Montenegro’s house prices – as recorded in the official statistics – are falling. But the reality is that there is strong property demand, a healthy construction sector, and (especially) booming tourism and foreign luxury property demand, which in turn is making some locals very rich.
In the second quarter of 2014, the average price of new residential dwellings in Montenegro fell by 6.5% from a year earlier, to €1,147 per square metre (sq. m.), according to the Statistical Office of Montenegro. On a quarterly basis, the average price of dwellings dropped 0.7% during the latest quarter.
Yet there’s obviously strong demand. Indicators for residential construction activity are soaring. The total number of dwellings sold in new residential buildings rose by 16.6% to 196 units in Q2 2014 from the previous quarter, based on figures from the selfsame Statistical Office of Montenegro. About 80% of all total sales during the quarter took place in Podgorica, the country’s capital.
In the first quarter of 2014, the total number of building permits rose by 31% y-o-y to 227 units. Likewise, the number of dwelling permits issued surged 49% y-o-y to 873 units in Q1 2014. Over the same period, the total floor area of building permits also soared by 43% to 63,918 sq. m.
What gives? Well, it is a case of parallel markets.
Montenegro isn’t a rich country. But foreign investors are being drawn in droves to the Adriatic coastal areas, particularly the islet of Sveti Stefan and the coastal town of Budva, now key resorts for the Russian new rich to show off their money.
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Budva is a charming coastal resort and Venetian port-city, with sandy beaches and a diverse nightlife, and is the centre of tourism, accepting well over half a million visitors annually. The larger Budva area had the most expensive housing in Montenegro, at an average price of €1,890 per sq. m. in Q2 2014.
The marvellously beautiful adjoining village of Stefi Stefan was a famous resort between the 1960s and 1980s, visited by celebrities like Orson Welles, Elizabeth Taylor, Sophia Loren, Princess Margaret, Carlo Ponti, Ingemar Stenmark and Kirk Douglas. Now after the war it is back, with an Aman resort.
The major foreign property buyers in Montenegro include Russians and British buyers.
In terms of price, Budva‘s average price of €1,890 per sq. m. in Q2 2014 is way ahead of Podgorica, the country’s capital, with an average dwelling price of €1,098 per sq. m., and Bar (€1,024 per sq. m.), Ostalo (€789 per sq. m.) and Niksic (€600 per sq. m.).
“The rugged beauty of Montenegro continues to attract high-profile visitors, including Michael Douglas, Catherine Zeta Jones, Madonna and The Rolling Stones,” says Glenda Lazare of overseas investment specialist company, Key Universal. “It is being tipped as the next Monte Carlo.”
Some of the residential projects which are currently under construction include Belvedere Residence (71 apartments), Poseidon Apartments (174 apartments), Harmonia building (120 apartments), Obilaznica (148 apartments), Gradnja Promet Ljubovic (165 apartments), Gradnja Promet Zabjelo (115 apartments), Block 6 Zetagradnja (180 apartments), and City Quarter (120 apartments), according to CBRE Montenegro.
Foreign property demand is expected to rise further these coming years with Ryanaid launching several new flights from across Europe (such as from Brussels, Milan, Barcelona, London, Oslo and Stockholm) to Montenegro.
“Montenegro property offers an excellent investment opportunity,” adds Lazare. “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.”
In 2013, the total number of tourist arrivals in the country was up by 3.6% y-o-y to 1,492,000, based on figures from the Statistical Office of Montenegro.
Montenegro’s economy is expected to expand by 2.8% this year and by another 2.9% in 2015, down from a 3.4% growth rate in 2013 but far better than the 2.5% contraction seen in 2012, according to the International Monetary Fund (IMF).
There 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.
This article was republished with permission from Global Property Guide.