Montenegro real estate market - trends, covid-19 impact, and forecasts for 2022

Montenegro is a country with a favorable strategic position on the Adriatic coast, a decade of consistent growth in real GDP rate, constant growth in the tourism sector, and the overall quality of life.

With its stable currency, low real estate tax rates, and the opportunity to obtain residence through property purchase and Citizenship through investment, the Montenegro real estate market has long been a popular place for investment for many foreigners from around the world. 

If you're interested in investing in a property in Montenegro, read our article and find out everything you need to know about the general economic situation in Montenegro, how COVID-19 affected it, and growing trends on the market, as well as forecasts for the year 2022.

In this article, you will learn about construction activity, price trends, and foreign investments in the Montenegrin property market. Discover which property the Montenegro real estate market has to offer, and find out what is the best place in Montenegro for your future investment and how you can buy property in Montenegro as a foreign citizen

For quite a long time, the Montenegro real estate market, as well as other sectors of economic activity in the country, have had nothing but bright predictions for growth in the future, and there are a number of important factors that are responsible for that success.

#1 Favorable tax policy and stable currency

One of the many things that attract numerous investors to Montenegro is its favorable tax policy.

Montenegro has long been known for its low personal and corporate tax rates, oftentimes even regarded as the European tax haven. However, on the 1st of January 2022, a new tax regime was introduced in Montenegro, which resulted in the use of a progressive taxation system.

But the real estate annual taxes remained among the lowest in Europe ‒ they can range from 0.25% to 1% of the value of the property.

Montenegro's use of the Euro as currency is another aspect that attracts many foreign investors to the country. Even though it is not a member of the EU, in 2002 Montenegro adopted the euro as its domestic currency, long before the beginning of its accession negotiations, which took place in 2012.

This step was intended primarily to ease the accession to the EU, but it has brought many more advantages. One of them is the fact that this way, the Montenegro real estate market is not influenced by possible currency fluctuations, which attracts foreign investors and results in more of them deciding to invest in Montenegro.

#2 A country focused on the growth of tourism and industry

Since Montenegro gained independence in 2006, its government became stable and started prioritizing the growth of the country’s tourism and industry. With its astonishing nature and rich cultural background, Montenegro has always had a big tourism potential, which the government recognized and took action upon.

The government started focusing on tourism and supporting immigration and foreign investment. In relation to that, the Montenegrin government introduced the opportunity to obtain Montenegrin residency through a property purchase.

Additionally, in 2019 the government started the Citizenship by Investment Program. According to this program, a foreigner who invests a certain amount of money in a government-approved development project, as well as a donation to a government development fund, has the chance to obtain Montenegrin citizenship and a Montenegrin passport.

#3 Tourism - the major growth driver of the Montenegrin economy

Montenegro is widely known as the country with the best tourism prospects in the region. Ever since gaining independence and a stable government, its tourism sector has been in constant growth.

During the period from 2011 to 2019, Montenegro's tourism grew steadily each year, with an average growth of 9%. Thanks to the growth in the tourism sector, the whole economy of Montenegro grew by an average of 3,6% annually.

The tourism sector accounts for about 20% of the country's GDP and has a substantial impact on the Montenegro real estate market.

Thanks to a stable currency, favorable tax policy, and blooming tourism and industry, as well as its great strategic position on the coast of the Adriatic Sea, Montenegro became a strong and stable country suitable for a good investment. This fact has been recognized by many foreign investors, which resulted in an increasing number of foreign investments in the country.

Montenegro is undeniably a country with great prospects. Its constant economic growth and blooming tourism make it a good place to invest in, which is directly shown in the country's GDP growth rate.

Since 2011, the country of Montenegro has been recording a consistent real growth rate of GDP. With the exception of a -2,7% in 2012, the period from 2011 to 2019 shows a GDP growth with the lowest 1,8% in 2014, to 5,1% in 2018.

Naturally, during the global pandemic of COVID-19, the GDP growth rate dropped, but this topic will be addressed in the next section.

