Until recently part of Serbia (and even earlier Yugoslavia), Montenegro is located in the south eastern region of Europe with neighbours including Croatia, Bosnia and Herzegovina, Albania and Serbia. Despite the struggle for independence the state has been formerly recognised by an array of countries throughout the world and was welcomed into the United Nations in 2007 and also became the 47th member state of the Council of Europe. 

Introduction To The Montenegro

The country is only 14,000 km2 in size and has a population of just 684,000 making it one of the smallest officially recognised countries in the world.  The history of Montenegro has been very eventful with the country changing hands on a number of occasions as it sought larger partners for protection and trade issues.  As you would expect from a population who have felt suppressed by larger partners, the Montenegro population voted in their droves when given the opportunity at recent elections.  They remain very loyal and very passionate about their country.

Montenegro is separated into 21 different counties, each of whom are under the overall control of the government situated in the capital Podgorica.  As you would expect from a country which was formerly part of the much troubled Yugoslavia, the Montenegro economy has suffered wild fluctuations over recent times.  The country relies heavily on industries such as electricity generation, steel, aluminium, coal mining, forestry and textiles in order to service the population, although the sudden loss of trading partners when leaving Yugoslavia and then Serbia was devastating.  Inflation was rampant, unemployment was rife and slowly but surely the country was sinking lower and lower.

The recent introduction of a privatisation program has brought in much needed money to the government coffers as well as offering a new style of market economy for the country.  There have also been a number of reforms set in place by the government and many believe that building blocks are being created for a more prosperous future.

Property Market in Montenegro

As you would expect from a country with a population the size of Montenegro, the property market is fairly small compared to their neighbours and most other European nations,  This is not to say that the property market does not have great potential for capital growth, due in the main to the influx of foreign investment after the country’s closer ties with the European movement.

For many years property values in the country have been seriously undervalued, and it is only now that overseas investment and overseas visitors are starting to arrive, that the potential is being realised.  The country has a fast growing tourist trade which many expect to be one of the country’s main markets for the future.  The increase in travellers has created a very healthy appetite for property in Montenegro, a country that still has great places of beauty and culture, despite the problems of recent years. 

Over the last 12 months, property returns of 10, 20 and 30 percent have been commonplace, with the coastal regions fairing better than most.  However, alarmingly a recent report stated that only 15% of the property market activity was from nationals, with the remaining 85% from a mixture of speculators and expats looking to relocate.  It is the more speculative investors in the market who are of concern as this speculative element can lead to wild swings in the property market - something which any long term investor would always look to avoid. 

The breakdown of current property investors makes it very difficult to tag local trends to the potential for the property market. In effect the market is currently at the whim of speculators, until property values rise to a level where they are deemed fair value on a risk / reward basis.

Buying Property in Montenegro

The process for UK expats buying property in Montenegro has been very much simplified by a reciprocal arrangement between the two countries.  However, older laws in Montenegro state that foreigners are not allowed to hold land directly, although it is possible to set up a local company to retain ownership.

The property purchase itself consist of the following stages:-

• Initial agreement. A 10% deposit is paid after initial interest in a property is formally confirmed.  This is none refundable if the buyer drops out, although the seller faces the return of the deposit plus a fine if the sale does not run on time.
• Verification of the titles and ownership of the property.  This will be carried out by local lawyers.
• Change in ownership.  After all of the paperwork is in place the final payment is made and ownership transfers to the buyer.

Typical fees would be in the region of :-

• Legal fees. 1% of the property price.
• Stamp duty.  2% of the property price.

There are local tax issues which need to be addressed prior to completion of any purchase, ensuring that the investor does not receive any unwanted shocks in the future.

Future Property Market

While all of the elements of the Montenegro property market point towards a prosperous time over the next few years, it is easy to forget that the country and the property market are very very small.  This makes prices more prone to sharp movements as and when purchase trends change - leaving what ,many will find a difficult market to read.

The economy has recently started to settle down, and the government’s privatisation program has injected some much need employment opportunities into the economy.  You have to admire how a country the size of Montenegro has managed to battle back from a number of recent set backs which effectively left the nation “high and dry” and needing to begin again at the bottom.

Perhaps the tourism industry and a strengthening of ties with the EU is the key to the future, but for many of the larger more experienced investor there will always be more than average risks associated with the property market. 

Due to the physical constraints of the country, there will always be a volatile element to the property market, although the future performance should begin to flatten out as more and more locals become involved in the market, increasing the very low 15% of local capacity in the market.