However the country has not escaped the financial turmoil gripping the globe. With some perceiving there is a lack of economic security in Montenegro and the infrastructure worrying some, the real estate market has stagnated and properties have not seen the surge in prices that was once predicted.

There is good news on the horizon for Montenegrin property investors. The recent parliamentary election which saw Prime Minister Milo Djukanovic’s coalition party claim victory may provide impetus for the property market.

Djukanovic is making EU accession and the Montenegrin economy a priority and both of these factors could help rejuvenate the jaded real estate market. With money being spent on infrastructure and a proposed reduction of red tape for overseas property investors, many believe that despite the economic climate, Montenegro looks to be a good place to invest in property.

Read our free Montenegro Buyer’s Guide.

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The direct flights not only open up the market to UK investors, but will also give the local area a boost to their tourism industry. Montenegro is starting to see transport links with many countries, and with promises made to improve the infrastructure throughout the country, it is easy to see why some foreign property investors are getting excited about Montenegro.

Montenegro probably isn’t the first country that overseas investors would think of, yet the country has a lot of plus points going for it. Already using the Euro, it is expected that Montenegro will be joining the EU in the near future. Prices are still relatively low compared to the rest of Europe and many are speculating that buying now could yield fantastic returns in the medium-term.

Montenegro has a population of around 700,000. Staggeringly, they welcome 2.3 million tourists to the country in 2007 and this figure is expected to increase over the next few years. A healthy tourism industry is always welcome news for investors as it means that there is a high chance of good rental yields from investment properties. With low taxes, many foreign investors are increasingly being drawn to the country ensuring that property prices are likely to grow over the next few years.

However, as with any purchase, it is advisable to do your homework. There is sometimes sketchy information on house deeds therefore it may take a while for a property purchase to complete. It is therefore advisable to deal with an experienced broker and/or lawyer who will understand all the quirks of the local property system. It is also important to note that new owners usually pay all the previous owners home-related unpaid bills therefore you should include a clause in your purchase agreement stating that the previous owner remains liable for their outstanding bills.

Read our buyer’s guide to Montenegro property purchases here.

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Currently, there is a law in place which states that any buyer from overseas must setup a company if they wish to buy real estate for development purposes. However the Montenegrin Government are now backing a removal of this law which will help overseas buyers invest in the country’s real estate.

Foreign property investors already have a fairly large presence in the country, owning over 19,200 hectares of land and 152 million square metres of property (both commercial and residential) in Montenegro alone. In fact, foreign property investors are so prevalent in Montenegro that it is said that every fourth property in Budva and every fifth property in Bar and Tivat is owned by an overseas investor.

Montenegro property prices have soared in the past few years, particularly on the coastal regions. Across the country, prices have rise by around 20% and some lucky property investors have seen their properties increase in value by as much as 100%. Much of the good land around the coast has already been taken and the past performance of the property market probably indicates that the best returns have already been made, however careful research may still be able to turn up a few gems.

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Finding Your Property
Once you have found your perfect Montenegrin property, a pre-contract is signed and a deposit must be paid. We advise that you find a lawyer who speaks Montenegrin and your mother-tongue fluently so that they can advise you through the contract and the buying process. It is also good if they have a good working knowledge of laws in your home country.

Mortgages
Many lenders in Montenegro will lend to foreign property investors however they will require a deposit of between 30-50%. It may be worth investigating if you can get a mortgage from your home country as it may work out cheaper.

Fees and taxes
Once all the searches on the property have been completed, the vendor and buyer will sign a final contact before the public notary. The change of ownership will then be registered with the land registry office. Taxes will need to be paid at this point – there is a purchase tax of 2% on resale properties and a tax of 17% on new builds. The notary and lawyer’s fees will also need to be paid – generally, you should budget about 1% of the property purchase price for these fees. If you have dealt with an estate agent, expect to pay between 4-15% in fees.

The lawyer should be able to advise you on other taxes associated with the property. Some countries have a double taxation treaty which means that you will pay tax in one country and not the other.

Capital gains tax is also applicable – all property sales are treated as income however properties owned for a minimum of three years prior to the sale are exempt from capital gains tax. We advise you budget about 7% for capital gains tax. Inheritance tax and gift tax on property varies between 1-30%.

Foreign nationals who are not residents of Montenegro, or who live temporarily in Montenegro will only be taxed on any income earned in Montenegro – this includes rental income.