The GDP growth rate has also resulted in an increase in salaries. In the last decade, both gross and net salaries have been in a slight but consistent rise, across all sectors. Thus, in the period from 2011 to 2019, the average gross wage rose from 709 EUR to 802 EUR, while the average net wage rose from 475 EUR to 537 EUR. In January 2022, the average gross and net salaries were 890 EUR and 686 EUR respectively.

Consequently, the growth of wages resulted in the improvement of the living conditions, which is a direct outcome of the growth in the whole industry, particularly in the tourism and real estate sector.

As far as foreign investments are concerned, according to data provided by the Central bank of Montenegro, over the past decade, the inflow of foreign direct investments in Montenegro has shown slight fluctuation.

From year to year foreighn direct investments (FDI) inflow has either been increasing or decreasing, but on average, it has been rather stable. The average total FDI inflow during the period 2011-2021 is EUR 496.43 million, with an average 11.3% y-o-y increase in net FDI inflow. 

In the structure of equity investments, inflow arising from the foreign investments in real estate amounted to an average of EUR 132.3 million, which is 26.6% of the total FDI inflow.

As it has previously been mentioned, in the last decade Montenegro has been recording a consistent real growth rate of GDP ‒ until 2019 it has marked an increase of up to 5,1%. However, in 2020 Montenegro faced a concerning drop of -15,3% in GDP growth rate, due to the economic consequences of the global pandemic.

The constant lockdowns affected all sectors of economic activity, but it seems they have been felt primarily in the tourism, hospitality sector, and real estate market. During the economic recession that was brought about by the global pandemic, the conditions of the Montenegro real estate market have been greatly worsening. 

COVID-19 affected both construction activity and property prices in Montenegro

In 2020, prices in the real estate market decreased significantly. The average price of dwellings in a new residential building in Montenegro decreased by 14.6% compared with 2019.

According to the Statistical Office of Montenegro “The average price of dwellings in a new residential building in Podgorica in 2020 was 966 EUR, in coastal region was 1 348 EUR, in the central region 554 EUR, while the average price of dwellings in a new residential building in the northern region was 720 EUR.“

However, during this period there were sold a lot of dwellings belonging to the category of solidarity housing development, which influenced the average price.

As stated, “A major impact on a average price per square meter of dwellings in a new residential building in Montenegro in 2020 has the share of the average price per m2 of dwellings which belonging to the category of solidarity housing development, which was significantly higher in the observed year compared to the previously observed year . . . The average market price of dwellings in a new residential building in Montenegro in category enterprises in 2020 was 1 151 EUR, while in category solidarity housing development was 581 EUR.”

Surprisingly, the construction activity continued to rise. Even though construction activity in the first two quarters of 2020 was lower than in their preceding quarters, the last two quarters showed a rise in construction activity. Additionally, the number of dwelling permits rose by 9.8% in the first three quarters of 2020, compared to the same period in 2019.

Foreign investments and tourism changes under the COVID-19 pandemic

In the Bulletin of the Central Bank of Montenegro from October 2020, the Central Bank of Montenegro stated as follows “According to the Ministry of Finance`s estimates, in September this year, source revenues of the Budget of Montenegro and state funds amounted to 142.5 million euros or 3.1% of the estimated GDP, and they were 21.8% lower than planned and 14.1% lower than in September 2019, as a result of the COVID-19 pandemic.”

Additionally, under the section about Foreign Direct Investments, it is stated that in the first three quarters of 2020 “The total inflow of foreign direct investments amounted to 506.8 million euros (fall of 14.4%) while the inflow arising from investments in immovable properties amounted to 72.4 million euros (44.1% decline).”

During this period, tourism in Montenegro faced great difficulties as well, which most likely had an effect on the property market in Montenegro.

Apart from being one of the main sectors of the Montenegrin economy, tourism is crucial for the success of the Montenegro real estate market, because the majority of foreign property investors first come to Montenegro as tourists.

In 2020, the number of tourist arrivals decreased by a staggering 83.2% compared to 2019 - from 2 645 217 arrivals in 2019 to only 444 065 arrivals in 2020.

However, in 2021 the situation improved ‒ the preliminary data of the Statistical Office of Montenegro, show 1 670 879 tourist arrivals in 2021, which is three times greater than in 2020. Additionally, foreign investment in real estate improved as well. “In the structure of equity investments . . . investments in real estates amounted to 184.3 million euros (a 154.3% growth).”

