Market in Depth

Montenegro’s housing market recovering, amidst booming tourism

November 20, 2017

Montenegro’s house prices are poised to rise, amidst strong property demand and a booming tourism sector.

During the year to Q2 2017, the average price of new residential dwellings in Montenegro rose by 4.95% to €1,102 per square metre (sq. m), according to the Statistical Office of Montenegro. This is in sharp contrast with a y-o-y decline of 10.18% during the same period last year. However when adjusted for inflation, new residential dwelling prices were unchanged in Q2 2017 from a year earlier.

However on a quarterly basis, the average price of dwellings in the country dropped 5.97% (unchanged when adjusted for inflation) during the latest quarter.

Despite that, the signs are good.  Demand is robust. Residential property transactions were estimated to have increased by an average of 10% every year in the past two years, according to local real estate experts.

“For the last few years, we’ve seen a steady interest in properties, without the excitement of a bubble, and good value apartments and houses are selling well,” said Ivana Vukicevic of property firm Montenegro Prospects.

Foreign property demand is expected to continue rising, due to the launch of several new flights from across Europe (such as from Brussels, Milan, Barcelona, London, Oslo and Stockholm). In 2016, tourist arrivals rose by 10.2% y-o-y to 808,788 people, according to the Statistical Office of Montenegro. Then during the first three quarters of 2017, tourist arrivals surged 18% to 737,753 people from the same period last year.

“Montenegro property offers an excellent investment opportunity,” says Glenda Lazare of overseas investment specialist company, Key Universal. “The country has a burgeoning tourist industry, bolstered by the government’s Tourism Masterplan 2007-2020, which aims to develop high-end hotels, golf courses and other luxury facilities in order to attract affluent tourists.”

Says Ashwinder Raj Singh of Anarock Property Consultants: “Since there isn’t a lot of awareness about this country, property prices are still modest and attractive for early-mover investors.”

The economy is expected to expand by a healthy 3.9% this year and by another 3.3% in 2018, from an annual average growth of 2.8% in 2013 to 2016, according to the European Commission (EC), buoyed by surging tourism and large infrastructure projects such as the construction of the Bar-Coljare highway.

Montenegro house pricesThere 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.

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 Vukicevic.

Analysis of Montenegro Residential Property Market »

Rental Yields

High prices in Montenegro

Prices in Montenegro are quite high, although they seem to have fallen over the past year. Buying prices for coastal houses average around €2,870 per square metre, or around €266 per square foot.

We are unable to give yields figures, because lets tend to be seasonal, and there is no basis for long-term yields calculations.

Read Rental Yields »

Taxes and Costs

Taxes are moderate in Montenegro

Rental Income: Rental income is taxed at a flat rate of 9%, with an optional lump-sum deduction of 40% in lieu of actual costs.

Capital Gains: Capital gains realized from sale of real property in Montenegro are taxed at a flat rate of 9%.

Inheritance: Inheritance of first degree relatives (spouses and direct descendants) is not taxed. Other heirs are liable to pay 3% tax on their share of the estate.

Residents: Residents are taxed on their worldwide income at a flat rate of 9%.

Read Taxes and Costs »

Buying Guide

Buying costs are low in Montenegro

Montenegro luxury housesRoundtrip transaction costs, i.e., the total cost of buying and selling a property, are around 6.57% to 24.02% 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 19% VAT is levied instead of the transfer tax.

Read Buying Guide »

Landlord and Tenant

Tenancy laws

Research is ongoing.

Read Landlord and Tenant »


Robust economic growth, fueled by strong tourism and construction

Montenegro Suscepan modern houseThe economy's major growth driver is tourism.  From 2011 to 2016, tourism grew by an average of 5.4% annually. In 2016, tourist arrivals rose by 10.2% y-o-y to 808,788 people, according to the Statistical Office of Montenegro.

Then during the first three quarters of 2017, tourist arrivals surged 18% to 737,753 people from the same period last year.

The economy grew by a modest 2.5% last year, after annual growth rates of 3.4% in 2015, 1.8% in 2014, and 3.5% in 2013, according to the IMF. The economy is expected to expand by a healthy 3.9% this year and by another 3.3% in 2018, according to the European Commission (EC).

However, large infrastructure projects are now putting pressure on Montenegro’s fiscal balance and public debt. The government budget deficit is expected to rise to 5.8% of GDP this year from 3.6% of GDP in 2016. Likewise, the government’s gross debt is also projected to increase to 71.1% of GDP this year, from 67.4% of GDP in 2016, according to the EC.

Montenegro will raise the value added tax (VAT) from 19% to 21% next year, in an effort to reduce public debt starting 2019. The government also plans to cut officials' salaries, freeze public sector employment, and scrap benefits to many social categories.

The country’s overall inflation slowed to 2.3% in October 2017 from 2.8% in the previous two months. Nationwide inflation averaged 1.5% from 2010 to 2016, according to the IMF.

Montenegro gdp inflationHowever, high unemployment remains a problem. Unemployment fell to 15.1% in Q2 2017, from 17.4% in the previous quarter and 17.5% in the same period last year, according to the Statistical Office of Montenegro.

Corruption, organized crime and the huge black market are other major issues that must be resolved.

Montenegro (pop. 623,000 in 2016) 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 became prime minister again from February 2008 to December 2010 after his successor resigned. After Igor Lukšić, Djukanovic took the prime minister position for the fourth time in December 2012. Djukanovic was replaced by close ally Dusko Markovic in November 2016, despite boycott by opposition parties, who complained of election irregularities. Markovic is expected to continue his predecessor’s policy towards further integration with the West, in particular Montenegro’s accession to NATO and its membership to the European Union.

The country officially applied to join the EU in December 2008. However, formal EU accession talks only began in June 2012. By end-2009, Montenegrin citizens were granted the right to visa-free travel within the Schengen zone. Montenegro became a member of the World Trade Organisation in April 2012.

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