Montenegro Real Estate Market. Investments in Montenegro

In this article, we decided to analyze the real estate market in Montenegro and give our potential (and real) investors our thoughts on the future of this market and the prospects for investing in it. Contents:

• Introduction
• Development of the real estate market since the independence of Montenegro
• How Montenegro's Real Estate Market Survived COVID-19: The Post-Pandemic State
• Why an organized complex is better than point development
• What other real estate is on the market in Montenegro?
• Prices on the real estate market in Montenegro
• Main resorts of Montenegro and their description
• Conclusions from the Deniz Estate agency

Brief summary. Montenegro is a country that gained independence relatively recently, in 2006. The state itself has existed since the 18th century, having separated as an independent kingdom from the Ottoman Empire. It existed in this form until the First World War, as a result of which it became part of the Kingdom of Serbs, Croats and Slovenes, and later – Yugoslavia. After the collapse of Yugoslavia, it was part of the Union of Serbia and Montenegro for some time, and in 2006, after a referendum, it declared independence.

Development of the real estate market since the independence of Montenegro

The geography and climate of this Balkan country are extremely attractive for tourism. And therefore, for investors investing in the real estate market of Montenegro. On one side, the coast of the Adriatic Sea, and on the other side, the mountain ranges contribute to a mild climate and a wide variety of tourist activities. This country has been of interest to Russian investors since the early 2000s, but the truly significant growth of the economy and all markets, including the real estate market, began in 2017, when several significant events occurred at once:

• The country joined NATO, which meant guaranteed security and stability in a political and military sense.
• World-famous airlines have entered the country: Ryanair, EasyJet, FlyDubai and others.
• The government began to actively develop other transport infrastructure, which had a beneficial effect on the investment climate.

Since Montenegro is a country with a developing economy, the real estate market here is highly differentiated and heterogeneous. The secondary real estate market is clearly expressed, where there is a completely outdated Soviet stock, but among such objects there are also truly ancient buildings, from the Enlightenment era. There is also a newer stock of buildings from the times of Yugoslavia.

The primary real estate market is also represented by very different objects. The sharp contrast between the elite, mid-price and budget segments may be uncomfortable for some investors, but this is the specificity of the market here. For this reason, official figures are often contradictory, since they can be tied to narrow territorial regions. For example, in the same 2017, the increase in housing prices in the country as a whole was about 8%, and in the resort town of Budva it reached 30%.

How Montenegro's Real Estate Market Survived COVID-19: The Post-Pandemic State

In 2020, real estate in Montenegro fell sharply in price. The overall average drop in the cost per square meter (without reference to region and technical characteristics) was more than 20% (on average to €870, in Q3 2020). 2021 also showed disappointing statistics. However, against the background of the overall average figures, there are pearls that have risen in price significantly. As an example, here we can cite one of the youngest resorts in the country – Lustica Bay, the opening of the first district of which took place in 2018, and it is still being completed, having successfully survived the pandemic. The cost per square meter in Lustica (by year):

• 2012 – sales start – average price per square meter was €2800
• 2013 – start of construction – €3200
• 2015 – first stage commissioning – €3900
• 2018 – Official opening – €5000
• 2021 – all infrastructure is working, the hotel is accepting guests, and the owners live in the houses and apartments – a square meter is sold for an average of €6,100

What is this paradox? In principle, luxury real estate in Montenegro has not suffered much as a result of the pandemic (there was almost no fall in prices here), but in the case of Lustica, there are other reasons.

Why an organized complex is better than point development

Integrated development and infrastructure

In new complexes, not just housing itself is being built, but a harmonious infrastructure – roads, parks, public spaces and social infrastructure facilities. The best specialists in the world work on landscape design, and developers strictly adhere to the developed plans and deadlines.

For example, the company that developed the master plan for Lustica Bay was awarded the Award of Excellence by the American Society of Landscape Architects in 2013, and the unrivaled Gary Player (who won 163 tournaments on six continents and is included in the World Golf Hall of Fame) was invited to plan the golf course.

Environmental friendliness of projects

This option is especially important for long-term investors. ESG development is trending all over the world: investors are interested in complexes that are environmentally friendly, develop social initiatives and maintain high standards of corporate governance. Now these are just the first signs of the trend, but in the future, non-compliance with environmental standards may become a major obstacle to sales. Large developers are ahead here. Smaller ones think about ecology last of all, but elite real estate is currently built only according to such standards and Lustica Bay is further proof of this. The development site is 690 hectares, but no more than 10% of the territory is planned to be developed. For compliance with such standards, the project has already received a gold LEED certificate (from the American Green Building Council)

Reliable developer

A large international company is a guarantee of the success of the project, thanks to its resources, experience and capabilities alone. Such developers are not particularly dependent on financing and can offer more flexible installment plans, and the documentation is clean and transparent. In addition, in such large-scale projects, the state plays the role of regulator and arbitrator. In the example of Lustica, 10% of the developer's shares belong to the government of Montenegro, which provides even more guarantees for the successful completion of the project.

