Is there any money to be made in a real estate investment in Montenegro? The short answer is yes, but one needs to have a very targeted approach.

We’ll have a look at the following topics

Montenegro overview
Which coastal areas are investable in Montenegro
My favourite investment plays in the Bay of Kotor
Three concrete examples of real estate investments in Montenegro
What mistakes to avoid making when investing in real estate in Montenegro
The impact of Covid and of the new Cold War on real estate in Montenegro
A lovely tax and regulatory environment by European standards
A few risks in Montenegro

Montenegro Overview

Most people haven’t even heard of this little Adriatic country of 600,000 souls which got its independence from Serbia in 2006. It joined NATO in 2017 and is widely expected to be the next incomer into the EU; 2028 being the latest estimate. Check out this CNN Travel link to see how picturesque Montenegro is: https://edition.cnn.com/travel/article/montenegro-things-to-do/index.html

GDP per capita is about half of EU average, and was seeing Central European-like GDP growth rates in the years prior to Covid (2.9% in 2016, 4.7% in 2018, and 4.5% in 2019). Covid measures hit the tourism economy really hard but the country has been steadily recovering.

Tourism numbers had seen steady growth up to 2019, and then crashed heavily in 2020.

*Source: Statistical office of Montenegro*

I spent my Summer 2020 in Montenegro, and the place was deserted. It picked up in 2021, and 2022 is set to be better.

The purpose of this article is to focus on the COASTAL areas of Montenegro. The Global Property Guide is a often good reference point, but its Montenegro numbers focus on the capital, Podgorica. There is nothing to be done there. It is a small capital of 200,000 people, with loose zoning laws and plenty of available land. The perspective for capital gains is structurally minimal.

real estate investment montenegro kotor tivat — *Kotor Bay early in the morning*

Which coastal areas should be avoided for the purpose of real estate investment in Montenegro?

One must be extremely careful when investing in property in Montenegro. Agents are typically good at selling stories of fantastic yields and massive tourism, but don’t have a long term perspective.

The best example being Budva, the main beach tourism and party destination of Montenegro/Serbia. Packed in the summer, quiet in winter, and void of any cultural or year-long attractions apart from a small Old Town; the place attracts middle-class Balkan people. Very fun place, but the zoning laws are so loose that developers build higher and higher without any proper urban planning. Every year Budva becomes more packed, as there is always more than enough supply to offset demand in the market. Prices tend to stagnate (very hard to find reliable statistics). Expect to pay €2,000 /m2 for an apartment, a 15 minute walk from the beach, with minimal views.

Developers and agents will sell you massive yields on Airbnb (it’s not uncommon to hear and even read 20%), but those are all lies. You’ll be lucky to get 6-7% after all expenses and taxes are taken into account if you make a decent purchase.

There are little towns and villages near Budva that are more premium and have better prospects.

Going down the coast to the south is a mixed bag. Places like Petrovac are extremely seasonal, though there are high-end hotels being planned in the area. As for Bar, it is more of a business city, with Ok-ish propects, and then there is Ulcinj, a pretty Albanian-majority town, next to a nice National Park. This area does have potential long term. If you’re looking for a quiet place to spend some time, with potential upside, and are very patient, this could be a place to look into. However from a pure investment point of view, there are places where the returns are quicker.

Why the Bay of Kotor, also called Boka Bay, is where you should target your real estate investments in Montenegro

When investing somewhere, I always ask myself, what is the growth story? And here, in the Bay of Kotor, the growth story is self-evident all over.

First, the place is as gorgeous as Norwegian Fjords, and secondly people are starting to notice.

real estate investment montenegro — https://www.thetimes.co.uk/article/montenegro-the-hot-new-playground-for-the-super-rich-6kt2ls326

Not only the press, but investors as well. And not just small time investors, but rather massive projects, that have the full support of the government which is trying turn the Bay of Kotor, and Montenegro generally, into the main Adriatic destination for the super rich. Whilst Croatia got in the game too early, built too early, and is attracting mostly middle class Europeans, Montenegro has a global vision, and has kept prime land for massive developments that target the 1%.

