Can you make any money by investing in real estate in Montenegro? The short answer is yes, but one needs to have a very targeted approach.

I’ve been involved in Montenegro’s real estate market since 2017 and typically spend my Summers with my relatives who have decided to retire in Montenegro. It’s one of my bases as I travel around the world and I absolutely love spending time here.

Ladislas in montenegro real estate market
Yours truly enjoying life in Montenegro

We’ll have a look at the following topics:

Overview of Montenegro: Real Estate and Economy

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 welcomed into the EU, with 2030 being the latest estimate.

GDP per capita is about half the EU average, and enjoyed 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 with GDP plunging 15% and then recovering with growth of 12% in 2021, 6% in 2022 and projected to be over 3% in 2023.

Montenegro has a Tourism-centric economy

Being a small country of 600,000 people, the reality is that the fixed costs of running a government are relatively high. It is hard to be efficient when running full government institutions for such a small population.

25% of the economy is tourism, which makes Montenegro one of the most tourism-dependent economies in the world.

tourism as percentage of gdp per country in europe
Tourism as percentage of GDP per country in Europe. Source: Adriatic Apraisal

Tourism numbers grew steadily until 2019, and then crashed heavily in 2020. Numbers started growing again in 2021 and 2022 but did not revert back to their 2019 peak. From my experience in 2023, the numbers did not reach 2019’s.

graph of tourist arrivals in montenegro
Source: Statistical office of Montenegro

80% of exports of the country are travel and tourism. Other than that, the economy consists mostly of construction, exports of hydroelectricity and aluminum, a vestige of its Yugoslavian days.

The debt to GDP ratio seems to be stabilizing around the 70% mark but the reality is that the government is in constant fiscal deficit and needs economic growth.

government debt to gdp ratio montenegro graph 2013-2022
Montenegro debt to GDP ratio. Source: Trading Economics

Importantly, the country has a significant current account deficit, and a lot of gross external debt. All of this is being covered by foreign direct investment into the country through debt and a lot of real estate investment.

Main economic indicators Montenegro
Main economic indicators Montenegro. Source: Vienna Institute for International Economic Studies

The point is that Montenegro is an economy prone to external shocks due to its reliance on tourism, real estate and external financing.

Major drawbacks of investing in Montenegro

Before going into detail about the key catalysts for investing in real estate in Montenegro, it is important to really understand the risks.

  • External shocks as mentioned in the previous section.
  • Chronically weak European economy with the European middle-class being squeezed by ever-higher prices and taxes. Most Europeans are feeling poorer now than in 2019, and thus have to cut back on discretionary spending (such as holidays in lovely Montenegro).
  • The potential for conflict in the Balkans. Montenegro seems to be staying away from the potential drama in Bosnia and Kosovo, but one cannot ignore the region’s history of volatility.

Key drivers for real estate investment in Montenegro

The typical argument that you will hear from real estate agents in Montenegro is that “tourism is booming” and that “Montenegro is booming”. I would tend to say both yes and no to both. It’s important to understand the key trends. As discussed, tourism is down. These numbers that I shared earlier are not lying. I saw and felt it too as I spent the peak season here. But there are nuances.

Kotor Bay in the morning
Kotor Bay early in the morning

Decline in lower and middle-class tourism, surge in luxury tourism

It’s not something that appears in official statistics, but it is apparent in everyday life. Normal restaurants seem emptier than in 2019, but high-end restaurants are packed. Same situation with 5-star hotels being fully booked, while mass-market tourism is down.

A big source of the drop in tourism numbers is that Russians, Ukrainians, and Belorussians used to account for a significant proportion of tourists pre-Covid and pre-war. Now, all these charter flights are gone. Tivat Internatinal Airport, for example, had direct charter flights from Siberia. This tourism is now gone, but it was mostly low-value tourism that focused on very local, affordable accommodation.

