In a recent appearance on the morning program Budilnik on Televizija E, economic analyst Dr. Jovo Rabrenović discussed the housing market in Montenegro, highlighting the persistent trend of rising property prices. He noted that in the country, prices rarely decrease, and if there is any minor correction, it is usually temporary before prices surge again.
According to an analysis from the Ministry of Finance, real estate prices in Montenegro are currently overvalued, a point with which Rabrenović agrees. However, he emphasized that this overvaluation is not limited to real estate alone but applies to all goods currently available on the market in Montenegro.
“Prices are what buyers are willing to pay. The market is, essentially, a space where supply and demand meet,” Rabrenović explained. “If supply exceeds demand, prices should fall. If demand exceeds supply, prices should rise. These are the economic principles, but the reality is often different,” he added.
Factors such as the quality of construction and location significantly affect property prices. Rabrenović noted that it’s not the same to own property in a suburban area as it is in a city center. Prices for new builds are typically higher, and Montenegro’s real estate market began to see substantial growth after the country regained its independence in 2006.
A psychological factor also plays a role in determining prices, Rabrenović continued. If buyers expect prices to rise again, they may rush to purchase properties. Similarly, if sellers anticipate a price increase, they may hold off on lowering their prices. “In Montenegro, we rarely see prices fall. When there is a slight correction, it is temporary, and prices usually start rising again,” he said.
Rabrenović explained that the overvaluation of real estate is partly due to foreign investment, which has been particularly evident since the start of the war in Ukraine. This period saw a significant increase in demand for properties under construction.
He also pointed out that the rising prices of construction materials, especially reinforced steel (used in building homes, apartments, and business properties), have contributed to the increase in property prices. The rising costs of other necessary construction materials followed suit, which led to price hikes not just for new properties but also for older ones. While the situation in the new build market affected the older properties, there is no direct causal link, Rabrenović noted. Despite a stabilization in steel prices later on, property prices remained high or even increased, as was evident over the past year.
“The impact of the war in Ukraine was clear in this context,” Rabrenović emphasized, “and even though there was a stabilization in the price of steel, real estate prices did not significantly drop, but rather stayed level or even increased.”
