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NewsMontenegro, Real estate prices are sky high compared to earlier

Montenegro, Real estate prices are sky high compared to earlier

In Montenegro, the prices of almost everything rise daily, and inflation has long since „eaten“ the increase in wages. Everything is more expensive, from food, shoes, clothes, to rent. The unstable economic situation, the war in Ukraine, and the arrival of citizens from war-torn territory, as well as from Russia, have influenced the growth of apartment rents in our country.

“Compared to the same period last year, we are recording an inhumanly high increase in the price of renting apartments. According to the data handled by the Association of Tenants, compared to the same period last year, rental prices have increased between 50 and 100 percent. On a smaller scale, rent prices have increased by up to 200 percent,” Dragan Živković, president of the Association of Tenants of Montenegro, told Portal Analitika.

And while in some neighborhoods a one-room apartment could be found for 150-200 euros, now it is an impossible mission. For a one-room apartment, it is now necessary to allocate one minimum salary on average, and prices range from more than 1,000 euros.

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“To rent a one-room furnished apartment today, you can’t find it in any city area for less than 350-450 euros. It seems unreal, but it is brutally real. We still note that not all landlords have raised prices, but we also note a clear tendency that this will happen. Simply, it is the law of the market”, says Živković.

High demand resulted in higher prices

In the past period, not only rental prices have increased, now more money needs to be allocated for the purchase of real estate. However, the increase in real estate prices did not affect the decrease in demand. In times of inflation, when real estate is recognized as a safe investment, demand actually increases.

“The Montenegrin real estate market is recording significant results with record high sales and, consequently, significant price growth. In both segments, sales and rentals, prices have risen significantly, and the strong growth has continued at the beginning of this year,” said Darko Đikanović, a real estate market analyst at the consulting company Adriatic Appraisal, for Portal Analitika.
And in 2023, it continued the trend of the previous two years, so it brought new price increases. Đikanović says that the selling prices of apartments are on average 25 percent higher compared to the prices in 2021.

“The highest average price was registered in Tivat in the amount of 2,800 euros per m2, followed by Kotor 2,500 per m2 and Budva 2,450 per m2. In Podgorica, the average price of an apartment is 1,520 per m2, while the same average in 2021 was only 1,190 per m2”, explains Đikanović.

And the price, apart from the demand, is also dictated by the location of the property, so several thousand euros are set aside for the square meter of the apartment.

“The offer of apartments varies considerably, and we have resorts on the coast where the prices of apartments often exceed 7,000 euros per m2, while in Podgorica, the prices of luxury residential complexes under construction go up to 2,500 euros per m2”, said Đikanović.

On the other hand, as he notes, the rent for real estate has also risen, much more extreme than when it comes to selling prices.

“On average, rents have increased by 60 percent compared to 2021. Based on current information, the most expensive cities for rent are Tivat and Kotor, where the average rent for one-room apartments is 700 euros, while in Budva the average is 600 euros. In Podgorica, the average rent for one-room apartments is 450 euros, and for the sake of comparison, the average in 2021 was 300 euros,” explains Đikanović.

The law of the market Is inexorable
Numerous factors influenced the increase in rent for an apartment, and as the president of the Association of Tenants notes, the higher the demand for renting apartments, the higher the rental prices.

“It’s a real chaos, we’re seeing a sharp jump in apartment rental prices with the arrival of foreign citizens. The real estate agencies are also partly to blame, as they took advantage of the situation and set rental prices unrealistically for the sake of maximum profit. But the address of the real culprit is certainly the state without protective legal mechanisms in such situations”, says Živković.

Economic analyst Darko Đikanović points out that, after the covid crisis, citizens recognized investing in real estate as a safe form of investment.

“These trends are mostly the result of global factors, both the war in Ukraine, which caused the arrival of a large number of citizens of Ukraine and Russia, as well as high inflation and a significant increase in the cost of living. Another factor that is important to note is that the demand for real estate in the post-covid period exceeds the supply. And historically, periods of uncertainty and high inflation make real estate one of the more attractive and safer types of investment. Therefore, 2022 will see record activity on the market”, explains Đikanović.

The Investment of foreign citizens in real estate in Montenegro in the last year exceeded the value of 400 million euros, which, explains Đikanović, is close to the record value achieved back in 2007, during the period of the first market boom.

Đikanović also explains when we can expect a reduction in rents and cheaper selling prices of apartments.

“Certainly, the current rents are to the greatest extent a consequence of the arrival of a large number of citizens from Russia and Ukraine, and corrections in the rental market will follow when the war ends and the demand decreases. In the sales segment, the demand for apartments will continue to exceed the supply, despite the rising cost of loans, and inflation, which is projected at six percent, will continue to make real estate a more attractive form of investment. Due to these factors, apartment prices will not fall in 2023, but it is more realistic to expect moderate growth during the year”, Đikanović.

Half of tenant families are in a state of social need
And while rent prices are rising uncontrollably, the financial power of citizens is weakening almost every day. The one who paid 250-300 euros for an apartment a year ago, now has to pay twice as much for the same space, which few can afford financially.

Along with all other necessities of life and rising prices, citizens find it increasingly difficult to allocate for rent.

“The general rule in the West is that the ratio of rent to income should not be higher than 30 percent, which means that the tenant should earn at least three times more than he gives for rent, and anything over 30 percent is considered a high burden of housing costs. On the example of Montenegro, that relationship is far less favorable if we take into account the average rent and salary”, explains Đikanović.

And then when it is necessary to set aside not 30 percent of the salary for the rent for an apartment, but the entire minimum or average salary, it is clear that a large number of citizens are barely “making ends meet”.

The question Is how those with the lowest incomes pay for the apartment.

“For a long time, we have been dealing with the fact that today in Montenegro we have twice as many tenants than was represented by the 2011 census. We think that in Montenegro we have over 30,000 tenant families, of which at least 50-60 percent are in a real state of social need. If we emphasize that among tenants we have pensioners, single parents, persons with disabilities, displaced persons, then it is clear to every human being how much of a problem it is, but also the urgency to do something”, said Živković.

And while we wait for apartment and rental prices to drop, there is no concrete solution.

“Had a meeting with the president of the Committee for Health, Labor and Social Welfare. They stated that it is a huge problem, unacceptable for a serious country, and that it must be reacted urgently. Irresponsible social policy and non-enforcement of existing laws have led to a situation where tens of thousands of tenant families have no chance to solve the housing issue,” says Živković.

The current rental prices for apartments, as Đikanović explains, will also affect the fact that some neighborhoods are “singled out” as affordable only for a certain segment of the population.

“These trends entail many difficulties for tenants. I believe that, among other things, there will be an accelerated segmentation of settlements into those that will remain accessible and where the majority of the population will live, as well as those that will cease to be so and will be mostly inhabited by foreigners or used for tourist purposes”, Đikanović concluded.

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