Wealthy Russians, Belorussians, and Ukrainians are still traveling and can be seen in the luxury developments. Gulf Arabs and wealthy Americans are increasingly visible.

So while the European middle class is being squeezed, the European high-end market still has disposable income and hasn’t cut back on vacations.

Attraction of global luxury brands to top cities

For such a tiny country, Montenegro attracts a lot of foreign direct investment (FDI) into luxury complexes. Despite being amazing lifestyle plays, such luxury developments are rarely good financial investments for retail investors.

Port Montenegro

A former Yugoslavian Navy base that was bought over in 2007 by a consortium composed of a Russian Oligarch, LVMH chairman Arnault, and the Rothschild family. The Canadian Founder of Barrick Gold 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.

Porto Montenegro, conveniently located 5 minutes away from Tivat International Airport, with direct flights to Europe and even Dubai, was recently bought over by the Dubai Investment Corporation. Expect to pay about €10,000 + / m2 to have a stunning apartment with sea views in this complex with hundreds of yacht berths, including for super yachts. Non first-line can be had for about €7,000 / m2

Gulf Royal families park several of their super yachts there all year round. These are valued in the hundreds of millions of Dollars. The complex also houses a 5-star Regent hotel.

I live walking distance from there and constantly see Gulf Arabs with shopping bags full of Dior, Fendi, and Balenciaga, all of which have boutiques in Porto Montenegro

Porto Novi

The latest addition to these luxury complexes focused on yachts is Porto Novi, located near Herceg Novi. It opened its gates in 2020 with hundreds of berths, including deep water berths with all the usual luxury amenities. It even has an international school.

Europe’s first 5-star One & Only Resort is the anchor tenant. The principal financial backers are from Azerbaijan. Count about €9,000 /m2 depending on the location/floor. Basic bedrooms with bay views go for upwards of €2,000 per night in peak summer

Lustica Bay

Lustica Bay is an impressive long-term joint venture between the Egyptian developer Orascom (90%) and the Montenegrin government (10%); this project was started over eight years ago and is now open to the public. The total investment is set to be about 1 billion Euros over 15 years, which is a rather substantial number for a country with a GDP of a bit over 5 billion euros.

Europe’s second 5-star Chedi opened its doors in 2019. They have plans for 500 villas, 1000 apartments, seven hotels, an 18-hole Gary Player course which is opening this year, two marinas, a school, medical facilities, etc. to make it a year-long destination. Prices range from €5,000 /m2 to over €13,000 /m2.

Various other luxury hotel brands

On top of the Regent, One & Only resorts, the Chedi, more hotel brands are entering the market, which will result in Montenegro having a higher concentration of luxury resorts than world-famous Croatia:

I wouldn’t recommend buying into these developments, as capital gains are often limited, if not negative, and rental yields low. Having said this, the lifestyle on offer is amazing. If you’re interested in any of these developments feel free to get in touch with my real estate agents in Montenegro, they can help you.

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

While Croatia 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%.

Increasing number of residents in Montenegro

There is a big shift in demographics happening in Montenegro that isn’t quite captured by government statistics, but which is extremely important to understand.

Though Montenegro is very dependent on tourism, it is becoming less so. Why? Because an increasing amount of people are moving to Montenegro full-time. The full-time population of Montenegro unofficially grew about 10% since the start of the war in Ukraine.

These are the typical archetypes:

