New Property Laws in Montenegro But Falling Prices

The news from the Montenegrin property market is mixed today.  On the one hand you have the central bank pretty convinced that their country’s real estate market is over priced and heading for a negative correction, and on the other hand you have the government striding ahead with significant property and mortgage law reforms and another firm offering mortgages for foreign buyers in Montenegro.

Seemingly there is room for improvement in the property market at least in terms of the legalities supporting an owner’s rights – but is there room for improvement in terms of property prices?  What do new property laws in Montenegro but falling prices mean for the investor?

The warning about falling prices in coming months comes from the central bank.  We agree with their findings relating to the rate at which house prices have increased along the nation’s stunning coastline and in its capital city of Podgorica, however, we cannot agree that the squeeze on local affordability that they have highlighted will definitely create a negative correction in the marketplace.

According to the central bank, property prices in Montenegro have grown alarmingly fast along the coastline and local affordability has been stretch beyond what it can cope with.  They believe this simply has to result in a downturn in pricing.  They point out that for an average local citizen to afford a 50 square meter apartment they will currently need to put down a deposit of EUR 17,000, take out a mortgage for EUR 68,000 and afford to repay EUR 487.75 a month on average for 25 years.  But the problem is, for this average person, their median monthly salary is just EUR 338.

So, yes, local affordability has stretch beyond what it can cope with.  However, there is significant international interest in property in Montenegro that’s holding up prices.  Russian and British interest in particular has been responsible for a great deal of the inward investment into Montenegro’s real estate market – and this level of interest is gaining strength rather than waning.  Which means...there will be affordability in the market which can maintain the ever increasing property prices.

And supporting this increasing interest is the fact that the government in Montenegro has announced far reaching changes to property ownership laws in the nation so that its laws come in line with the norm in the EU.  This is one item on the government’s agenda as it seeks to align policies and legislation with accepted EU norms so that it can move towards full EU membership in the near future.

Under very recently announced plans, the government will give foreign buyers the rights to own property in Montenegro freehold and without the requirement of having a company structure in place to own the real estate in question.  Added to this, the government wants to make it easier for mortgages to be issued on off-plan and under construction properties.  Again – this fact will boost international interest in the wealth of gorgeous and prime property for sale in Montenegro which could well mean prices continue to rise.  And finally, UK based international mortgage broker Frontier Financial Services has announced that it can raise mortgages for British buyers for property in Montenegro – giving choice for UK buyers interested in the market.

To be honest, we at Amberlamb think there is room for further growth in the tourism and business hotspots in Montenegro...and we believe that if the government’s legislation changes go through, there will be an increase in the number of international property sales in Montenegro in 2008 compared to 2007...but we could be wrong.

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