 2024, foreign visitors were dominated by those coming from Serbia, representing about 17.2% of the total foreign visits, followed by United Kingdom (9.5%), France (7.3%), Germany (7.2%), Poland (6.6%), and Bosnia and Herzegovina (3.9%).
About 78.4% of tourists stayed at seaside resorts while around 13% lodged in the capital city. Budva, Herceg Novi, and Bar had the most visits in September 2024.
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.
Serbians overtook Russians as the biggest foreign homebuyers in Montenegro
During 2023, foreign investments in real estate in Montenegro totaled about €463 million, up by 3% from the prior year.
The Serbians are now the biggest real estate investors, spending a total of €78 million last year, overtaking the Russians after sanctions were imposed by Montenegro on Russia related to its war on Ukraine.
Though the Russians were still the second biggest real estate investors, splurging about €56 million in 2023 to buy Montenegrin real estate. Together, they accounted for around 29% of total real estate foreign investment in the country last year.
They were followed by investors from Germany and Turkey, with a total real estate investment of €51 million each, United States (€34 million), Ukraine (€15 million), Switzerland (€13 million), and UAE (€13 million).
However, FDI in the country's real estate sector has been slowing this year. In the first eight months of 2024, foreign investment in real estate fell by 4.01% to €284.92 million as compared to the same period last year, according to the September 2024 Bulletin of the Central Bank of Montenegro. Despite the recent decline, the figures still surpass the pre-pandemic levels, which indicates that foreign investor interest in Montenegro remains high.
"The top investors continue to be from Serbia, Turkey, Germany, Russia, and the USA," said market analyst Darko Dikanovic. "The only notable shift from previous years is the reduced involvement of Russian buyers and the increased presence of Turkish investors."
Prior to the imposition of sanctions, Russia had been biggest foreign homebuyers in Montenegro. 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.
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.
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.
Supply Highlights:
Residential construction activity falling
During 2023, the total number of dwelling permits rose by a modest 2.8% to 2,217 units from a year earlier, following a huge growth of 232.2% in 2022 and annual declines of 50% in 2021, 17.9% in 2020, 32.4% in 2019, and 47.3% in 2018, according to figures from the Statistical Office of Montenegro. Likewise, the floor area of permits issued rose by 8.6% y-o-y to 143,370 sq.m in last year.
Yet residential construction activity is now slowing rapidly. In the second quarter of 2024, the number of dwelling permits plummeted by almost 75% y-o-y to 148 while the total floor area plunged by 70.6% to 11,087 sq. m over the same period.
In Q2 2024:
- Residential buildings with one dwelling: the number of permits dropped by 13% from a year earlier to 20 and the total floor area was down 30.3% to 2,910 sq. m.
- Residential buildings with two dwellings: the number and total floor area of permits plunged by 66.7% to only 6 units and 77.9% to just 569 sq. m, respectively.
- Residential buildings with three or more dwellings: the number of permits fell sharply by 77.2% y-o-y to 120 while floor area declined by 75.9% to 7,244 sq. m.
- Additions (extension): the number of permits plummeted by 85.7% y-o-y to only 2 units and floor area dropped 56.2% to 364 sq. m.
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 €2,107 per sq. m. in Q2 2024, up by a spectacular 49.1% from the same period last year, according to figures from the Statistical Office of Montenegro. But in popular resorts, real estate prices can go even 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 the 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.
Rental Market:
Rental market growing, yields moderately good
Residential rents continue to increase, buoyed by robust demand. Currently, one-bedroom apartments in Montenegro rent for about €450 to €1,000 per month, and €700 to €1,100 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.
Gross rental yields in Montenegro are moderately good, with an average of 5.61% in Q3 2024, slightly down from 5.95% in the same period last year, according to a recent research conducted by the Global Property Guide.
By major areas:
- In Podgorica, apartments offer rental yields ranging from 5.81% to 7.62%, with a city average of 6.67% in Q3 2024.
- In Tivat, rental yields range from 4.71% to 5.45%, with an average of 5.08%.
- In Budva, rental yields range from 4.3% to 5.49%, with an average of 5.08%.
Mortgage Market:
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%+6M Euribor | 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% |
| Payment method | Monthly | Monthly | Monthly | Monthly |
| Source: Savills Dream Estates Montenegro | ||||
Mortgage interest rates stabilizing
In September 2024, the average interest rate for new housing loans drawn from banks stood at 5.08%, down from 5.79% in the previous year but still up from 4.61% two years ago, according to figures from the Central Bank of Montenegro.
