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Montenegro: the best is yet to come

Since the ancient Romans the Adriatic Coast has been one of the most attractive tourist spots in Europe. However the Soviet “Iron Curtain” made the opposite coast of the Adriatic inaccessible for the Western Europe and was forgotten due to lack of promotion and tourist flows. But one fine day the situation changed almost in a glance and capitalism brought along tourists, private hotelers and developers to Montenegro. Short payback period investment hunters from all around the globe rushed to invest in local real estate. Political instability and non-transparent construction and real estate purchase laws did not stop them. Current legal base is updated simultaneously with the national housing stock and investments in local real estate seem to become even more profitable.

Wreckage with the sea view

The basis of the residential stock of Montenegro (both along the coast and inside the country) is formed by multifamily panel houses of post-Soviet construction which require overhaul repair. For example, in Herceg Novi such houses are located in the most picturesque places, along quays with great views. Moreover, most houses (not only old ones but even the ones which have been erected 2-3 years ago) located in the best parts of the coastal area have another no less embarrassing challenge: they lack not only their own courts and parking area but also even utility services. “Houses built without construction permission that have no fenced territory where groups of noisy tourists could walk, no parking area or operational company which would replace light bulbs in the house or remove garbage were interesting as long as they were cheap”, says Julia Titova, Head of Foreign Real Estate Department of BEST-Nedvizhimost. Currently such houses are no longer constructed however until the new town-planning layout is approved, only infill development will be performed and the main residential stock of Montenegro will still be formed by low-quality housing.

Once units of business and elite segments are launched to the market, cheap housing will not get much more expensive since it is not acceptable for investment deals aimed at receipt of the profit from marketing of apartments. Ms. Titova believes that only local population and foreigners who do not count on price growth and purchase apartments for their personal use only will buy real estate built during the Soviet time. And during “the time of troubles” construction was often performed without any permits or going round the law. Now the control system has become stricter and those few emerging projects correspond to both their declared prices and quality and comfort requirements. “If we conventionally divide areas developed in 2007 by the number of people who want to purchase real estate in Montenegro, each share will not cover even a meter. So currently there is a serious demand/supply imbalance on the market”, Julia Titova continues. She thinks that the price for secondary housing will decrease significantly once there is qualitative competition; and according to the expert forecast if growth rates of prices for new constructions will remain the same during the next 3 years, simultaneously prices for secondary housing will get lower due to its poor quality.

Affordable real estate

“During the next 3-4 years real estate price growth in Montenegro is forecast to equal about 20-30% per annum”, says Ekaterina Teyn, Director of Elite Residential Estate Department of Knight Frank. The most popular places with purchasers still are Tivatsksys, Budvanskaya, Kotorskaya Riviera and Saint Stephen District located near Budva.

Depending on location and view the price of a square meter of economy class housing vary from 2.5 to 3.5 thousand euros, of business class housing – from 3.5 thousand euros (the most part of new constructions also falls within such price range). Prices of elite houses vary from 3 to 10 thousand euros per square meter and the apartment price mainly depends on location and prestige of a project. Prices of townhouses and cottages constructed under new projects are 300 to 600 thousand euros and 500 thousand to 3 million euros respectively, depending on their area and distance from the sea shore. The price of one square meter of secondary stock houses is 3 to 10 thousand euros; but there are less expensive variants such as 2 to 3 thousand euros per square meter within 1-10 km from the sea and even less in the hinterland. An average price of land ranges from 100 to 400 euros per square meter, and construction costs are 400 to 1,500 euros per square meter.

Average price of housing in Montenegro (thousand euros)
Housing class
2,5–3,5 (1 sq. km. M)
2–3 (1 sq. km. M)
3–5 (1 sq. km. M)
3–10 (1 sq. km. M)
5–10 (1 sq. km. M)
10 (1 sq. km. M)
500 – 3000

Radiant future

However, experts say that Montenegro is only starting to realize its potential as a major international resort and sees the emergence of an elite segment of expensive real estate which will be in demand subject to development of elite tourism (yacht clubs, casinos, world hotel networks). Thereafter buyers will prefer business class estate with developed internal infrastructure, and optimistically forecasted growth in average prices of Montenegro real estate is mainly based on obvious prospects of real estate development in business class and VIP segments. Julia Titova said, “For those who are fond of Montenegro and ponder over whether it is too late to buy Montenegro real estate or not the answer is no. Current prices are somewhere in the middle of their active growth and construction of facilities which are conceptually new, highly liquid and promising in terms of investment is only at its start.”

But experts say that Montenegro is only beginning to disclose its potential as a major international resort, and here emerging segment of the elite expensive real estate, which will be in demand in developing tourism elitist: yacht clubs, casinos, hotels world brands. In the future, buyers will be given preference for business-class advanced internal infrastructure, and the optimistic forecast average growth of real estate prices in Montenegro is based primarily on the apparent prospects for real estate development segments in business class and VIP. "For those fans of Montenegro, over those who hesitate, if not too late to buy Montenegrin real estate, the answer is negative. Today, prices are somewhere in between its active growth, while construction of new conceptually highly liquid and prospective sites for investment has only just begun," - argues Julia Titova.

Specific features of local laws

Today Montenegro is a visa-free country and Russian citizens do not need any special documents if they spend there 30 days or less. However purchase of real estate will not provide you with citizenship. In the long term, given changes resulting from a different status and political course of Montenegro, real estate owners will be able to obtain a multiple visa whose status is equal to a national residence permit.