The top three developments are:

Porto Montenegro

A former Yugoslavian Navy base was bought over in 2007 by a consortium composed of a Russian Oligarch, LVMH chairman Arnault, and the Rothschild family. The Canadian Barrick Gold founder embarked on a mission to turn this part of the Adriatic into the next Monaco and super yacht destination, which the government then turned into its own strategy for the country.

The project, conveniently located 5 minutes away from Tivat international airport, with direct flights to all over Europe and even Dubai, was recently bought over by the Dubai Investment Corporation. Count about €10,000 / m2 to have a stunning apartment with sea views in this complex which has hundreds of yacht berths, including for Super Yachts. Gulf royal families have a number of their super yachts based there all year round. These are valued in the hundreds of millions of Dollars. The complex also house a 5-star Regent hotel. https://www.portomontenegro.com/en/

Porto Novi

The latest addition to these luxury complexes with a focus on yachts is Porto Novi, located near Herceg Novi. It opened its gates in 2020, with hundreds of berths, including deep water berths, and all the usual luxury amenities. Europe’s first 5-star One & Only Resort is the anchor tenant. The main financial backers are from Azerbaijan. Count about €9,000 /m2 depending on the location/floor. http://www.portonovi.com

Lustica Bay

A really impressive long-term joint venture between the Egyptian Orascom (90%) and the Montenegrin government (10%), this project was started over 8 years ago and is now open to the public. The total investment is set to be about 1 billion Euros over 15 years or so, which is a rather substantial number for a country which has a GDP just shy of 5 billion euros. Europe’s second 5 star Chedi opened its doors in 2019. We’re talking plans of 500 villas, 1000 apartments, 7 hotels, an 18 hole Gary Player course, 2 marinas, a school, medical facilities, etc, to make it a year long destination. Prices range from €3,000 /m2 to over €13,000 /m2. https://www.lusticabay.com.

I wouldn’t recommend buying into these developments, as capital gains are often limited, if not negative, and yields low.

But nevertheless, their success demonstrates that serious money is flowing into Montenegro. This little country has a big vision, and is implementing it step by step.

Where exactly in the Bay of Kotor should I invest?

My favourite place to invest in Montenegro is the Bay of Kotor. Why? Because of the premium crowds and decent infrastructure that this area offers. In an age of uncertainty and rising inflation, you would rather target the well-heeled crowd who can still afford a vacation.

3 examples of real estate investments in Montenegro

1. Kotor Old Town Long Term rental

Less than €2,000 /m2 for a 51m2 apartment within the fortifications of UNESCO heritage Kotor Old Town. With negotiation, a 3% stamp duty tax, some lawyer fees, and renovation of bathroom + kitchen, one ends up at a round €100,000. Property taxes would probably be about €500 a year. This apartment could go for about 400 euros a month. Expect 80% occupancy. Deduct the property tax and some maintenance and you end up with 3% net rental yield.

2. Lustica villa flip – how to earn 50% on a house flip

In this video below one of my favourite agents Peter Square Meter showed me this failed construction project in Lustica.

The numbers are attractive. You buy a horrible looking 300m2 brown-phase villa. The list price is €220,000 but I would go in there negotiating hard as such assets have low liquidity.

I would then add about €300,000 in renovations and back-taxes, which would be enough to make a stunning, contemporary villa out of it. I would then aim to flip it for €750,000 – €800,000. The whole operation would take about 18 months. You can watch the whole case study in this video here.

Amazing views by the way.

Peter Square Meter specializes in helping people invest in the Bay of Kotor area, feel free to get in touch with him per email: petersquaremeter@thewanderinginvestor.com.

3. An Airbnb operation in Becici, near Sveti Stefan and Budva

The most popular investment model in Montenegro is to run an airbnb operation. This apartment below is a case study I did with Ksenija, who helps people invest all over Montenegro. Her agency is a full service agency, so her team not only helps you buy real estate in Montenegro, but then also does the renovations, if required, and the Airbnb management.