During the last decade, the activity of real estate buyers in Montenegro has shown ongoing trends which have shaped the Montenegro real estate market. Here are the key market trends of the Montenegro property market.

#1 Rise in international property buyers

One of the main Montenegro property market trends is certainly the increase in the number of international property buyers. With the possibility of obtaining a residence permit based on the ownership of a property, as well as participating in the Citizenship by Investment Program, more and more foreigners choose to invest in the Montenegro real estate market and make this prosperous country their home.

The Montenegro real estate market allows foreign citizens to invest in Montenegrin property under rather favorable terms. In fact, the requirements a foreign citizen has to fulfill in order to buy a property in Montenegro are the same as for domestic citizens.

The only difference is the following - while EU and non-EU citizens can buy any residential property and land with planning, to buy agricultural land one has to set up a company. However, purchasing residential or commercial property does not have any restrictions.

What are the terms for buying a property as a foreigner?

When you've found the desired property and agreed on the purchase price, it is highly advised to appoint a lawyer who is licensed to work in Montenegro, especially if you are not familiar with the Montenegro real estate market.

It is not legally required to hire a lawyer in order to purchase the property, but it is advisable. The lawyer will check the property deeds, protect your interest, negotiate the contract terms for you, and follow the land registry registration process.

Before you sign the purchase contract, you usually have to place a deposit to take the property off the market. Then, the next step is to sign the Sales and Purchase Agreement, which contains the conditions of the purchase.

The contract must be signed in person by both the buyer and the seller, in front of the appointed notary in Montenegro. If you can't be there in person, you can give your lawyer power of attorney, so that they can sign it for you.

If you do not speak Montenegrin, a licensed interpreter must be present during the signing, in order to translate the contract and the discussion in the meeting. 

After signing the contract, you need to pay the purchase price via bank transfer. Once you've paid the price in full, the notary will send all the necessary documents to the land registry, so that the property will be titled to your name. This process is usually completed within a few weeks.

Additionally, at this point, you need to pay the purchase tax or title transfer tax, which amounts to 3% of the value of the property. When the property is registered in your name, you can also change utility bills in your name.

International real estate agencies offer assistance to all interested buyers

There are evidently a lot of things to be taken care of when making such an important investment as buying a property. Luckily, in Montenegro, there are real estate agencies and lawyers that are licensed to work internationally.

Montenegro Prospects in particular is the most experienced international real estate agent in Montenegro which offers great benefits to foreign investors.

Besides helping their clients find the fitting property for their investment, they can also take care of the whole process of buying the property for them. They offer property evaluation and a list of recommended lawyers, as well as services in both English and Russian.

#2 Rise of luxury properties in coastal areas

During the last decade, the Montenegro real estate market trends have shown an increased interest in luxury properties, especially in coastal areas, which represent the heart of Montenegrin tourism.

The development of yacht marinas and naval tourism has led to a growing number of tourists in these areas, which in turn led to a greater need for luxury rental real estate, as well as commercial waterfront real estate.

Luxurious projects such as Lustica Bay, Porto Montenegro, and Porto Novi influenced the growing popularity of these properties and Montenegro's reputation as an eminent destination for investment in these projects.

That is why today there is a lot of newly developed waterfront luxury real estate in the popular coastal tows such as Budva, Kotor, Tivat, and Herceg Novi. Investors can now choose between luxurious hotels, villas, and apartments along the coast, as well as commercial properties in the hotspots of Montenegrin tourism.

However, enclosed residential developments hold an advantage over other luxury properties. Namely, they offer maintenance of your property throughout the whole year, so you don't have to worry about potential problems that may arise. 

#3 Montenegro real estate market price trends

As already mentioned, the global COVID-19 pandemic greatly affected prices in the Montenegro real estate market, lowering them significantly in 2020. However, the average price of dwellings in 2021 increased.

In 2021, there was an average increase of 15% in the prices of dwellings, primarily because of the rise in construction material and labor prices.