  • Russians fleeing conscription or who want to work online without getting banned from payment processors and online platforms due to Russian residency. Many entrepreneurs as well are starting local businesses.
  • Ukrainians who are independently wealthy or work online. Ukrainians who want free government money or a job move to Western countries. But people who are independently wealthy or work online prefer low tax countries such as Montenegro. Montenegro has the highest number of Ukrainian refugees per thousand inhabitants in all of Europe.
Ukrainian refugees per thousand inhabitants in European countries
Ukrainian refugees per thousand inhabitants in European countries. Source: Adriatic Apraisal
  • Turks who disagree with politics back home. All are entrepreneurial and are starting local businesses.
  • Right-leaning Western Europeans who disagree with politics back home and want to live in a country that leaves them alone. Many moved to Montenegro during Covid as the restriction were minimal and poorly enforced. Many more moved after the Ukraine war started. They flee what they perceive to be censorship in their countries.
  • Western Europeans who want lower taxes and/or a lower cost of living. As inflation ate away at people’s savings in Western Europe, many realized that one way to beat inflation is to lower one’s tax bill and living expenses. It’s important to note that Montenegro offers both low taxes and a low cost of living as long as one avoids the luxury resorts mentioned earlier.
top 10 real estate buyers in Montenegro per country
Germans have been moving en mass to Montenegro. Source: Adriatic Apraisal

All these people are much better than tourists. Some pay income tax, social security taxes, but all pay VAT and drive the local economy through year-round consumption. These immigrants are all a net positive for the economy. They barely use any social services and instead consume locally, pay taxes, start businesses and are overall a true blessing for the Montenegrin economy which is now much more vibrant. The international school business is booming in Montenegro with several private English and Russian schools along the coast.

Effectively, the Montenegrin economy has become a lot less seasonal. We’ll see this in some real estate figures a bit below.

Also important to note is that all these people are fleeing something. If you believe that we are in an increasingly chaotic world with more people leaving their home countries, Montenegro is set to become a net beneficiary of such a trend.

Great for Digital Nomads

This is a big boon for Montenegro. Many digital nomads are very happy to spend a few months every year in Montenegro. It’s affordable, the weather is great, and there is a lot to do.

Importantly, Montenegro is outside of the Schengen zone. Effectively, this attracts a lot of relatively high-earning digital nomads from North America and other countries who cannot spent more than half the year in the Schengen zone. They thus come down to countries such as Montenegro to recharge their “Schengen days.”

Prospective EU membership and extensive infrastructure development

Ever since I’ve been coming to Montenegro people have been saying Montenegro will join the EU. First I was told 2022, then 2023, then 2025, then 2028, and now I hear 2030.

The lesson being, don’t listen to real estate agents when they come up with overly optimistic forecasts.

The reality is that Montenegro has been doing great without the EU, and that prices of real estate have risen without EU accession. For now, Montenegro seems to benefit from the EU development aid and free infrastructure, as well as implicit financial support, without losing its tourism-, immigration-, and business-friendly orientation, which is the key to its success.

China is also investing a lot of money in Montenegro and is building many highways in the country, increasing Montenegro’s connectivity. These projects are far from cheap, but because Montenegro is 85% mountains, projects in this environment are invariably costly.

Thriving Real Estate Investment Market in Montenegro

Real estate prices have been shooting up in Montenegro. You would expect that because of rising prices the rental yields or capitalization rates would be decreasing.

European house prices and rents percent change in Q1 2023 versus 2021
Rents increased even faster than prices in Montenegro. Source: Adriatic Apraisal

Wrong.

Although property prices rose by 25%, rents experienced an even greater increase, despite lackluster tourism numbers.

Why? Because relatively wealthy people are moving full-time to Montenegro and this ultimately has more of an impact than cash-strapped middle-class Europeans forgoing their one week vacation.

Essentially, despite booming prices rental yields and capitalization rates are at worst stable, if not increasing, which is quite a statement to make.

However, the increase in prices has been very inconsistent with most of it happening on the coast. In towns like Tivat, near Porto Montenegro where I stay, prices are up almost 50%. But so are rents.

apartment prices in Montenegro
Apartment prices in Montenegro. Source: Adriatic Apraisal

Where to buy real estate in Montenegro?

This graph will give you an idea of what to budget for in the different cities in Montenegro. As you can see, there is a wide discrepancy between the various cities.

