Montenegro’s construction and real-estate market is once again at the centre of political and economic debate after the United Reform Action (URA) party warned that increasing VAT on construction land could lead to higher apartment prices. The proposal, still under government discussion, aims to align taxation with EU norms and generate additional fiscal revenue, but critics argue it risks aggravating already severe housing affordability problems.
The real-estate sector plays an outsized role in Montenegro’s economy, influencing employment, banking, foreign investment and municipal development. Over the past decade, apartment prices have risen sharply, particularly in coastal areas and Podgorica, driven by strong foreign demand and limited supply. As monte.business recently noted, price pressures have accelerated faster than income growth, making home ownership increasingly unattainable for many Montenegrin families.
The proposed VAT adjustment would increase tax obligations for developers acquiring land, which URA argues would inevitably be passed on to buyers. In a market where prices already outpace wage growth, even marginal increases could reshape demand dynamics. Critics warn that this could slow construction activity, increase project delays and further deepen the mismatch between supply and affordability.
Supporters of the VAT reform counter that harmonisation with EU standards is essential, especially as Montenegro seeks to eliminate distortions that allow speculative land acquisition. They argue that increased revenue could support public infrastructure and local urban development, helping municipalities manage the consequences of rapid real-estate expansion. Some economists maintain that price increases would be limited, depending more on market demand than taxation.
The issue intersects with Montenegro’s broader fiscal debate. The government faces increasing budgetary pressures and seeks new revenue sources that do not disproportionately affect low-income households. Property taxation is often viewed as a fairer alternative to consumption taxes. Yet without parallel housing policies—such as subsidies, affordable-housing programmes or urban planning reforms—the risk is that higher VAT becomes a blunt instrument with painful social consequences.
Analysis in monte.news highlights that housing is becoming one of Montenegro’s most politically sensitive topics, particularly in growing urban centres. While the VAT proposal aims to stabilise fiscal policy, its practical impact may ripple far beyond the state budget, shaping household finances, investor behaviour and the trajectory of urban development.
The coming months will determine whether the government proceeds with the reform or introduces mitigating measures. For now, the debate underscores an unavoidable reality: Montenegro must modernise its tax framework, but doing so without harming social stability requires careful economic engineering.