According to the owner of “Zetagradnja”, one of the biggest construction companies in Podgorica, at the beginning of 2022, the prices of apartments in new residential buildings went between 1 250 EUR and 1 700 EUR per square meter. Whether the prices are going to continue to rise depends on the rise of construction material and labor prices.

According to the director of “Montenegro Prospects”, the most experienced international real estate agency in Montenegro with offices in Kotor, Budva, and Bar, prices in the coastal area also grew significantly, somewhere between 10% and 20%. The coastal real estate market marked increased activity in 2021 compared to a couple of previous years, despite the pandemic. Apartments were sold much more than houses ‒ they amounted to 64% of the total investment, while houses were 27% and land 10%. He also commented that continued growth of the prices is to be expected, primarily because of growing demand.

However, he stressed that generalizing and trying to define the average dwelling price in the coastal region can lead to false conclusions because the prices are directly affected by the location and the size of the property, as well as the number of its amenities.

Property prices in 2022 - properties in the coastal areas are still sold at the highest price

According to the data from the personal database of the Montenegro Prospects real estate agency, average property prices in the second quarter of 2022 show that the highest prices per square meter remain in the coastal area.

Waterfront properties in Budva sell for 2,300-5,850 EUR per square meter, while properties further in the town go from 1,200 EUR to 1,500 EUR.

In Tivat, prices range from 1,500 EUR to 2,700 EUR, with the exception of the luxury projects of Lustica Bay where they go from 3,550 EUR to 6,700 EUR, and Porto Montenegro with prices from 5,000 EUR to 7,200 EUR per square meter.

In the capital of Podgorica however, property prices are much lower and range from 850 EUR to 1,750 EUR, depending on the location and the condition of the property in question.

Compared to the previous year, property prices in Podgorica haven't changed significantly. Namely, in 2021, apartment prices went from 1,000 EUR to 1,500 EUR per square meter.

However, property prices in the coastal region changed notably. In 2021, apartments in Budva were sold for the price between 1,400 EUR and 2,950 EUR, while now they range between 1,200 EUR and 5,850 EUR, both center and waterfront apartments included.

The same goes for Tivat, where in 2021 the average apartment price was between 1,650 EUR and 3,350 EUR, while now they go from 1,500 EUR all the way up to around 7,000 EUR, thanks to luxury projects like Lustica Bay and Porto Montenegro.

Looking at houses, apartments, and land thorough the whole of Montenegro, the average prices largely depend on the location of the property. To compare pieces in more detail, explore our catalog.

According to the website Global Economy, under the period between September 2011 and February 2022, “The average value for Montenegro during that period was 5.99 percent with a minimum of 4.55 percent in February 2022 and a maximum of 7.8 percent in March 2012.”

From July 2021 until February 2022, it has been steady, with an average of 4.59%.

As far as property taxes are concerned, the purchase tax for real estate in Montenegro is 3% of the value of the property. The value of the property is determined by the tax office but is usually the same as the purchase price on the contract.

The purchase tax can be paid as soon as the contract is signed, and must be paid within 15 days of signing the contract. However, it is advised to do it as soon as possible because interest rates rise every day of the delay.

As the registered owner of the property, you are obliged to pay an annual property tax, which depends on the location and size of the property, as well as its location. Property owners also need to pay tourist tax, which they receive in their mail. Additionally, if you rent your property, you are obliged to pay income tax on your rental income.

The Adriatic Coast of Montenegro is the most popular part of the country among tourists, and the best investment opportunity by far. 

Being the most popular area in the Montenegro real estate market, the coastal area offers numerous luxury properties such as luxurious villas with beautiful sea views and spacious apartments in new residential developments on the waterfront.

Coastal cities like Budva, Kotor, Tivat, and Herceg Novi are without a doubt the most popular tourist areas in Montenegro. With beautiful rivieras, new apartment complexes, luxurious hotels, and developing yacht marinas, they offer tourists an exclusive place to visit.

Additionally, exclusive waterfront commercial properties make for an exquisite place to start your new business. Having all of this in mind, buying rental or commercial property in this part of Montenegro is by far the best investment, which will quickly result in high returns.