This 61m2 two bedroom apartment with a sea view is listed for €120,000, and is in Becici close to Budva and Sveti Stefan. Lovely sandy beaches are a 10 minute walk away.

The discount you would negotiate should be enough to mostly cover the kitchen and furniture.

Ksenija and I ran two different estimates. Her team of Airbnb property managers ran one simulation, and I ran a more conservative one.

real estate investment montenegro airbnb

We were aligned on the costs:

Ksenija real estate agent Montenegro — *Ksenija*

I’ll publish a video of this case study in the near future. In the meantime, if you are looking for a full-service real estate agent in Montenegro to invest, for renovations, construction, or Airbnb management, feel free to get in touch with ksenija: ksenija@thewanderinginvestor.com

What mistake to avoid when investing in Real Estate in Montenegro

Either go for new-builds, or for old stone houses/apartments. This is what people are looking for. Nobody is interested in structures from the 90s & 2000s anymore, though these could be good for personal use as they often offer the best value
Don’t forget to negotiate as liquidity is low. Some sellers are hungry for a deal.
Some areas of the Kotor Bay have almost 0 sunshine all year round due to the angle of the mountains. Typically the sellers wouldn’t warn you 🙂
Get a good lawyer. A lot of houses and developments were built illegally, which can lead to substantial issues down the line
I repeat: Get a good lawyer. Title deeds oftentimes have oddities happening on them, like people owning strips of your garden, or lawsuits/claims by family members. If you want to use my team of lawyers in Montenegro click here to find out more about Bojana who can put you in touch with the right professional for your transaction.

The impact of Covid and of the new Cold War on Montenegro

Russians were historically a huge source of tourism revenue. Following Montenegro’s NATO accession, Russian tourism figures went down significantly. The latest round of European sanctions, which Montenegro joined, brought these number almost to a halt. Same thing with tourism from Belarus.

Instead we saw a surge in Ukrainian tourism as the Ukrainian economy was booming. This changed due to the war, though approximately 1% of the population in Montenegro is now from Ukraine, with mostly middle and upper class Ukrainians having chosen Montenegro as their plan B. The profile of Ukrainians choosing Montenegro as their place of refuge is quite different from the ones going into the EU. On average, the ones moving to Montenegro are wealthier as they don’t expect anything from the Montenegrin government, as opposed to the crowds going to the EU who get a lot of financial support.

This decline in Eastern European tourism has been partially plugged by an increase in Central and Western European tourism. The Poles and French are particularly prominent. The French are particularly interested in the national parks dotting the nation.

Balkan tourism remains the main source of tourism. Serbs, Bosnians, Macedonians and Kosovars flock to the country’s beaches.

Prior to Covid, Asian tourism was starting to be increasingly visible. They haven’t come back yet.

What is clearly visible is an increase in high-end tourism from North American and Western Europe. Many Westerners moved to Montenegro during Covid due to the relatively lax implementation of restrictions. It’s quite easy to obtain residency in Montenegro, and is actually one of the easiest countries in Europe for non-Europeans to move to (details here).

From a real estate point of view, in line with this increase in wealthy Western tourism, higher-end villas and homes have been selling like hotcakes, while studios and 1 bedroom apartments that typically targeted middle class eastern Europeans have been a bit slower to sell.

A decent tax and regulatory environment by European standards

The tax system in Montenegro is decent. 15% capital gains, 9-15% income tax, 9-15% corporate tax rate, and low property taxes, usually less than 0.5% of the actual value of the property, and much less if one resides there. Montenegro also offers residency to real estate owners (details here), and there is a Citizenship by Investment programme as well (details here).

Montenegro is beautiful, growing, there is significant upside in certain pockets but it’s not a market where everything will go up in as in a booming city. It’s important to target the investment properly, and to be clear on one’s objective.

