05 Jan Procedures of investing in a property in Montenegro
Buying a property is a huge investment and a big step. Doubly so if it’s located in a country you’re unfamiliar with.
There can be unusual legal procedures, different terminology and the ever-important idea that location matters most. Montenegro is a great place to live with a fairly straightforward real estate system.
A property may be the home where you live or at least be a significant piece of your portfolio, so don’t make a purchase without doing your research.
Use this guide to get set with the information you need before buying real estate in Montenegro.
Advantages of Buying Property in Montenegro
Before we dig too deeply into the how, where and other details of purchasing a home in Montenegro, let’s spend a moment with the why. The long list of reasons to buy here include:
- NATO membership brought a boom in foreign interest which has been great for the property market. This means you have a good chance of making money when it comes time to sell.
- Sources peg the rental yield on Montenegrin property at four to eight percent, which is one of the highest in the region.
- There is a relatively low, flat capital gains tax of 9% on real estate in Montenegro.
- Buying a habitable property entitles you to a temporary residence permit.
Types of Property for Sale in Montenegro
There is a wide range of properties for sale in Montenegro.
Many of the real estate listings in English are in tourist areas and geared to vacationers or those looking for an income property.
Dig deeper and you’ll find a wide variety of options.
Some of these are:
- Apartments: In cities like Podgorica they are what you might expect — units in a multi-story building. Along the coast, in tourist areas, they are more likely to be complexes built around a shared pool or with an ocean view and easy access to the beach.
- Townhouses: This is the term usually used for houses (almost always detached) outside the city center, of about 2,000 sq. ft. and built fairly recently.
- Villas: These are commonly bigger than townhouses, closer to the city center, often include a walled garden and might have older building features like stone walls.
- Plots of land: Obviously, these are your opportunity to build what you want. Keep in mind that foreigners must buy land (both undeveloped and developed plots) with a registered company.
- Ruins: Old houses, almost always built of stone, that are in need of very significant renovations make up a separate category of real estate in Montenegro. They usually need a new roof, drastic modernization and new internal walls — basically, you’re buying romance and potential. Keep in mind that you’ll have to find qualified craftsmen to carry out the renovations.
Just as when renting a property in Montenegro, it’s important to keep local terminology in mind. Older, more traditional apartments might be listed as a “one bedroom” even if the bedroom is meant to do double-duty for both sleeping and as a sitting room.
Where to Look When Buying Real Estate in Montenegro
Very broadly speaking, properties that you might want to buy falls into three areas. They are in:
- Popular tourist areas along the coast.
- The capital city of Podgorica.
- Small towns and the Montenegrin countryside away from the coast.
It’s best to look at the options for buying property in Montenegro through these lenses because there are obvious differences in price and selection between the three.
Popular Tourist Areas for Those Buying Property in Montenegro
A look at a Montenegro property market report quickly shows that a huge amount of investment is pouring into Montenegro. Equally, tourists are flocking to the sunny coastal regions and, with a good property manager, there is the strong potential for rental income here.
If you spend any time reading about Montenegro tourism, you’ll inevitably see the quote from Ed Cumming in the Daily Telelgraphabout the country feeling like the French Riviera 50 years ago. Specifically, the tourism boom is focussed around:
- The Bay of Kotor, especially in Tivat and the city of Kotor itself.
- Budva, with its nearby “Budva Riviera” that includes about 8 miles of beaches on the Adriatic coast.
- The seaside strips near Bar and Ulcinj, which are a bit less popular with English-speaking tourists but have fans from Russia.
Now is probably the time to buy if you’re looking to pick up a tourist-friendly property in Montenegro. There is still a significant discount on them versus nearby Croatia, and local property management servicesare available so it doesn’t have to be a burden.
Where to Buy in Podgorica, Montenegro’s Capital
For a metro area of only about 190,000 citizens, Podgorica has a relatively long list of differentiated neighborhoods. If you think you might want to buy a home in Podgorica, paying careful attention to area features will help narrow your search.
For instance, Blok 5 and 6 are known as family-friends areas; Pod Goricom is an exclusive hill-side enclave; but Tološi is marred by poor urban planning that led some streets to be built without sidewalks or drainage.
There is some tension in Podgorica between preserving the natural environment and allowing development. So, if you’re particularly keen on green space or think that will be a big factor on resale value it makes sense to pay careful attention to development patterns.
Don’t assume the renovated villa with parks across the street and houses on either side will always have such attractive neighbors!
Where Else to Buy Property in Montenegro
At about 57,000 residents, Nikšić is Montenegro’s second largest city. Like other parts of the interior, it is slowly converting to a post-industrial economy and there are plenty of properties for sale.
Kolašin 1450 is the biggest ski resort in Montenegro. The tourism potential is not as strong as near the coast but there are plenty of properties near here that could turn out to be great investments.
Can Foreigners Buy Property in Montenegro?
The short answer is yes.
If you want to buy property that sits on its own parcel of land, like a house, you’ll need to do it through a registered company. That means working with a lawyer on an extra (but straightforward) step in the process.
The requirement for foreigners to hold property through a company only applies to land, not apartments. These can be owned outright by those not from Montenegro.
Fees You Pay When You Buy Property in Montenegro
Real estate transactions in Montenegro involve a standard set of taxesand fees, which are what you might expect to also pay elsewhere. They are:
- For existing properties only: A transfer tax of 3% of the assessed value.
- For new properties only: A VAT of 21% of the purchase price.
- Notary fees of approximately 0.01% of the property value.
- Lawyer’s fees that generally run to about €100 to €1,000 per transaction.
- The seller will pay the real estate agent’s fee of 3 – 6% of the property value.
So, as a buyer, you can expect your taxes and fees to add less than 3.1% to the price of old properties and less than 19.1% to that of newly built properties.
The Steps for Completing a Real Estate Transaction in Montenegro
Property transactions here are governed by The Law of Proprietary and Ownership Rights. Generally, most sales will have these steps:
- The buyer finds a property they want to purchase.
- An offer is made and the buyer and seller (or usually their agents) negotiate the details.
- A deposit of up to 10 percent of the purchase price is paid by the buyer.
- The buyer’s lawyer confirms that the property is fit for sale. Given Montenegro’s tumultuous history, it’s not a surprise that some properties have a complicated ownership record. If your lawyer finds that it is not fit for sale, your deposit will be refunded.
- A Sales & Purchase Agreement is prepared and signed by both parties. The buyer pays for it to be notarized.
- Payment is made according to the schedule set out in the Sales & Purchase Agreement.
- The 3 percent Real Estate Turnover Tax is due within 15 days of the Sales & Purchase Agreement being signed.
- The buyer’s lawyer registers the transaction and has the title deed transferred.
What You Need to Know About Buying Montenegrin Real Estate
Buying property in Montenegro is a fairly straightforward affair.
You’ll need to hire a lawyer and will benefit greatly from working with a trustworthy real estate agent.
Land transfer taxes are reasonable and there is a wide range of available options.