Investors may be missing an opportunity if they do not consider an investment in the red hot real estate market of Montenegro. The country contains one of the fastest expanding areas in the world for this industry. In the past few years prices have tripled but there is still plenty of room for growth. The spectacular expansion in real estate began in 2006 in this part of the world. The huge inflow of foreign investment produced a bit of chaos in the developing market of Montenegro but it has remained an excellent place business possibility.
There was huge discrepancies in property prices leading to unique possibilities to acquire fabulous properties at extremely reasonable prices. This was the result of the domestic market producing a crop of unprepared and uninformed agents who were most eager to make a sale. Their lack of experience allowed the earliest investors to walk away with some incredible deals.
As the real estate market became more sophisticated in Montenegro a number of foreign firms arrived. They are mostly from Russia and the United Kingdom. Property prices remain attractive for foreign investors but have gotten a bit pricey for the domestic market.
The main foreign buyers in the market originated from Ireland, Russia and the United Kingdom. This has recently expanded to include France and Germany. Now investors from Asia and North America including the United States are becoming aware of what Montenegro has to offer in real estate.
For many foreign investors there are simply looking for a holiday villa along the coast. Others are looking for a place to make a good return in the tourist market. Travelers are often looking to rent properties for vacations or even extended periods of time.
A more recent phenomenon is the concentration of buyers from certain regions of the world. For example, Russian buyers seem to be congregating in the area around Budva and Sveti Stefan. It is not hard to imagine, that in future years there will be thriving ethnic communities in a number of areas throughout Montenegro, particularly along the coast.
A potential investor may be wondering why they should choose Montenegro? The country possesses a great geographic location. Major European countries are closer than you might think. Situated on the Adriatic Sea the country is on the opposite coast of the Amalfi region of Italy.
The Montenegrin coastal region is one of the most beautiful and best preserved natural wonders in all of Europe. Although this small country has been isolated and once submerged inside Yugoslavia it is rapidly modernizing. Montenegro is looking to integrate its economy with the European Union in the years ahead. The country has already adopted the Euro as it’s national currency It has become a major tourist magnet for those individuals who want to take a vacation that is off the normal pathways.
The country has been independent since 2006. The people of Montenegro at that time voted to separate themselves from the country of Serbia. The country borders the nations of Albania, Bosnia and Herzegovina, Croatia, Kosovo and of course Serbia.
The country contains a great variety of land forms and it has the highest concentration of biodiversity in all of Europe for its size.
Tourism is considered the backbone of the economy in Montenegro. Future growth will continue to be dependent on travelers from Europe and elsewhere. Government expenditures of the nation in infrastructure continue to focus on the tourist market.
Foreign investments are practically doubling each year in Montenegro. Much of it is concentrated in the real estate and tourist markets.
The country has some spectacular national parks, sandy beaches with clean water, great mountains with some excellent ski resorts, and a varied landscape that remains mostly unspoiled. The climate is relatively mild throughout the year.
Aware that there is continuing interest in the purchase of property by foreign investors, the country has made the process much easier. The general climate for investment in real estate is quite positive for a number of reasons. Property rights are respected and crime rates remain very low. The country has a small population less than 700 thousand. The total land area of Montenegro is 13,812 km2 which is just a bit over 5 thousand square miles. That gives the country one of the lowest population densities in all of Europe. Although a small internal market may be a disadvantage for some businesses, it is a great advantage in the real estate industry.
Where should a potential investor look for a property? One must consider either a coastal site or one in the mountainous interior. The coastal region can be practically split in two as far as property investments. These would be the Bay of Kotor and the open coastal region from Budva to Ulcinj.
The heart of Kotor Bay is the town of Kotor itself. It is one of the must sees when you visit Montenegro . There is a strong real estate market at this site but there is equal interest in smaller communities like Perast, Prcanj, Morinj and a number of others. The advantage of Kotor Bay is that besides the main town it is not a distinctive tourist region. There are no sandy beaches and there is a lack of big hotels so there will be no summer invasion of visitors. This will enable one to enjoy the natural scenery and the relaxing way of life in the area throughout the year.
Most of the Bay of Kotor is quiet and calm for most of the year. There are a number of old fisherman villages that have been there for centuries. There are numerous aged stone houses with an ample supply for sale. There are a number of different styles and sizes that will suit most prospective property investors. Some of these buildings are built along the water line and others are set further back. Although there is no view of the open sea the sights from both sides of the bay are absolutely stunning.
The entire Kotor Bay region begins at the town of Tivat in the south and ends with Herceg Novi in the north. This town is situated near the border with Croatia.
If you would prefer to invest in an area that has more tourism then you other choice for the coastal region would be further to the south. Budva, Petrovac, and Sveti Stefan have become boom towns for real estate investments. It is in these communities that you will find the sandy beaches and wonderful views of the Adriatic Sea.
The Budva area has been the traditional area for tourism in Montenegro. It is here where the major foreign investment in real estate began. Many individuals might prefer to purchase property with the motive of using it as rental property. Others might wish to purchase land with the intention of building on the site later. This outright purchase of land is still not permitted at this time. The same is true in neighboring Croatia. If this is your intention and you are not a citizen of Montenegro, you will need to open a holding company or business within the country. This will permit actual land purchases and subsequent sales. It must be noted that these property laws are set to change in the near future. This will of course, simply the process of acquiring land for development in the real estate market.
The other area for possible investment as stated earlier, is the mountainous interior and rural parts of the country. One of the most beautiful areas to consider for a possible investment is the land around Skadar Lake. It is in the border area between Montenegro and Albania. There are a number of older stone homes that are for sale on the lake front. Outright land purchases will be more difficult, until the laws on property acquisition change, as explained above.
Another area of interest is the area around the town of Zabljak. It has become very popular with tourists recently. Less developed areas include the areas around Mount Durmitor, Piva Lake, Kolasin, Lovcen and a number of others.
At present, foreign individuals and legal entities can acquire land if the property is deemed necessary for their business activity. You will need to register a company and then later transfer the property to individual ownership if that is your wish. Two conditions of course will need to be met. Legal entitlement to the property and registration of the property through the Area Property Registry.
Once an investor has decided on a property a purchase contract is drawn and signed by both parties or their representatives. All signatures will then be verified in a court of law in Montenegro. Once legal ownership is established a department within the Local Council Offices determines the value of the property purchased. The new owner then must pay the property transfer tax of 3% of total assessed value. Once the tax is paid the contract is stamped. You are then permitted to register the property with the local Area Property Registry.
Transactions costs of buying and selling a property is usually from 6.02 to 9.75 of the property value. The buyer pays the transfer tax of about 3%. The commission for the real estate agent averages between 3% to 6% but as in the West is usually paid by the seller.
It is important to note that if you are building new buildings on acquired property the tax levied is much higher. Instead of the 3% transaction cost you will pay a 17% VAT (Value Added Tax). This is why this investment writer recommends that at this time, (until the property law changes) you might consider purchasing properties that are already developed.
The only additional fees are registration and notary fees. Notary fees are around 0.01% of the property value. Legal fees if you contract a lawyer which is traditional business practice, range from 100 to 300 Euros ($136 to $408 USD United States Dollars) per transaction.
The real estate market for Montenegro has excellent growth potential in the coming decade. Further legal reforms and modifications in property and business investment procedures will only enhance these opportunities.