A few risks in Montenegro

There are a few macro risks in Montenegro, such a growing public debt levels and the general macro situation in Europe. External powers have also been agitating in nearby Bosnia. I wouldn’t go all-in Montenegro due to these risks.

However, Montenegro offers:

Appealing real estate for decent prices
A low-leverage market in a world of rising interest rates – rising interest rates won’t impact the market in Montenegro as it is almost all cash, which is a natural hedge to Central Bank monetary policies
A place you can enjoy for parts of the year if you buy real estate there
A call option on a low-tax, low-cost residency by making a real estate investment in Montenegro

I am personally happy to have some exposure to Montenegrin real estate in my portfolio. It’s good diversification in a world of uncertainty.

If you are looking at investing in real estate in Montenegro, feel free to get in touch with my two favourite realtors in Montenegro. You can find out more about them here.

7 Comments

Nenad on March 17, 2020 at 12:49
Excellent article, it is rare to see such good understanding of local situation from non-resident. The ony thing missing is the sewage problem, which should be the first thing to inquire about, as some municipilies have treatment plants and some dont.
The Wandering Investor on March 17, 2020 at 16:08
Very good point. Thank you. Even if some municipalities do have treatment plants, some houses are not connected to the municipal sewage system which means a septic tank is necessary. Some septic tanks are easy to maintain, and others are not.
hemesh chaturvedi on September 21, 2020 at 13:06
kotor (old Town) look good for investment. Besides porto Montenegro and Porto Navi the other 2. I am a tourism professional (Inbound Travel Director) from India and into this work for the last 2+ decades. Have a budget of 150kEuro and would like to start a business say a super market in Kotor or any other daily need store. I am although open to investing in real estate provided the returns are good. Willing to go for the citizenship as a reward for investing. I see huge potential in this Monaco of Russians once!
Miguel Rocha on August 21, 2021 at 16:17
Very nice article. I spent 2 weeks in Boka Bay recently and I am already planning to go back in September. As a real estate investor, I also saw sooo much potential in there and since I can work from home, I would definetly love to have a property in such a beautiful and peaceful place. I’m already contacting some agencies in order to find a nice apartment to buy ( < 150k). I'm looking for something near by old town, maybe Dobrota or Risan. Based on your experience, do you think it would be nice towns/villages to invest? They seem so raw yet but full of potential.
Congrats again for the article.
The Wandering Investor on August 22, 2021 at 18:30
Thank you Miguel. Dobrota is well established, whilst Risan has the cheapest real estate in the Bay. They both have very different investment theses.
Happy house hunting!
Alex G on October 23, 2021 at 14:58
Thank you for the informative article. Just starting my research into ME and Kotor Bay from a long distance in lockdown. A few questions: You mention ‘people are looking for news builds or old stone houses/apartments’. Are you referring to short/long term renters or for potential re-sales and capital gains?
‘No one is interested in 90’s and 2000’s houses’, does this include apartments in small buildings built during that period. Reason I ask is that I’ve noticed some affordable small apartments (sub €2000/Sam with spectacular views in places like Krasici (and Dobrota) with some interesting/unique features, eg. large balconies, lofts etc. They could make interesting first ‘toe in water’ investment for residency purposes and suitable for vacation rentals/personal use? Because of the earthquakes in the 1970’s that destroyed the old village in the hills I assume that the re-building of the town near the sea would have taken place over the next few decades. Do you have any thoughts on this idea or this part of Kotor? Interesting comment you make regarding sunshine on the bay, thank you.
Spiro Jankovich on May 10, 2022 at 01:47
My name is Spiro Jankovich and I was born in Igalo. My family home is still there, my family has resided there for 3 to 4 hundred years. The country is a unique and beautiful place but is run by the Milo gang like a mob family. We had to leave, my father was going to be executed by the communist liberators(?). We lost everything and ironically much of the property(s) has been sold or being to be sold. We have received no restitution. The one property (after 50 years) we have received restitution but we will never get the money. Need your confirmation.
It is wonderful but it is a very dangerous country.
Spiro J.

Real Estate Investment in Montenegro