Prices of Montenegrin real estate rose abruptly after the country declared its independence on May 21 2006, which coincided with growing investor interest, Kapital weekly reported. For instance, property along the Adriatic coast gained 96 per cent on average during the first five months of 2007, as compared to the respective period in 2006, while in certain regions it even achieved more than 100 per cent hike, according to the calculations of a think-tank in Podgoritsa.
A large number of customers encounter difficulties in buying property because most of new construction units are sold off-plan, Kapital wrote.
Local media reports that real estate developers in the ex-Yugoslav republic generate tenfold returns on their investments. Montenegro’s finance ministry data shows that property revenues increased four times in 2004/06, hitting 750 million euro for 2006 and surpassing 780 million euro in the first 11 months of 2007 alone.
Taxes on property deals rose to 14.64 million euro in 2006, from 5.14 million in 2005 and 3.84 million euro, collected in 2004.
There is a robust demand for authentic stone houses, plots along the coast and newly-built apartments and the interest in agricultural farms near seaside towns is rising, Kapital weekly said. Residential prices in prime locations hover in the 2 500-2 800 euro a sq m price range.
Local real estate agencies say that property prices have not peaked yet and will see another 30 per cent growth in 2008-2009 time span.
However, independent observers, cited by the Montenegrin Republika newspaper and Bloomberg agency, tend to think otherwise. According to them, property prices in Montenegro would decline in 2008. Experts from the Montenegrin Centre for Entrepreneurship and Economic Development think-tank, quoted by Kapital, reckon that real estate in the ex-Yugoslav country could start depreciating or stagnating over the next 12 to 36 months.
A drop in prices at the Adriatic coast will have a negative impact on prices of property inland, they commented. Considering the hefty Russian, Swedish, British and Irish interest, though, prices will keep their current levels in the worst-case scenario, the experts said.
Nonetheless, Montenegro is not exactly the investors’ “promised land.” The communist and war heritage has not yet been overcome. Electricity and water shortages are not a rare occurrence still. There are hardly any direct flights to Montenegro from most European and United States locations, and even low-cost air-carriers have not stepped on the local market yet. Roads are in poor condition and quality of life is still low for a large number of Montenegrins.
Foreigners, whether companies or individuals, are allowed to buy real estate, but when it comes to purchases of land, foreign individuals are not allowed to own land if they do not plan to build on it right away. Therefore, very often foreigners buy real estate through local companies, which become owners of the land until building works are completed. Only then do they transfer the plot ownership to the foreign person.
Property ownership in Montenegro is not registered on paying the transaction price, but after paying the tax on the acquired property unit. The tax on property ownership transfer is two per cent of the unit’s market value and the notary fee is 200 euro on average. Corporate tax in Montenegro is nine per cent and personal income tax is 15 per cent. Foreign citizens can stay in the country without visa no longer than 30 days.
