Why Montenegro?

  Deep blue seas, beautiful beaches, pristine lakes and rivers, rugged mountains, lush green forests, picturesque villages and well-preserved medieval towns, have led to resurgence in tourism, which in turn has created the conditions for an emerging property market.

The property market

  Montenegro is widely believed to be in the first stages of a property boom. Prices are around 40–60 per cent cheaper than in neighboring Croatia, the average being €123,000 (around £83,000) for a two bedroom apartment and €223,500(approximately £150,500) for a three bedroom house.
  In the short term, money can be made from letting, to tourists or to the domestic market, depending on location. Prospects for long term growth seem promising, as the local population grows richer, mortgages become more widely available and the international property market becomes established.
  Opportunities for capital appreciation are currently greatest in the south of the country and in mountain resorts, including the ski areas of the north and east, where the winter sports industry looks poised to expand.
Popular locations
  The Kotor Bay region, at the northern end of Montenegro’s dramatic coast, has traditionally attracted the majority of foreign property investors, including Germans, Italians, Russians and the British.
  The area’s popularity is reflected in prices, which tend to be considerably higher than the country’s average; a three bedroom house costs around €312,000 (about £210,000). Because of this, serious investors are now looking further south to the Adriatic Coast, and inland, where better bargains can be found.
  The southernmost part of the coastline, the Budva Riviera, is Montenegro’s tourism capital. A three bedroom house in the historic city of Budva costs an average of €128,500 (approximately £86,500), and properties close to the region’s long, sandy beaches are expected to see significant price increases.
KotorBay, a UNESCO World Heritage Site, is actually Europe’s most southerly fjord. The ancient walled port of Kotor, which has one of Europe’s best-preserved medieval Old Towns, is another World Heritage Site. Its summer carnival draws crowds, and it is known for its nightlife.
  Like Kotor, the towns of Bar, Herceg Novi, Perast, Prcanj and Tivat (which boasts one of Montenegro’s two international airports) offer a range of properties, including apartments and detached houses, many within a short walk of the sea. Rents have more than doubled over the last two years, with almost 100 per cent occupancy during high season in good quality developments.
The Adriatic Coast
  This area’s picturesque resorts, striking coastline, sandy beaches and mild climate have long made it a favorite with holidaymakers. In summer, open-air festivals at Budva, Petrovac and Becici offer the chance to experience traditional Montenegrin culture. Historic monuments abound, including ancient monasteries clinging to the mountainsides.
  Budva is approximately 40 minutes from Tivat International Airport and two hours30 minutes from Dubrovnik. Much of the city has been restored, including its walled medieval Old Town, where there are numerous characterful shops, restaurants and galleries.
  Becici, two kilometres from Budva, offers a wide variety of water sports. Walking is another popular pastime. Montenegro’s best paragliding location, which operates from late March to late September, lies above Budva.                                       
                                                                                                                                      

Buying a property

  There is no restriction on Irish nationals buying private property in Montenegro. However, because of the country’s unstable past and its status as an emerging market, purchasers face numerous pitfalls. For instance, although there is a Land Registry, effective methods of tracking property ownership have hitherto been lacking, which can make it hard to establish clean title. This, combined with ongoing lawsuits by families trying to reclaim from the government assets appropriated during President Tito’s time, creates potential for disputes .In many cases, a property can be bought freehold, but the land on which it is built can only be purchased leasehold. It is wise to insist on a survey in this case, particularly in the case of an older property.
The purchase process
  As with most European countries the purchase process is in two parts; signing the contract and taking legal possession of the property, and then making sure that the process is duly recorded at the land registry. The process is remarkably straightforward, Montenegro uses the Euro, and except for public lands such as parks and roads there are no limits on the property in which foreigners can invest.
  Like close neighbors Slovenia and Slovakia, Montenegro has computerized the registration process. From beginning to end, registration is unlikely to take more than a couple of days.
The buying process is as follows: after agreeing a purchase price with the seller, a 10% deposit is standard. Should the buyer fail to hand over the balance of the purchase price by a set date the deposit is forfeited, but if the seller fails to complete the deposit is returned plus an additional 10% penalty fee. After the contract is drawn up it must be signed by both parties or by representatives with valid powers of attorney. The signatures must also be attested, purchase tax of around 2% of the property value is paid and the change of ownership registered with the land office.
  Once a price has been agreed and the preliminary searches have been conducted, a deposit (typically 10 per cent) is paid and a pre-contract signed.
  When all searches are complete, buyer and seller sign the final contract of sale before a notary public, and the balance of the purchase price is paid. The change in ownership is then registered.
Fees and costs
  A purchase tax of 2 per cent on resale properties and 17 per cent on new builds is payable, calculated on the Montenegrin Inland Revenue’s valuation rather than on the purchase price. Other expenses the buyer must meet include the lawyer’s and notary public’s fees (typically 1 per cent) and the estate agent’s charges (usually4 per cent).
Financing
  When deciding how to finance your purchase, consider all the options. Paying cash, if you can afford to, is the simplest way. Mortgage lending is in its infancy in Montenegro, but is beginning to become more widespread. Loans are usually from 50 to 70 per cent of value.

Taxation

  Ireland has a double taxation treaty with Montenegro; tax is paid in one country or the other, not both. Unlike the Irish one, Montenegro’s tax year corresponds with the calendar year.
Income tax rates are progressive, to a maximum of 24 per cent.
Personal taxation: nonresidents
  Foreign nationals living temporarily in Montenegro are considered nonresidents and taxed only on Montenegrin sourced income, including rental income (at 15 per cent), interest payments and dividends.
Personal taxation: residents
  Foreign nationals who have a permanent home in Montenegro, or who spend more than 183 days there per calendar year, are classed as residents and taxed on their worldwide income. The 183 days need not be consecutive.
Residents are liable for tax at 25 per cent on rental income earned in Montenegro
Capital gains arising from the sale of property are treated as income, but properties owned for a minimum of three years prior to sale are exempt. Capital losses can be carried forward against future gains, to a maximum of 10 years.
Property taxes
  An annual property tax of between 0.08 and 0.8 per cent is payable, calculated on the market value of the property as at 1 January of the year in question.
Montenegro’s currency is the euro (EUR).
Currency (including travellers’ cheques) in excess of € 2,000 (£1,346) must be declared by anyone entering Montenegro.
Passports and visas
Irish and UK citizens can visit Montenegro for up to 90 days without a visa.
          

Economy

  Unemployment remains a key issue. On the plus side, inflation is low, the public spending deficit is decreasing, the banks have been privatized, credit is booming and access to EU markets is on preferential terms.
  The government’s chief goal is sustained increases in economic growth, employment and incomes, both for their own sake and as a foundation for EU membership.Tourism is now Montenegro’s main industry. There were 820,000 visitors in 2005,a rise of nearly 17 per cent on 2004. Aluminum production (now privatized), lumber milling and salt processing are also important.
  It is essential to obtain professional advice and guidance specific to your circumstances, especially in areas like property purchase, potential rental returns, taxation and mortgages. Never sign any document until you are satisfied that you fully understand what you are committing yourself to.

This web site provides general advice for guidance purposes only. It is recommended to seek professional advice before making any purchase. Contact us for additional information or services.