Foreign investment in Montenegro’s real estate: Trends, challenges and future outlook

In the last four years, foreigners have purchased real estate in Montenegro worth a total of 1.5 billion euros. Their interest remains high, though it is slowly slowing down, according to data from the Central Bank of Montenegro regarding the balance of payments and foreign direct investments.

In the first year after the COVID pandemic, 2021, foreigners bought real estate worth 278 million euros. In 2022, there was a significant increase of 60%, reaching 448 million euros. In 2023, foreigners purchased real estate worth 463 million euros, reflecting a modest 3.3% increase compared to the previous year. However, due to rising property prices, foreigners acquired significantly fewer square meters for nearly the same amount. From January to November of last year, foreigners bought properties worth 398 million euros, which is about 40 million less than in the same period of 2023.

Over these four years, foreigners also sold properties in Montenegro worth 421 million euros and withdrew that money abroad. In 2021, they sold real estate for 72 million euros, in 2022 for 108 million euros, in 2023 for 134 million euros, and by November of last year, they sold properties worth 107 million euros.

Foreigners bought two-thirds of the properties last year

Between January and November last year, banks in Montenegro approved housing loans worth 156 million euros for both domestic and foreign citizens and companies with registered residence. Considering that there is also direct purchase by domestic citizens and companies, it can be concluded that foreigners bought around two-thirds of the properties available on the market in 2023.

The Ministry of Finance, in its new Economic Reform Program, stated that real estate in Montenegro is overvalued due to the increased foreign investment in their purchase and that a slow decline in property prices is expected in the coming period, bringing them closer to their fair value.

Ministry expects a drop in prices

According to data from the Statistical Office Monstat, the average price of a square meter of newly built apartments in the third quarter of last year (July-September) was 1,853 euros. In the same period four years earlier, before the surge in foreign interest, the average price was 1,192 euros.

“The latest preliminary estimate of the deviation of property prices from their base value for the period 2006-2024 shows that prices in the second quarter of 2024 were moderately overvalued, to a lesser extent than at the end of 2023. A slow decline in prices towards their fair value is present. However, this decline is not as sudden or immediate as it was in 2008-2009, and it appears to be quite gradual, which alleviates any risk of a price bubble in the real estate market. This is positive for financial stability,” states the draft Economic Reform Program.

The Ministry concludes that “all available data indicate that property prices have been primarily driven by foreign direct investment (FDI) in real estate.”

FDI in real estate accounted for around 6.4% of GDP annually since 2021, compared to 3.5% in the period from 2015 to 2020, indicating that the increase in property prices was driven by greater foreign interest rather than rising objective costs.

The list of the top ten countries from which most buyers of Montenegrin real estate come includes only one EU member—Germany.

Most properties bought by Serbs, Russians and Germans showing declining interest

Over the past four years, the largest number of properties in Montenegro were bought by citizens and companies from Serbia, totaling 230 million euros. In 2021, they bought real estate worth 35.7 million euros, in 2022 the amount rose to 53 million euros, and in 2023 to 78.3 million euros. By November last year, Serbia had purchased real estate worth another 62.5 million euros.

Second place in purchasing Montenegrin real estate goes to Russians, who invested 210 million euros in properties over these four years. However, their interest has significantly decreased. In 2021, Russians bought real estate worth 59 million euros, in 2022 for 61.2 million euros, and in 2023 for 56 million euros. By November last year, Russian investments amounted to 33.5 million euros.

Germans rank third, having spent 180 million euros on real estate in Montenegro over these four years. However, their interest has also noticeably decreased. In 2021, they purchased properties worth 26.6 million euros, in 2022 for 70 million euros, and in 2023 for 51.2 million euros. By November last year, Germans had invested 31.8 million euros in Montenegrin real estate.

Growing interest from Turkish buyers

Turkish citizens and companies are in fourth place, having invested 152 million euros in real estate in this period. There is a slight increase in their spending on Montenegrin properties. In 2021, they bought real estate worth 14.7 million euros, in 2022 for 29.7 million euros, and in 2023 for 51 million euros. In the past year, by November, they purchased properties worth 56.2 million euros.

Citizens and companies from the United States bought real estate in Montenegro worth 118 million euros over the past four years, ranking them fifth on the list. They spent 21.4 million euros in 2021, 37.3 million euros in 2022, and 34.3 million euros in 2023. By November last year, their investments amounted to 34.5 million euros.

Swiss citizens and companies rank sixth, having invested 75 million euros, followed by buyers from Ukraine (53 million euros), the United Kingdom (46 million euros), Bosnia and Herzegovina (44 million euros), and the United Arab Emirates (37 million euros).

A total of 59 countries or territories are listed by the Central Bank of Montenegro as foreign investors, with other countries contributing a combined total of 3.2 million euros.

Declining foreign investment in companies and banks

In total, foreign direct investments for the first eleven months of last year amounted to 801 million euros, with almost half of this sum related to real estate purchases. Much less money was invested in business activities or banking operations.

Foreign investments in companies and banks in Montenegro amounted to 114 million euros, and foreign loans to their Montenegrin companies and banks (so-called intercompany debt) reached 263 million euros. The repatriation of domestic capital from abroad amounted to 25 million euros.

In the total sum, the largest investments came from Serbia (107 million euros), Russia (94 million euros), Turkey (91 million euros), and Germany (65 million euros).

Four years ago, in 2021, foreign investments were more evenly distributed, with 278 million euros invested in real estate, 215 million euros in companies and banks, and 323 million euros in loans from foreign companies to their Montenegrin subsidiaries. Since then, investments in companies and loans have been gradually decreasing, while real estate purchases have risen.

Foreign Investment Outflows for the First 11 Months of Last Year Were 347 Million Euros

The net foreign investments amounted to 453 million euros. The largest outflows of foreign capital were through the repayment of loans that foreigners had given to their companies in Montenegro, which amounted to 152 million euros, the sale of properties in Montenegro (107 million euros), loans from Montenegrin companies to foreign firms (45 million euros), and the purchase of real estate abroad (29 million euros).