In the last four years, foreigners have bought real estate worth one and a half billion euros in Montenegro. Their interest is still at a high level, but it is slowly slowing down, according to data from the Central Bank on the balance of payments and foreign direct investments.
In the first year after the covid pandemic - 2021, foreigners bought real estate for a total of 278 million euros, in 2022 there was a significant increase of 60 percent - to 448 million euros. In 2023, foreigners bought real estate for 463 million euros, which is an increase of only 3,3 percent compared to the previous year, but as real estate prices rose, they bought significantly less square footage for almost the same amount. For the period January - November last year, foreigners bought real estate for 398 million euros, that is, for about 40 million less than in the same period in 2023.
During these four years, foreigners sold real estate in Montenegro worth 421 million euros and withdrew the money abroad. In 2021, foreigners sold real estate for 72 million, in 2022 for 108 million, in 2023 for 134 million, and for 11 months last year for 107 million euros
They bought two thirds of the real estate last year
In 11 months of last year, banks in Montenegro approved housing loans, to individuals and legal entities, worth 156 million euros, which also applies to domestic companies and citizens and foreigners with registered residence. Considering that there is a direct purchase of domestic citizens and companies, it can still be said that foreigners bought about two thirds of the properties that were on the market last year.
The Ministry of Finance stated in the new Program of Economic Reforms that real estate in Montenegro is overvalued due to the growth of foreign investment in their purchase, as well as that they expect a slow decline in real estate prices in the coming period towards their fair value.
The Ministry expects prices to drop
According to the data of the Monstat Statistical Office, the average value of a square meter of an apartment in a new building in the third quarter of last year (July-September) was 1.853 euros, while in the same period four years earlier, before this great increase in interest from foreigners, the average price of a square meter of an apartment in a new building was 1.192 euros.
"The latest preliminary assessment of real estate price deviations in relation to their base value in the period 2006-2024. year, showed that prices in the second quarter of 2024 were moderately overvalued, to a lesser extent than at the end of 2023. There is a slow decline in real estate prices towards their fair value. However, this decline is not as sudden or immediate as in 2008-2009. already appears to be quite gradual, thereby mitigating any risk of a price bubble in the real estate market, which is positive in the context of financial stability," the draft PER stated.
The Ministry concludes that "from all available data it follows that real estate prices are primarily driven by foreign direct investment (FDI) in real estate."
"FDI inflows into real estate amounted to about 6,4% of GDP annually from 2021, compared to 3,5% in the period from 2015 to 2020," the document stated, proving that until growth the price of real estate was due to greater interest from foreigners and not due to an increase in objective costs.
On the list of ten countries from which the most buyers of Montenegrin real estate come, there is only one member of the European Union - Germany.
Serbs buy the most, Russians and Germans are slowly withdrawing
In the past four years, the most real estate in Montenegro was bought by citizens and companies from Serbia, for a total of 230 million euros. In 2021, they bought real estate for 35,7 million euros, then in 2022 that amount increased to 53 million, and in 2023 to 78,3 million. In 11 months last year, they bought real estate from this neighboring country for another 62,5 million euros.
In second place for the purchase of Montenegrin real estate are the Russians, who have invested 210 million in them over the past four years, but it is noticeable that their interest is significantly decreasing. In 2021, Russians bought real estate for 59 million, in 2022 for 61,2 million, and in 2023 for 56 million. For 11 months of last year, their investments in real estate in Montenegro amounted to 33,5 million euros.
German citizens and companies are in third place because they have spent 180 million euros for the purchase of real estate in Montenegro in these four years, but a significant drop in interest is also noticeable among them. In 2021, they bought real estate for 26,6 million euros, in 2022 for 70 million, and in 2023 for 51,2 million. In 11 months of last year, they invested 31,8 million euros in Montenegrin real estate.
Growing interest from buyers from Turkey
In fourth place in terms of real estate purchases are Turkish citizens and their companies, who invested 152 million euros in this period. There is a slight increase in spending on Montenegrin real estate among this group of investors. In 2021, they purchased real estate in Montenegro for 14,7 million euros, in 2022 for 29,7 million, and in 2023 for 51 million. Last year, in 11 months, they purchased real estate for 56,2 million.
Citizens and companies from the United States of America bought real estate in Montenegro for 118 million euros in the past four years, making it the fifth place on this list. They bought real estate for 2021 million in 21,4, 2022 million in 37,3, 2023 million in 34,3, and 11 million in 34,5 months of last year.
In sixth place in terms of money invested in the Montenegrin real estate market are citizens and companies from Switzerland who invested 75 million euros, followed by buyers from Ukraine with 53 million, from Great Britain with 46 million, from Bosnia and Herzegovina with 44 million, while in tenth place are buyers from the United Arab Emirates with 37 million invested.
The Central Bank of Montenegro's list of foreign investor countries includes 59 countries or territories, followed by others totaling 3,2 million.
Foreign investments in companies and banks are decreasing
Total direct foreign investments for 11 months amounted to 801 million euros, almost half of which was related to the purchase of real estate, that is, much less money was invested in economic activity or banking operations.
Investments by foreigners in companies and banks in Montenegro for this period were worth 114 million euros, and loans by foreigners to their companies and banks in Montenegro (the so-called inter-company debt) amounted to 263 million. The return of domestic capital from abroad was worth another 25 million euros.
And in the total amount, the most investments came from Serbia 107 million, Russia 94 million, Turkey 91 million, Germany 65 million.
Four years ago in 2021, foreign investments were more evenly distributed, then 278 million euros were invested in the purchase of real estate, 215 million euros in investments in companies and banks, and loans by foreigners to their companies and banks in Montenegro were worth 323 million euros. . Since then, investments and loans for companies have gradually decreased, while real estate purchases have increased.
The outflow of foreign investments for 11 months last year amounted to 347 million, so net foreign investments were worth 453 million euros.
The most money flowed through the return of loans given by foreigners to their companies in Montenegro 152 million euros, through the sale of real estate in Montenegro 107 million, investments of loans from Montenegrin companies in foreign countries 45 million, purchase of real estate abroad 29 million.
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