Montenegro issued more building permits in the second quarter of 2026, but the number of homes covered by those approvals fell sharply, pointing to a smaller scale of planned residential construction. A total of 257 building permits were issued in Q2, an increase of 20.7% from the previous quarter. The permits, however, covered just 784 planned dwellings, down 43.5% from the 1,388 homes approved in Q1.
Planned residential floor area also decreased, falling 30.9% to 57,569 square metres. The divergence between the number of permits and the volume of housing was partly reflected in the type and scale of projects receiving approval. Natural persons accounted for 63.8% of permits in Q2, while buildings containing three or more apartments accounted for 645 planned homes, or more than 82% of all dwellings covered by the permits.
Smaller Projects Account for More Permits
The permit figures show that the number of approvals does not necessarily correspond to the amount of new housing entering the development pipeline. A permit for an individual family home is counted alongside an approval for a larger residential scheme, even though the projects differ substantially in scale. During the first six months of 2026, Montenegro issued 470 building permits covering 2,172 dwellings and approximately 140,858 square metres of residential floor space.
The first-half figures do not indicate a collapse in construction, but the substantial quarterly reduction in planned homes shows a change in the volume of projects being approved.
Property Demand Remains Strong
The shift in the residential pipeline comes as Montenegro’s property market continues to face strong demand, particularly from foreign buyers in coastal municipalities. Bank liquidity remains abundant, while household deposits have exceeded €2.5 billion, providing capacity within the financial system for mortgage and developer lending. Tourism also continues to support investment in apartments intended for short-term rental.
At the same time, housing affordability for domestic households has deteriorated, while construction costs remain high and infrastructure constraints have become more significant. Apartment developers face land acquisition costs, labour and material expenses, planning risks, infrastructure contributions and financing costs. Maintaining project margins can therefore require higher selling prices or greater development efficiency.
Housing Markets Differ Across Montenegro
The national permit figures cover several distinct property markets. Podgorica is primarily a domestic urban market supported by employment, government, services and migration from other parts of Montenegro. Tivat and Kotor have greater exposure to international wealth and tourism, while Budva combines domestic and foreign demand and remains highly seasonal.
In the north, Kolašin and Žabljak are increasingly influenced by tourism and second-home investment.
A national decline in planned dwellings therefore does not necessarily correspond to weaker demand across all municipalities. Investment can instead become concentrated in fewer locations where tourism, infrastructure and international capital overlap.
The large share of permits issued to individual applicants is consistent with a more fragmented development pattern.
Supply and Affordability Face Different Pressures
Smaller-scale construction can address local housing requirements and reduce dependence on large developers, but it does not necessarily resolve affordability pressures. If larger apartment developments slow while demand remains strong, limited supply can support further price increases in the most sought-after markets. This is particularly relevant for Podgorica and coastal municipalities, where wages have not increased at the same pace as property values.
Housing supply is also differentiated by the intended buyer. Coastal apartments can be marketed to foreign purchasers or short-term rental investors, premium Podgorica developments can target higher-income households, while mountain properties can be positioned as tourism investments. Such projects do not necessarily increase the availability of affordable housing for ordinary residents.
Infrastructure Shapes Residential Development
Residential expansion also depends on infrastructure capacity. New districts require roads, schools, water supply, wastewater systems, electricity and public transport. Developers may cover part of these costs, while municipalities ultimately face significant operational responsibilities.
This makes housing development closely connected with planning, transport, utilities and municipal finance rather than residential construction volume alone. Montenegro’s property sector has also served as both an investment industry and a channel for foreign capital, supporting GDP, employment and tax revenue. However, property-led growth cannot indefinitely increase productivity through additional apartment construction alone.
The foreign investment structure continues to show a strong concentration in real estate compared with corporate equity. The decline in planned residential construction could therefore represent a shift toward more selective development, although its significance will depend on how the pipeline evolves.
If planned homes continue to decline while property prices remain elevated, housing affordability could come under further pressure. If the Q2 reduction reflects project timing or a greater number of smaller developments, construction activity could increase again. For now, the second-quarter figures show a clear divergence between permit numbers and residential capacity: building approvals increased 20.7%, while the number of planned dwellings fell 43.5% and planned residential floor area declined 30.9%.