Apartment prices in Montenegro per city
Apartment prices in Montenegro per city. Source: Adriatic Apraisal

Real Estate Investment in the Bay of Kotor (Tivat, Kotor, Lustica)

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.

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

The Times Screenshot
https://www.thetimes.co.uk/article/montenegro-the-hot-new-playground-for-the-super-rich-6kt2ls326
Forbes Screenshot

This is where I chose to invest and where I made most of my real estate deals. It’s the most premium region of Montenegro, and is the one I want to keep betting on. People come to Montenegro primarily for Kotor Bay, especially the rich. It’s where you’ll get more premium tenants, and where you will have the privilege to own real estate in what is objectively one of the most beautiful bays in the world.

The whole area is investible; Kotor, Dobrota, Tivat, Lustica peninsula, etc.

The fact that Tivat has an international airport with many European flights bolsters the strong case for Kotor Bay. Connectivity, in today’s world, is priceless.

I love to spend my Summers here. My relatives love living all-year round enjoying the mild climate and a calm life in a uniquely beautiful setting. There will always be demand for real estate in such a setting.

Real Estate Investment in Budva

Budva is the real ogre of mass tourism in Montenegro. Though Kotor Bay attracts luxury and is more widely known in the outside world, Budva is a regional heavyweight and attracts the most tourists due to its old town, big beach, and party atmosphere. It’s the preferred destination for higher-end Balkan tourism from Serbian and Bosnia. In my opinion it’s overbuilt but regional tourists love it as well as Eastern Europeans. I prefer smaller towns nearby such a Becici. But from an investment point of view, there is always rental demand there.

Real Estate Investment in Podgorica

Nothing to see here. Probably Europe’s least interesting capital city. No need to even go there unless you’re shopping for furniture or have a flight to catch. There’s a reason prices are not moving like they are on the coast.

Real Estate Investment in Bar

This city is more of a commercial destination due to its big port and railway infrastructure. However, it is becoming increasingly popular amongst foreigners moving full-time to Montenegro. Why? Because you still get to benefit from the beautiful Montenegrin coastline and beaches, but at a much lower price point. Most foreigners who have moved here are Germans, Ukrainians and Russians on lower budgets. Not a bad investment as there is room for this city to improve over time.

Real Estate Investment in Northern Montenegro

When Montenegrins refer to the “North” of the country, they are referring to the Mountainous areas. The two top investment destinations are Kolasin and Zhabljak near Durmitor National Park.

Both destinations have amazing hiking during the Summer and decent skiing in Winter. However, I find that there is too much real estate supply already in these areas and that the ski seasons are short. Finding quality property management is also a bit of a challenge in those areas, and liquidity is very low.

Personally, I bought a house near Niksic as a pure lifestyle decision as it is 90 minutes away from the coast and an hour away from the breathtaking Durmitor National Park. In this video below I was selling the land but then I decided not to in the end. My mix of coastal property and rural property inland makes for sublime Mediterranean living.

The North of Montenegro offers great lifestyle, but it’s not a particularly interesting investment destination. Continue reading this article for actionable insights and bookmark this video for later viewing as it’s mostly about lifestyle.

Real Estate Investment in Herceg Novi

bay view of herceg novi with a beer
What’s not to like apart from the beer being empty already?

Yes. Interesting investment story with upside.

Herceg Novi is essentially like the rest of Kotor Bay, but at a significant discount. For the moment it seems to attract people who love Kotor Bay but who can’t quite afford Tivat and Kotor. It’s a different crowd from Bar people who are on the cheap side.

Objectively, Herceg Novi is almost as beautiful as other parts of the bay. Prices are much lower, but I see upside. More and more premium developers are working on projects there, including the massive luxury Porto Novi development I mentioned earlier.

This part of the Montenegrin coast will gentrify quicker than other areas. For now, tourism is still mostly domestic and regional (Bosnian and Serbian) but an increasing number of Westerners and Croats priced out of Croatia end up here because it is right on the Croatian border.