For outstanding housing loans, the average interest rate was 5.07% in September 2024, slightly up from 4.98% in the previous year and 4.58% two years ago. Over the same period:
- Up to 1 year: 5.11%, down from 6.18% in September 2023 and from 6.43% in September 2022
- Over 1 year: 5.07%, slightly higher than the 4.98% in the prior year and 4.58% two years earlier
Socio-Economic Context:
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 6.4%.
During 2023, the country registered another robust economic growth of 6% from a year earlier, amidst the continued recovery in tourism. Tourist arrivals surged by nearly 20% y-o-y to 2,613,306 visitors last year.
However, the International Monetary Fund (IMF) expects Montenegro's economic growth to moderate to 3.7% this year. On the other hand, the World Bank and the European Commission are even more conservative, both projecting a real GDP growth rate of 3.4% for Montenegro this year.
"Montenegro's economy recorded high GDP growth in 2023, driven by very strong private consumption and a good tourism season. Output growth is projected to moderate in 2024-2025, as household consumption decelerates. Subdued external demand is likely to affect tourism growth," said the European Commission.
The country's inflation eased for a sixth consecutive month to just 1% in September 2024, down from 2.2% in the previous month and 7.9% in the same period last year, according to figures from the Statistical Office of Montenegro. It is now the lowest level registered since March 2021.
Nationwide inflation averaged just 1.5% annually from January 2010 to December 2021 before surging to a record 17.5% in November 2022. Inflation remained high at an average of 8.7% last year.
The labor market continues to strengthen. In the second quarter of 2024, the nationwide unemployment rate decreased to 11.4%, down from 11.9% in the previous quarter and 12.9% a year earlier. This was also far lower than the average jobless rate of 18.7% annually from 2005 to 2023.
The country registered a fiscal surplus equivalent to about 0.2% of GDP in 2023, an improvement from deficits of 5.1% of GDP in 2022, 1.9% in 2021, and 11.1% in 2020. In fact, it was the first surplus recorded since 2008.
As a result, the government's gross debt narrowed to about 60.3% of GDP in 2023, sharply down from 70.8% of GDP in 2022, 83.3% in 2021, 103.3% in 2020, and 74.9% in 2019.
Sources:
- Prices of dwellings in new residential buildings (Statistical Office of Montenegro): https://www.monstat.org/
- Property prices in Montenegro in 2024 (Tranio): https://tranio.com/
- Montenegro's Real Estate Market in 2024: Key Trends and Changes (LAM-Estate): https://lamestate.com/
- Montenegro will introduce a progressive property tax. What it is and how it will affect the market: expert opinion (Realting): https://realting.com/
- City Quarter (Celebic): https://celebic.com/
- Building permits and notification of building work (Statistical Office of Montenegro): https://www.monstat.org/
- Foreign investments in real estate in Montenegro jumped to 463 million euros (Peters Group Real Estate): https://peters-estate.com/
- Real estate foreign direct investments drops 9% in the first seven months of 2024, with shift in investor activity (Montenegro Business News): https://montenegrobusiness.eu/
- Russian Interest in Montenegrin Real Estate Spikes Despite Sanctions (Balkan Insight): https://balkaninsight.com/
- Interest rates (Central Bank of Montenegro): https://www.cbcg.me/
- Gross rental yields in Montenegro: Podgorica and 2 other cities (Global Property Guide): https://www.globalpropertyguide.com/
- Mortgage in Montenegro in 2024: how to get a real estate loan (Poradnuk): https://poradnuk.com.ua/
- Tourist numbers in Montenegro edge up 0.3% in Jan-Sept (SeeNews): https://seenews.com/
- Arrivals and overnight stays (Statistical Office of Montenegro): https://monstat.org/
- Arrivals and overnights of tourists, total 2023 (Statistical Office of Montenegro): https://monstat.org/
- Montenegro (International Monetary Fund): https://www.imf.org/
- Recent Economic Developments (The World Bank): https://www.worldbank.org/
- Consumer Prices index CPI (Statistical Office of Montenegro): https://www.monstat.org/
- Labor Force Survey (Statistical Office of Montenegro): https://www.monstat.org/
- Montenegro Government Budget (Trading Economics): https://tradingeconomics.com/
- Montenegro Government Debt to GDP (Trading Economics): https://tradingeconomics.com/
- Financial Stability Report 2023 (Central Bank of Montenegro): https://www.cbcg.me/
- CBCG Bulletin September 2024 (Central Bank of Montenegro): https://www.cbcg.me/