Montenegro

Why Montenegro?

Having suffered great hardship during the Balkan Conflict of the 1990s, Montenegro is now undergoing a period of change and economic growth.

We hope this guide will help you decide whether to consider Montenegro for your property purchase. Many research tools are available, including television and radio programmes, magazines, the internet, property exhibitions and estate agents.

The property market

Montenegro is widely believed to be in the first stages of a property boom. Prospects for long-term growth seem promising, as the local population grows richer, mortgages become more widely available and the international property market becomes established. Rental yields can reach 8-10 per cent.

Popular locations – an overview

The Kotor Bay region, at the northern end of Montenegro’s dramatic coast, has traditionally attracted the majority of foreign property investors, including Germans, Italians, Russians and the British.

The area’s popularity is reflected in prices, which tend to be considerably higher than the country’s average; a three-bedroom house costs around EUR400,000 (about £311,000).

The centre part of the coastline, the Budva Riviera, is Montenegro’s tourism capital. A three-bedroom house in the city of Budva costs an average of EUR400,000 (approximately £311,000), and properties close to the region’s long, sandy beaches are expected to see significant price increases.

Kotor Bay

The ancient walled port of Kotor, which has one of Europe’s best-preserved medieval Old Towns, is another World Heritage Site. Like Kotor, the towns of Bar, Herceg Novi, Perast, Prcanj and Tivat (which boasts one of Montenegro’s two international airports) offer a range of properties, including apartments and detached houses, many within a short walk of the sea.

The Adriatic Coast

In summer, open-air festivals at Budva, Petrovac and Becici offer the chance to experience traditional Montenegrin culture. Montenegro’s best paragliding location, which operates from late March to late September, lies above Budva.

Buying a property

There is no restriction on UK nationals buying private property in Montenegro.

However, because of the country’s unstable past and its status as an emerging market, purchasers face numerous pitfalls.

The purchase process

Once a price has been agreed and the preliminary searches have been conducted, a deposit (typically 10 per cent) is paid and a pre-contract signed.

Fees and costs

A purchase tax of 3 per cent on all properties is payable, calculated on the Montenegrin Inland Revenue’s valuation rather than on the purchase price. Other expenses the buyer must meet include the lawyer’s and notary public’s fees (typically 1 per cent) and the estate agent’s charges (usually 4 per cent).

Financing your purchase

The other options are remortgaging your UK home or arranging a mortgage on your new property through a Montenegrin lender. Remortgaging generally offers the easiest solution. Releasing equity in a UK home means that the second home can be purchased for cash, without the need for another mortgage.

Euro mortgages

Euro mortgages, which are tied to the rate set by the European Central Bank (ECB), currently lower than the Bank of England base rate, may seem an attractive option, though no UK lenders are currently offering mortgages on property in Montenegro.

Taxation

The UK has a double taxation treaty with Montenegro; tax is paid in one country or the other, not both. Unlike the UK’s, Montenegro’s tax year corresponds with the calendar year.

Income tax rates are 15 per cent.

There is no Capital Gains or Inheritance Tax in Montenegro.

Personal taxation: non-residents

Foreign nationals living temporarily in Montenegro are considered non-residents and taxed only on Montenegrin-sourced income, including rental income (at 15 per cent), interest payments and dividends.

Residents are liable for tax at 15 per cent on rental income earned in Montenegro.

Property taxes

An annual property tax of between 0.08 and 0.8 per cent is payable, calculated on the market value of the property as at 1 January of the year in question.

Money matters

Montenegro’s currency is the euro (EUR). The current exchange rate is EUR1.30 = £1.00 sterling. Foreign currency can be exchanged at banks, bureaux de change, post offices and large hotels.

Currency (including travellers’ cheques) in excess of EUR2,000 (£1,346) must be declared by anyone entering Montenegro.

Passports, visas and residency

Following a referendum in May 2006, the State Union of Montenegro and Serbia (the looser alliance that replaced the Federal Republic of Yugoslavia) has been dissolved, and Montenegro is now independent country.

Passports and visas

UK citizens with passports endorsed ‘British Citizen’ can visit Montenegro for up to 90 days without a visa.

Montenegro’s economy

On the plus side, inflation is low, the public spending deficit is decreasing, the banks have been privatised, credit is booming and access to EU markets is on preferential terms.

Tourism is now Montenegro’s main industry.

Communications

Telephone

Montenegro’s telecommunications service is modern, with access to European satellites. Telecom Montenegro has a monopoly in operating fixed telephone lines.

The country has around 600,000 mobile phone users, a number that is increasing rapidly. Both offer national coverage and operate advanced services.

Internet

Services are provided mainly by Internet Crna Gora, owned by T-Com (who bought Telecom Montenegro), which offers ADSL and dial-up connections.

Post

Postal services are reasonably good.

Investing in property is not without risk, particularly in an emerging market.