Real estate investment

Montenegro’s real estate market is one of the most attractive and secure investments you can make in the country. Also, as investing in touristic real estate is one of the requirements of the CBI program, the market is seeing a recent boom that will continue for the three years the program is expected to last.

One of the main advantages of the real estate market is that it has landscapes, prices, and types for everyone: beachside villas on the coastlines, luxurious apartments in the capital, lodges in the mountains, and more.

Likewise, the real estate market benefits from Montenegro’s tax system. Land transfer, property, and capital gains tax are significantly lower, even twice (or more) lower than in most of Europe.

However, as it is a developing market and all legal documents are in Montenegrin, it is vital to seek advice from our experts.

The market has seen a significant influx in the last few years, but is still developing, and is expected to continue growing in investment, quality, and revenues in the next decade. The best real estate projects in Montenegro are yet to be developed, which means it’s still a fantastic time for real estate investment in Montenegro, especially when considering the potential returns your investment may have.

First of all, prices and particularities depend on what you’re looking for. Are we talking about a residence in the capital? A luxury villa on the Coast? Likewise, it is always good to work with someone with expertise. The best prices and estates are sold quietly, and foreigners are seen as an easy negotiation, so to get the best price possible, it is vital to work with a real estate agent.

These are, broadly, the main types of properties on sale in Montenegro.

• Apartments: Podgorica has plenty of multi-story building apartments. In the Coast, they are more luxurious as they are usually complexing with pool, and at a walking distance from the beach.

• Townhouses: They are generally located outside the city centers, of more or less 2k sq. ft, and usually are entirely new. 

• Villas: They are even bigger than townhouses, more luxurious, and closer to the city downtown.

• Land plots: There are plenty of land plots in Podgorica and its metro area to build what you want and how you want it.

Similarly, the location of the real estate fall into three categories:

• Tourist areas in the coast

• Podgorica

• Small towns, especially in the north

This combination of classes will determine the price ranges and characteristics of the real estate you might be looking for.

However, if we take a look at the investment in the real estate market, it’s mostly targeted at touristic real estate. This has two reasons. First, tourism drives Montenegro’s economy. Second, the CBI program requires an investment in tourism, which has increased the number of projects in development. Similarly, one of the best ways to obtain income from real estate investment is through rental income. As the prices are low for European standards, it’s easy to find someone to rent your estate to, especially during the tourist season (from May to September). However, the prices are increasing, which means you can get an incredible investment return.

The most sought touristic real estate locations and the ones with the most projects in development, mainly approved developments for the CBI program are in the South, mostly:

• The Bay of Kotor.

• Budya, which is called the Balkan Miami and includes more than eight miles of beaches right on the Adriatic coast.

• Seaside strips near Bar, which are usually filled with Russian tourists.

Now, if you’re thinking about investing in Podgorica, don’t let the 190,000 citizens number fool you. It has plenty of differences between neighborhoods. Some of the most-wanted are Blok 5 and 6, especially for families, and Pod Goricom is for the-top-of-the-top. Podgorica has one of the lowest sq. meter prices among European capitals, at a meager average of €1000. In comparison, in Zagreb, it costs €1,900, and in Belgrade, it costs €2,200 approximately.

However, if you're looking for even lower prices, Nikšić is the second-largest city in Montenegro. The city doesn’t have as much tourism potential as the capital or the coast, but it has some of the most important industrial centers of the country. That means that if Montenegro continues its FDI flow, an investment in Nikšić may pay off.

What are the main factors swaying property prices across Montenegro? There are many influencing factors over the positive trends on Montenegro’s real estate market:

1. The country has had a pro-business, stable government since its independence.

2. The beautiful landscape of the country and its attractive business environment has attracted loads of FDI for developing hotels and touristic complexes.

3. The Montenegrin government reformed residence laws to add property acquisition as a fast-track way to acquire it.

4.  The CBI program has led to a renewed influx of FDI in touristic real estate.

5. The country’s geographical location, close to Russia, Turkey, and Southern Europe means there is a mix of foreign investors willing to take part in Montenegro’s real estate business.