The coastal area is also suitable for digital nomads and those who wish to afford themselves a luxurious life in a modern place that offers amazing natural beauty and an astonishing cultural heritage. By buying a residential property in this area, you will get the chance to experience its charms all year round.

Even though real estate in the coastal area costs more than that in the inland, it is a great investment opportunity, and most investors choose to buy waterfront property for rental purposes, as well as commercial property.

Together with the coastal area, the capital of Podgorica also has a high demand for property, both by domestic citizens, as well as foreign investors. However, the recent period shows that the northern region of Montenegro started gaining greater popularity among investors, who are now constructing profitable holiday houses in this area.

The global pandemic of COVID-19 made a great impact on the Montenegro real estate market, not only economically, but also in the aspect of future property market trends. Here are the most common predictions of the future trends of the real estate market in Montenegro.

#1 Growing interest in all-year-round apartments

The latest period has shown a growing interest for apartments that can be used throughout the whole year, and not just during the peak of the holiday season.

Namely, more and more foreigners choose to move to Montenegro permanently, which investors have recognized and started shifting their focus to this particular type of property. When choosing this kind of property, the main amenities it should have are different than those of the usual holiday apartments.

Since the property in question is not going to be used only during the holiday season, the vicinity of the beaches and the sea view the apartment offers are in the background. Instead, what matters the most are the vicinity of a public school and a local market, as well as infrastructure because the neighborhood should be suitable for everyday life.

#2 High demands for holiday apartments in coastal areas still remain

Despite the growing interest in apartments that can be used all year round, the Montenegro real estate market still shows a high demand for holiday apartments. 

When deciding on a holiday apartment, buyers focus mainly on the sea view it offers, as well as the vicinity of the waterfront. These apartments are usually used for a couple of weeks during the holiday season. Holiday apartments in Budva appear to be especially popular, given the fact that Budva is a well-known center of Montenegrin tourism.

#3 Investors' growing recognition of holiday houses in the northern region 

As far as houses are concerned, there is a growing trend of construction in the northern region, mainly in rural areas. The reason for this is that investors recognized the fact that it is not very profitable to build houses in towns, since there is a much higher need for apartments there.

Instead, more and more houses are being built in the northern region, while the particularly profitable properties can be found located close to Lake Skadar. These houses are used as holiday houses and can be rented much longer than holiday apartments in the coastal area.

For instance, houses in Žabljak are usually occupied for a minimum of 6 months, while properties in the coastal area are occupied only during the summer holiday season, which is around 3 months.

Even though buying property in the coastal areas is still very popular, property in the rural areas of the northern region is surely becoming a trend. From this, we can draw the conclusion that, if you want to invest in a rental property, investing in houses in the northern region of Montenegro is a wise decision.

#4 Venetian apartments in the Bay of Boka for a hedonistic lifestyle

As the most beautiful part of Montenegro, as well as the Adriatic Sea, the Bay of Boka reveals a completely different experience to its visitors. Even though it doesn't have beaches, properties in the Bay of Boka offer the opportunity to have your own access to the sea, directly from your residence.

Properties for sale in the Bay of Boka consist of old Venetian houses, which rarely appear on the market. This fact, together with their ancient and renowned architectural style, forms their high market price. These properties mainly attract the attention of a chosen clientele that is interested in a hedonistic lifestyle.

The global pandemic that so severely affected the whole world has evidently had an impact on the Montenegro real estate market, tourism, and the country's overall economy, but it quickly got back up again, resulting in an even greater demand for real estate and direct investments, especially in the coastal areas.

The year 2020 marked a great drop in GDP growth rate, tourism arrivals, and foreign investment in immovable property, which resulted in decreased prices of residential and commercial property.

However, in 2021 the situation improved, and if the pandemic doesn't worsen, an even greater approvement can be predicted for 2022.

The year 2021 marked three times larger amount of tourist arrivals and three times greater foreign investment in real estate, and the average real estate price increased by 15%.

The growth in demand for real estate is to be expected in the future, especially in the coastal area, but whether the prices are going to continue to rise or not largely depends on the rise of construction material and labor prices.

The average dwelling price can not be easily defined and should not be generalized, because it is affected by the number of amenities, location, and size of the property.