Vacant Apartments and Illegal Real Estate in Montenegro

Risks and Opportunities for Investors in Montenegro

More than 160,000 apartments in Montenegro are either vacant or used only seasonally, while thousands of unauthorized properties remain outside the cadastre due to a prolonged and complex legalization process. The market remains opaque, yet demand for rental housing remains high, and prices continue to rise, which can attract investors.

Housing Crisis in Montenegro

Montenegro is facing a deep housing crisis, gradually turning into a serious social problem with long-term consequences, reports the Bankar portal citing data from the Association of Tenants of Montenegro (Udruženje podstanara Crne Gore). The situation reflects a systemic failure in housing management and the rental market.

According to the latest census, Montenegro has more than 70,000 vacant apartments. Another 90,000 units are used exclusively during the tourist season or for temporary residence. Thus, over 160,000 housing units do not serve as permanent homes. At the same time, tens of thousands of families and individuals lack their own apartments or houses and are forced to rent housing under unstable conditions, often without formal contracts or legal protection.

Association representatives emphasize that the main problem is the absence of an organized housing policy and control over the real estate market.

Grey Rental Market in Montenegro

Experts are particularly concerned about the widespread “grey” rental market, where apartments are rented without official registration or tax payments. In such cases, tenants lack protection, and the state loses control over a significant segment of the market.

The tenants’ association also criticizes the focus on new construction projects, such as Velje brdo. Solutions in such cases are sought only through expanding supply via investment, while the existing housing stock remains underutilized. Without systemic regulation, each new project risks becoming another investment unit unable to address the problem of affordable housing for ordinary citizens.

Udruženje podstanara insists on immediate state measures, including mandatory rental contracts, the creation of an effective mechanism for monitoring the real estate market, countering the expansion of vacant apartments, and combating the “grey” economy. Otherwise, Montenegro may enter a phase of permanent housing instability with unpredictable social and economic consequences, effectively losing government control over a key sector.

Housing is expected to become inaccessible for a significant portion of the population, prices will continue to rise uncontrollably, and young families and individuals may be forced to seek opportunities abroad. Cities could turn into areas where residents are displaced by the interests of large investors, and the social structure could be at risk.

Illegal Housing in Montenegro

The number of illegal constructions in Montenegro may reach 100,000, further aggravating the country’s real estate market. Authorities periodically attempt to regulate their status, but reforms stall. The latest law was passed in August 2025 — owners of such properties had until February 14 to submit legalization applications, but very few did.

Completion of cadastral procedures and preparation of geodetic documents proved impossible within the set deadlines due to technical and organizational issues. The term was extended from six to 18 months. Additionally, some requirements regarding minimum distances from neighboring plot boundaries are proposed to be relaxed, but the market remains opaque. Investors risk putting money into illiquid properties that cannot later be legally transacted.

Montenegro Residence Permit via Real Estate

Montenegrin authorities introduced financial requirements for obtaining a residence permit based on property purchase. The threshold of €200,000 applies to foreigners who are not citizens of the EU, UK, Switzerland, Norway, or Iceland. The cost is determined based on property tax assessments.

Previously, the Law on Foreigners did not contain financial requirements: status could be obtained regardless of property value. In 2022, about 4,000 people received residence permits under this provision, in 2023 — about 4,100, in 2024 — 4,529. From January to November 2025, 5,260 such permits were approved. In 2026, a decline in approvals is noted. Additionally, stricter rules for business-based residence permits have led to some outflow of foreigners.

Real Estate Taxes in Montenegro

Foreigners in Montenegro pay the same progressive property transfer tax as locals: from 3% for property purchases up to €150,000 to 6% for transactions over €500,000.

Foreign citizens are prohibited from directly acquiring agricultural and forest lands, as well as property in border areas, on islands, or in regions of strategic national security importance.

The annual property tax in Montenegro ranges from 0.25% to 1% of market value. Rental income tax for foreigners is 15%, but owners can deduct 30% as standard expenses for long-term rentals or up to 70% for tourist rentals.

Conclusion

Analysts from International Investment note that Montenegro’s real estate market remains attractive to investors due to high rental demand and rising prices; however, investments carry significant risks. Vacant apartments, grey rentals, and illegal constructions create an opaque environment where many properties are difficult to bring to market or legalize.

Investors should consider that new projects are mainly oriented toward short-term tourist rental income, while the existing housing stock often remains underutilized. Without systemic regulation and effective government oversight, investments may be illiquid. Additionally, tightening measures in the rental sector could reduce property profitability.

Financial requirements for residence permits and tax rules create additional barriers. A key factor for successful investment is a careful assessment of the property, its legal status, and potential profitability, taking into account market restrictions and risks.