Montenegro is currently experiencing a notable imbalance in its housing market, characterized by a rapid increase in residential construction that does not align with demographic trends. A recent report from the United Nations Economic Commission for Europe (UNECE) indicates that while the country has seen significant growth in housing units, nearly half of these properties remain unoccupied. This situation raises concerns about the sustainability of the ongoing construction boom.
The 2023 population and housing census reveals that Montenegro has a total of 392,909 housing units, reflecting an increase of 78,205 since the last census in 2011. However, during this same period, the population grew by only approximately 2%, suggesting that the rate of housing supply is outpacing population growth by a substantial margin.
According to UNECE, only about 54% of residential units are occupied on a continuous basis. The remaining stock includes secondary homes, vacation properties, and units that are temporarily vacant or abandoned. This translates to nearly 46% of the housing inventory not being permanently inhabited, which presents a significant challenge for policymakers aiming to address housing needs effectively.
The construction and real estate sectors are vital components of Montenegro’s economy, contributing around 8.8% to GDP in 2023. Of this, construction alone accounts for 3.5%. The residential development sector has been particularly robust, especially along the Adriatic coast and in urban areas like Podgorica, Budva, and Kotor.
A considerable portion of new housing projects is driven by tourism and foreign investment rather than domestic demand. Developments aimed at luxury living and tourism-related properties have attracted buyers from various regions, including Europe and the Middle East. While this influx of capital has bolstered economic growth, it has also led to a market where new constructions cater more to investment interests than to the needs of local residents.
The UNECE report emphasizes a crucial distinction between construction activity levels and actual housing demand within Montenegro. Despite ongoing tourism growth and foreign investment supporting development, local absorption rates indicate that many newly constructed homes are not being utilized by permanent residents.
The organization urges the Montenegrin government to implement policies focused on converting vacant properties into permanent residences. Future housing strategies should prioritize not just new builds but also address existing stock utilization, affordability challenges, and long-term demographic trends.
This analysis comes at a time when property prices in Montenegro remain high despite an influx of new supply. The combination of foreign investments and limited availability in prime coastal areas has prevented typical oversupply conditions seen in other markets. Nonetheless, the widening gap between available housing units and resident numbers is becoming increasingly pressing for policymakers.
From an economic standpoint, the UNECE findings underscore challenges faced by many economies reliant on tourism. While construction continues to drive GDP growth and attract investments, much of the new housing serves as financial assets or seasonal rentals rather than fulfilling permanent residency requirements. Moving forward, Montenegro’s housing policy may need to shift its focus towards occupancy rates, affordability, and sustainable urban development rather than merely expanding the overall housing supply.
