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NewsMontenegro, Amendments to the law on real estate tax is not the...

Montenegro, Amendments to the law on real estate tax is not the best solution especially in these tough times

The recently adopted amendments to the law on real estate tax, with which the government provided for the taxation of real estate valued at EUR 150,000 and above, represent a failure, because with the increase in the price of square meters that we have witnessed in the last year, we have come to a situation where that amount no longer represents a luxury, he said. Economic analyst Predrag Drecun is talking to Dan.

– I think the limit of EUR 150,000 is too low. Today in Budva, Podgorica, Kotor… you can hardly buy a two-bedroom apartment for 150,000 EUR. A two-room apartment is not a luxury. I think the limit should have been much higher, if the goal is to tax luxury. In general, I think that taxing the turnover of luxury real estate is not a good solution, because it opens up space for various forms of evasion, whether legal or illegal – Drecun believes.

In his opinion, a much better solution for the state is to tax high incomes, high deposits, “immobilized” deposits, as well as all forms of “immobilized” property.

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– I am afraid that this law will affect a very wide range of young people, married couples who are solving the housing issue, as well as everyone else who buys an apartment. Instead of giving them certain benefits, which later multiply back to society, through an increase in the birth rate or higher personal consumption, the state disincentivizes them at the very beginning of life. Apartments are mostly bought on credit, so the interest will be higher, because the increased tax will be added to the purchase price. The demand for smaller apartments will increase, and thus the prices of studio apartments and one-room apartments. The price of renting out apartments will also increase, the state’s income from the tax on income from renting out apartments will increase – said Drecun.
The situation on the Montenegrin real estate market worsened drastically last year, after the escalation of the war in Ukraine and a significant influx of population from that country, as well as from Russia, whose standard of living is far above the domestic average. Apartment prices in Podgorica increased by 13 to 15% last year, and in coastal municipalities by 20 to 25%.

According to some information, the price of a square meter in the capital ranges from 1,300 to even 2,500 EUR in new buildings, and when it comes to older buildings, the square meter costs up to 1,800 EUR. When it comes to the coastal region, the prices are the highest in Budva and the Bay of Kotor.

The average price of a square meter in Budva is around 2,300 EUR, although it can be higher, while in Kotor a square meter costs between 2,500 and 4,000 EUR in the Old Town. The average price in Herceg Novi is around two thousand euros, and in Bar 1,800. When the income of the average citizen is taken into account, it is clear that buying real estate is almost unattainable at the moment.

A square meter on average EUR 1,409

The average market price of apartments in new construction in Montenegro in the last quarter of 2022 was 1,409 euros, Monstat data show.

This is a drop of 37 euros per square meter compared to the third quarter. In Podgorica, in the last three months of last year, a square meter apartment cost EUR 1,477, in the coastal region EUR 1,387, in the central region EUR 691, and in the north EUR 1,268.

When apartments of joint housing construction are included in the calculation, the average price per square meter is EUR 1,399. Compared to the third quarter of last year, the price per square meter in Montenegro, with apartments of joint construction, was EUR 1,319, which is EUR 80 less compared to the fourth quarter.

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