Is there any money to be made in real estate investment in Montenegro? The short answer is yes, but one needs to have a very targeted approach.
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; 2025 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 has seen Central European-like GDP growth rates in the last few years (2.9% in 2016, 4.7% in 2018, and 4.5% in 2019).
Tourism numbers have seen steady growth, but are still predominantly a Serbian and Russian affair even though these demographics are changing fast, with Westerners and Asians growing faster than the average.
The purpose of this article is to focus on the COASTAL areas of Montenegro. The Global Property Guide is a good reference point, but its 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 almost none.
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 foreigners 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, dead in winter, and void of any cultural or year long attractions apart from a small Old Town; the place attracts middle class Balkan people and Russians. 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, if not go down (very hard to find reliable statistics). Expect to pay €1700-2000 /m2 for a new build, a 15 minute walk from the beach, with some 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 2% after all expenses and taxes are taken into account, and there won’t be capital growth. Don’t listen to these agents that try to sell you these stories.
The story is pretty much the same down the coast along to the south. Names like Petrovac should make you run away. 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 investment 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.
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 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 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 is set to open this year in August 2019, with hundreds of berths, including deep water berths, and all the usual luxury amenities. Europe’s first 5 star One & Only Resort is to open in Summer 2020 within its premises. 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 5 years ago and is now open to the public. The total investment is set to be about 1 billion Euros over a 15 year plan 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 last year. 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
The point being that though I wouldn’t recommend buying into these developments, as capital gains are often limited, if not negative, and yields low, 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?
This graph by Savills gives very good background information on the real estate investment market in Montenegro. Tivat has been gaining in strength, and keeps going up, whilst Kotor is gradually coming back from the depths of the recession.
These two exact places are where one is the likeliest to get a good mixture of acceptable yields and potential for capital growth:
– Kotor Old Town: We’re talking of a beautiful old town, similar to Dubrovnik, with apartments that can be found at €2000-3000 /m2, which is at a substantial discount to Dubrovnik. There is clearly a geo-arbitrage play to be done here. Cruise boats come in mass, and no guidebook or article on Montenegro will fail to mention Kotor old town. Being able to buy a piece of history, which will never go out of fashion is a great way to at least maintain asset value. The Savills graph mentioned a big drop in prices after the Great Recession, but what it does not mention is that the drop was much lower in the old town. Old stone apartments and houses keep their value as there is limited supply.
Example: Less than €2,000 /m2 for a 51m2 apartment. 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 50 euros a night, for 120 night. €6,000 gross. Take about half for management, maintenance, taxes, etc and you get yourself a net yield of 3%, a nice place to stay yourself a few weeks of the year, a piece of history, and upside. These are conservative figures.
Kotor Real Estate Investment 
Kotor Real Estate Investment 
Kotor Real Estate Investment 
Kotor Real Estate Investment 
Kotor Real Estate Investment 
Kotor Real Estate Investment
– Tivat: Right where the country’s second international airport and Porto Montenegro are. Whilst Budva is packed and intense, Tivat is laid back, and has more of an all year round life. There are two plays here, one being Airbnb & the other one being long term lets as there is a high number of expats who choose to live here all year long, and a healthy local jobs market. It is worth mentioning that Tivat has not 1, but 2 English international schools. There is growth in Tivat, with infrastructure being developed & relatively strict zoning laws. The place has upside. It’s listed with Ntrealty.
Example: This new built apartment is not cheap at about €2900 /m2, but has a swimming pool & parking, will be ready in 2 months, and is a 7 minute walk to the beach. At €49,500 fully furnished, this 17m2 apartment, you could easily get €250 a month in rent from a long term let, giving you a gross income of €3000, and a net income of about €2200 after all deductions and taxes. Taking stamp duty and lawyer fees into account, you would end up with a 4% net yield, which is not bad in this low yield world. Here, even though the price is steep per m2, you get a mixture of the cheapest entry point in town, in a relatively luxurious development. This guarantees you tenants as you’ll be able to have a very attractive price point. This one is listed with Remax.
Tivat real estate investment 
Tivat real estate investment 
Tivat real estate investment
Not only is Tivat a good destination for real estate investment in Montenegro, but it is also one of the best places for retirement in the region. Properties of varying degrees of quality can be found between €1300 /m2 and €4000 /m2 outside of Porto Montenegro. It has an active expat scene, an international airport (flights to London, Moscow, Munich, Paris, Dubai, etc), good beaches, and no massive crowds in Summer. To top this, it even has ski slopes a 3 hour drive away in Winter.
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 anymore in houses from the 90s & 2000s, 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 lawyer click here to find out more about him.
A lovely tax and regulatory environment by European standards
The tax system in Montenegro is lovely. 9% capital gains, 9% income tax, 9% 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 property owners, and there is a Citizenship by Investment programme as well.
Montenegro is beautiful, growing, and there is significant upside in certain pockets. It’s not a market where everything will go up in prices as in a booming city. It’s important to target the investment properly, and to be clear on one’s objective.
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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.
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.