EU accession would prove to be a massive catalyst for Herceg Novi.

Real Estate Investment in Ulcinj

It’s by far the cheapest on the coast in Montenegro because the ethnic element is crucial to understand. Ulcinj is populated by ethnic Albanians. They speak Albanian, have their own political parties, and wave Albanian flags more than Montenegrin ones. The tourism dynamics quite distinct, with few tourists that are not from Kosovo. At this point Ulcinj is essentially a play on Kosovo tourism. You won’t find many Serbs or Westerners here. You do find Montenegrins who want a cheap holiday.

It’s not a bad real estate investment destination in Montenegro, it’s just that the dynamics are extremely different and you must be aware of it.

Montenegro Real Estate Market: 4 case studies

Long Term rental in Kotor Old Town

About €2,700 /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 €150,000. Property taxes would probably be about €500 a year. This apartment could go for about 700 euros a month. Expect 85% occupancy. Deduct the property tax and some maintenance and you end up with 4%+ net rental yield.

Lustica villa flip – earning 50% profit 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.

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. Mention your Whatsapp if you use it.

Airbnb business 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 helps you buy real estate in Montenegro, does the renovations if required, and does the Airbnb management.

You can watch the video case study below. We discuss all the expenses.

ROI figures for real estate investment in Montenegro

If you are looking for a full-service real estate agent in Montenegro to invest in renovations, construction, or Airbnb management, feel free to get in touch with Ksenija per email: ksenija@thewanderinginvestor.com. Mention your Whatsapp if you use it.

Buying plots / lots of land to build in Montenegro

Peter Square Meter took me around to have a look at various good value land plots in Lustica and Herceg Novi. We proceeded to calculate the ROI numbers for people who would like to buy land, build, and then sell the real estate. Overall, buying land and building can lead to interesting capital gains, and most importantly can lead to better lifestyle for those who want something specific.

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. Mention your Whatsapp if you use it.

Common mistakes to avoid when investing in Montenegro’s Real Estate

  1. Either go for new-builds, or for old stone houses/apartments. This is what people are looking for. Few people are interested in structures from the 90s & 2000s anymore, though these could be good for personal use as they often offer the best value.
  2. Don’t forget to negotiate, especially on the secondary market. Some sellers are hungry for a deal.
  3. Some areas of the Kotor Bay have almost zero sunshine all year round due to the angle of the mountains. Typically, the sellers wouldn’t warn you 🙂
  4. Get a good lawyer. A lot of houses and developments were built illegally, which can lead to quagmires down the line
  5. 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.

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 property’s actual value, and much less if one resides there. Montenegro also offers residency to real estate owners.

Real estate transfer tax / stamp duty in Montenegro

There is a transfer tax to be paid by the buyer that was recently updated in January 2024:

  • Real estate < €150,000 = 3%
  • Real estate €150,000 to €500,000 = €4,500 + 5% of amount above €150,000
  • Real estate > €500,000 = €22,000 + 6% of amount above €500,000

Montenegro is ascendant and beautiful, and there is significant upside in certain pockets. However, it’s not a market where everything will go up as it would in a booming city. It’s important to target the investment properly, to be clear on one’s objective, and to not be all in. Montenegro is a decent market, but due to the risks, staying diversified is crucial.

Connect with the right realtors in Montenegro

If you are looking at investing in real estate in Montenegro, feel free to get in touch with my two favorite realtors in Montenegro who I have worked with and trust.

Peter Square Meter

ladislas with peter square meter in Herceg Novi

Peter is from the UK and specializes in the areas of Kotor Bay (Tivat, Kotor, Lustica, Herceg Novi).

Learn more about Peter

Ksenija

ladislas with ksenija in Budva

Ksenija is from Montenegro and her agency covers the whole coast + does renovations + property management.

Learn more about Ksenija

Other articles on Montenegro:

Available services in Montenegro:

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