Real Estate Market Overview of Montenegro

Today we would like to give you a brief Real Estate Market Overview of Montenegro. Like & Share! Introductory overview The Republic of Montenegro is a small Mediterranean country located in south eastern Europe. It is a NATO’s newest member (2017) aspiring to join the EU by 2025. The economy is stable with an average growth rate of 3.5% in 2013-18 . Montenegro remains one of the fastest growing economies in the region and Europe as a whole (the average growth rate for EU countries at the time was 1.8%). Montenegro is a service-based economy with circa 60% of GDP generated in the services sector . Tourism makes up approximately 2/3 of these services as Montenegro has exceptional natural landscapes that are a critical component of its prosperity . According to the latest overview of international tourism by Worldwide Tourism Organization, Montenegro is one of the fastest growing tourism destinations worldwide . There are more than 2 million tourists arriving in Montenegro each year, and the number is growing. This means 3.5 per capita, top-3 highest result in Europe — for every 10 people living in Montenegro, 35 people from another country spent a night in Montenegro. Concerning the structure of overnight stays of foreign tourist, in 2018, the most of them were realized by tourists from Russia (25.1%), Serbia (24.5%), Bosnia and Herzegovina (9.1%), Ukraine (3.9%), Germany (3.6%), France (3.1%), Poland (2.8%) and United Kingdom (2.6%). Beyond Europe, Chinese visitors are the next biggest tourist group by nationality. Responding to the Montenegrin government’s efforts to create an environment that is investor-friendly, with minimal state interference and low taxes, Foreign Direct Investment (FDI) inflows have increased from $63 million in 2004 to $486 million in 2018. Investments made the strongest contribution to growth as the construction of the Bar-Boljare highway and residential construction accelerated. Besides, in 2019 the government of Montenegro launched the program “Citizenship of Montenegro by Investments”. The main requirement is to purchase property in Montenegro that costs at least €250,000. Real Estate. Residential Last few years there have been a decline in residential sales that were caused by the economic and financial crisis and then disruption of relations between Russia and Ukraine, which led to a surplus of the apartments available across Montenegro. Despite the losses of Russian buyers, the sales were supported by the return of British and Ex Yu purchasers. In spite of the fact, that Montenegro’s house prices are now falling , in the long-tern house prices stay relatively stable (no more than ±10% change in 5 years). Note, that the trends in prices for coastal, central and northern regions differ considerably. Even now rental yield in Montenegro is one of the highest in Europe — from 4% to 8% , but it is crucial to consider seasonality of the coastal properties. We strongly believe that the housing market will bounce back, due to booming tourism and a stable, growing economy. Real Estate. Hotels Hotel operating performance has realized significant growth rate recently. The most important metrics, namely, revenue per available room and average daily rate rose in the past 10 years on average by 12% and 11%, respectively (See the Graph). Still, high seasonality is a challenging issue. In the mid-season priced are down by 30%, while at low season they are usually with 40-50% discount . When we look at the supply and demand relationship of the hotel sector, we see that, for example, in 2018, the number of bed-places in hotels in Montenegro were over 40 thousand, according to the data from UNWTO, while the number of overnight stays was 12.9 million. This means that the number of bed-places to offer were 300 times smaller than the total number of overnight stays. This relationship indicates that excessive demand for hotel rooms. With 14 international brands present in the market there is clear indication that the market is of interest to global players (See the Table). All in all, the stable growth of the economy, its political aspirations and real estate market that is boosted by foreign investors and tourism make properties in Montenegro highly attractive as an investment opportunity today. *** Authors: Philipp Rowe/ Managing Director and Certified Real Estate Broker (Germany) and Victoria Shevchuk/ Real Estate and Investment Analyst. “RC Montenegro Property & Investment” is connecting the best properties and investment opportunities in Montenegro with investors worldwide. A brand of the Rufil Consulting Group. With offices in Germany (2001), Russia (2007) and Montenegro (2014). Serving our investors and customers worldwide.