During the European crisis, Montenegro’s real estate prices fell by almost 30%. As we said before, the economy is incredibly vulnerable to external shocks. However, not long after the crisis, Russian investors appeared to purchase land lots to build seasonal homes, which was also followed by Western investors when prices and the market started to rise again. 

So, how has the influx of investment affected prices across Montenegro? For example, the Bay of Kotor is one of the most popular for vacation developers. Diar, a Qatari developer, recently made a €250 million investment for a resort complex in Tivat. In this touristic area, a new, 50 sq. meters, seaside apartment may cost around €100,000-€120,000.

However, prices in Podgorica are not as high. A 75 sq. meters apartment in a good zone can cost around €60,000. If you’re looking for something classier, a 300 sq. meter villa in a top neighborhood, costs around €350,000. As we said, Nikšić offers even lower prices. A small house (90 sq. meters) may cost €70,000.

The future trends are positive. Real estate prices have increased, but are still affordable. More investment, more tourists, and more luxury projects should also mean a sustained growth in prices, which means better investment returns for those who take advantage of the wave.

After reviewing the market, you’re probably asking what you need to do to buy property in Montenegro. First of all, can foreigners buy property in Montenegro?

Shortly, yes. But there are certain conditions. If you want to buy real estates sitting in its own parcel, such as a house or a land lot, you’ll need to do it through a registered company. That means you must work with a lawyer to register a business in the country to buy the property. However, apartments can be directly purchased by foreigners without registering a company.

When buying a property in Montenegro, you must consider the following fees (we’ve already mentioned some of them):

• For re-sold properties: 3 % transfer tax of the assessed value

• For new properties: 21 % VAT of the purchase price

• Notary fees: 0.01 % of the assessed value

• Lawyer fees vary depending on the transaction, but they generally go from €100 to €1k

• Real estate agent fees are usually between 3 % and 6 % of the purchase price

Now, what are the steps to buy property in Montenegro?

1. The potential buyer finds a real estate of his liking and makes an offer. He negotiates the details with the seller (usually through agents)

2. The buyer makes a 10% deposit of the agreed purchase price

3. The buyer’s lawyer confirms that the property has no issues with ownership records. Some properties may have problems due to Montenegro’s complicated history, even if it wasn’t fully involved in the wars in the 90s. If the lawyer finds the property isn’t fit for sale, the deposit is refunded

4. If everything is fine, a Sales & Purchase Contract is signed by both parties and is notarized

5. Payment is made. The schedule is set on the contract

6. The 3 % transfer tax must be paid within 15 days after signing the contract

7. The buyer’s lawyer registers the agreement and processes the title deed transfer

Before continuing, we must make a small clarification. Some real estates have ownership issues because Montenegro has belonged to three different countries in the last three decades. First, it was part of Yugoslavia, and if you’ve studied some history, you know that it didn’t end well. Plenty of people left their homes under awful conditions. That means many properties don’t have clear titles, which is a significant barrier to the development of the real estate market. If hiring a real estate agent and a lawyer makes sense in every country, it makes even more sense in Montenegro.

Mortgages for foreigners are a somewhat new concept in Montenegro. However, with the development of large-scale touristic real estate projects, banks are increasingly offering this service. What should you know?

• Usually, only multinational banks in Montenegro offer these services

• Loan terms can be as far as 25 years, but some banks only provide 20-year or even 10-year mortgages.

• Montenegrin banks don’t usually offer loans for more than half of the property’s value or €300k, whichever is lower

• Montenegro doesn’t have national mortgage insurance, but private mortgage and home insurance are mandatory. Property insurances usually cost around €1 per sq. meter per year and around €1.5 per sq. meter for seasonal properties

• Banks typically charge between 1 and 2 % of the loan as processing fee

So, overall, is Montenegro real estate a robust investment? Completely. Montenegro is one of the best vacation destinations in the Balkans, and one of the most underrated in the Mediterranean. The government has sought to modernize the banking sector, meaning there are more funding options for these projects. Likewise, the government has eased the legislation, and the tax system is quite attractive and straightforward.

There’s not much local demand for luxury real estate. However, the CBI program is expected to lead to serious growth both in investment and demand for luxury and touristic real estate across the coast and the north.

Want to invest in real estate in Montenegro? Contact our experts, and they’ll gladly assist you (COMING SOON)