A wide range of options for living and recreation

• Beautiful and well-maintained embankment for walking
• Port with a full range of services for yachts
• Four Beaches
• Supermarkets, boutiques, clubs, restaurants, spas
• Several fitness centers
• Recreational parks, walking areas
• Golf course and golf club
• Amphitheater and conference hall
• Kindergarten, school and medical center
• Police and Fire Station
• Post office, car service, gas station, bank

You buy an apartment, and you get all this “stuffing” to boot. [special_block]

What other real estate is on the market in Montenegro?

The buildings of the Venetian era (15th-18th centuries) have been preserved by the sea. Many mansions in the historical centers of Budva, Kotor, Perast, Herceg Novi are being restored and rented out to tourists. Some houses museums or hotels. However, similar properties can still be found on the real estate market if an investor is interested. Agree, a historical mansion by the sea is quite attractive! The main development of the Soviet period of history took place in the capital – Podgorica. However, you can also find complexes of typical Soviet construction by the sea. Today, this is the cheapest housing in Montenegro – most of these complexes need repair and renovation. After gaining independence, Montenegro experienced several construction booms: the number of tourists in the country jumped sharply, and with them – the international demand for real estate. Most of the new buildings are mid-rise buildings without infrastructure or with minimal amenities. In the first years of independence, the country was characterized by spot heterogeneous development for several reasons:

• Lack of land on the coast due to the dense location of mountains in close proximity to the sea. It is difficult to find a plot for a large residential complex with developed infrastructure.
• The construction was started by small local developers who did not have the resources for large-scale projects.
• Unfinished urban development legislation. The demand for real estate grew faster than the young government could develop detailed plans for territorial development.

However, about 10 years ago, large international developers began to enter the Montenegrin real estate market and began to develop large-scale projects. In fact, these projects gave rise to a separate segment of the real estate market – housing in organized complexes. Lustica Bay is a bright example of this type of real estate.

Prices on the real estate market in Montenegro

The most expensive area of Montenegro is, of course, the coast. The cost of real estate here is higher than in the capital, and even more so in the provinces. The minimum amount you can count on is €1,500 per square meter. For this money, economy-class apartments are sold in not the newest buildings, without infrastructure and quite far from the sea. For this money, you will not get beautiful views from the window, high-quality finishing and convenient parking. The average price range is €2,500–€4,000 per square meter. This is the cost of high-quality real estate by the sea, you can even find new-generation development. Premium options cost €4,000–€8,000 per square meter. These are top locations, the best views, impeccable quality of construction.

In the real estate market of Montenegro, the price of real estate objects strongly depends on the stage of construction. Here it is profitable to buy apartments at the initial stages of construction and invest in new phases of popular complexes!

Main resorts of Montenegro and their description

Budva

The city is considered the resort capital of Montenegro. Situated on the Adriatic Sea, real estate here is the most expensive in the country. There is a high flow of tourists here, so real estate will be of interest to investors for business and rent.

Tivat

Another resort town north of Budva. Demonstrates positive dynamics in infrastructure development, and as a result, a rise in the real estate market.

Kotor

A city in the depths of the bay of the same name. It is considered the cultural center of the country, contains many architectural and religious monuments. Its central part is included in the UNESCO list of protection as the heritage of all mankind. The region is very popular among tourists of all nationalities. The real estate sector here is characterized by self-sufficient residential complexes more for those wishing to live permanently.

Bar

A young tourist center of the country. It is being actively built up, the revival of tourism is mainly associated with the new highway, as well as the nearby ski resort of Kolasin. Real estate here is still cheaper than in the previous cities.

Conclusions from the Deniz Estate agency

• The real estate market in Montenegro has huge potential; the country is very attractive in terms of tourism due to its favorable geographical location, climate and relief.
• The market is not very developed yet and large European developers are just beginning to enter it.
• The best area for investment in the Montenegrin real estate market is luxury real estate, the price fluctuations of which were not significantly affected even by the pandemic.
• The most reliable and liquid investments will be in large complexes with all the infrastructure and socialization of future owners.
• The most profitable investments will be those made at the initial stages of construction.