Foreign investors who have a permanent home in Montenegro or who spend more than 183 days in the country per calendar year, are classed as residents. These investors are taxed on worldwide income and not just income earned in Montenegro. However, check the double taxation treaty to ensure that you are not paying too much tax.

For most people holding foreign passports who wish to stay in Montenegro for more than 90 days, they must apply to the Ministry of the Interior for a temporary residence permit in good time.

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Much has changed in the past five years in Montenegro to allay investor fears – there are far more enlgish speaking professionals who can help with your purchases, and with the introduction of foreign mortgages and increased levels of legislation designed to protect foreign buyers, Montenegro looks to be an excellent place to invest.

The government are doing their bit to push foreign property investment with their ‘Tourist Masterplan’ which maps out a long-term strategy to 2020 to push for more tourists to come to the country. The plan includes new luxury hotel complexes, golf courses and developments, all of which will be music to the ears of those who have already invested in Montenegro. However, the government are taking care to ensure that the natural beauty of Montenegro is not destroyed as the country’s beauty is one pull for tourists. To ensure overdevelopment does not become a problem, there are intense regulations laid down. This means that in the future there is likely to be a shortage of property as demand starts to outstrip demand – another reason why Montenegro as part of a long-term property investment strategy would be a good one.

As ever, location is everything. Here at BuyingForeignProperty, we believe that inland areas such as Lake Skadar or the ski regions of Durmitor and Kolasin, which are currently fairly cheap, look like a good bet for the future. Herceg Novi is also set to be a good place too invest thanks to it’s proximity to Durovnik airport in Croatia and therefore buoyant rental market. Budget airlines look set to fly to Montenegro’s capital, Podgorica, soon therefore if you are looking to buy immediately, we would suggest here would be a good place.

For those interested in culture and history and who have a little more in their budget, properties around the Boka Bay area and around Buva/Petrovac are worth a look. Properties in this area are unique and the setting is stunning. With new marinas and a golf course set to be built nearby, the rental market is good and looks set to be strong for the foreseeable future.

The one downside of Montenegro is that the property market is almost entirely dependent on the tourist industry. There are few large commercial purchases in the country and there are not a lot of factories or headquarters of large companies, nor is there the market for these sorts of ventures at the moment. Instead, the market relies on holiday rentals and is turning into an exclusive holiday centre.

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Montenegro’s charm comes from it’s stunningly beautiful coastline, extremely cheap real estate and incredibly friendly people. Montenegro has captured the hearts of many stars, and recently Jeremy Irons, Chrissie Hynde and Michael Douglas and Catherine Zeta-Jones are all rumoured to have bought property in the country.

Montenegro has had a troubled past. Separated from Yugoslavia from June last year, some remnants of it’s past remain – the antiquated sewers which smell terrible, particularly in the heat, and the often sporadic water supply. However with the influx of new money, Montenegro is starting to flourish and properties with the most amazing views can still be bought at rock bottom prices. An old villa covering 1,500 square foot, and fully modernised and renovated will set you back a cool £300,000 however this is nothing if you consider the same villa in Croatia would be twice the price.

Taxes are very low, which again is encouraging foreign investors. Property buyers face a transfer tax of 2% of the purchase price and up to £15 per square foor for construction. Income tax is set at 9% – the same rate as capital gains tax. However, the government is fairly laid-back about taxes and has a similar attitude to house deeds. Whilst the tax is good for most (many people don’t pay the capital gains tax), the lack of good records for deeds can cause problems when buying a property. Records on landowners, or land usage laws, are often spotty at best meaning you may discover further down the line that the land you have bought cannot be built on, or that a road will split your land in half in a few years time.

When buying a property, it is better to deal with an experienced broker who can offer advice and guidance on the peculiarities of the property system. If records of your property aren’t complete, they can also help trace the owners and the property’s past by searching through property archives and documentation.

One important thing to note about buying property is that new owners must pay all the previous owners home-related unpaid bills so you should include a clause in your purchase agreement that the previous owner will pay all his outstanding bills. Some people will not pay their bills for months before selling their house, and some unpaid bills have been known to total over £15,000!

Buying in Montenegro probably poses more risks than most other European countries however the country has a unique charm and the positives outweigh the negatives. If you are looking for a property on a budget but want beautiful views and cheap living, Montenegro should be near the top of your countries to look at.

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