When mentioning the real estate in Montenegro, maybe the first thing to come to our mind is Budva. The capital of tourism of Montenegro was the first town to attract foreign investors en masse. Unfortunately, the years of transition and market boom were followed by urbanization chaos. As a consequence, Budva transformed from a quiet tourist place dominated by a few hotel chains, to become a jam-packed destination, with skyscrapers watching the magnificent old town. Yet, such a fast and rather uncontrolled development did not make Budva less attractive for real estate investors. In this guide, we will offer you a few tips when investing in Budva town real estate
Turbulent development
If you come across photos of Budva from the end of the 20th century and compare it with a recent one, you will remain astonished, as if comparing an old photo of Dubai before the oil discovery, with a recent one. The difference is that the oil in Budva are tourists, and drilling rigs are residential properties. The immense riches of Budva were created through real estate, and there was so much money in that market, that many majors of Budva were imprisoned, as unable to resist the temptation of real estate money. In recent years, the local and state authorities realized that a brake has to be pulled, otherwise, the infrastructure will be unable to keep up with the development. Thus, the illegal dwellings are reduced, while some of the large projects did face difficulties from the local authorities and communities. One of the marking signs of Budva, the open clubs on the promenade are banned since the last year, and a new expanded promenade is under construction. This should be a breaking point from cheap entertainment to a more elite tourism in the most attractive area in Budva. The owners of expensive real estate and families will appreciate it, but less those who lived from renting apartments and rooms to youngsters from all around the region. Note that movida in Budva will not disappear, but from coastal open bars, it will move to hills and closed clubs, because, in Budva, the show must go on!
Budva Old Town and St Nicholas island
Market segmentation
Geographically, the real estate market in Budva can be divided into four regions: (1) Zone 1 - bellow and around Mediteranska Street, (2) Zone 2 - bellow and above Jadranski put (a very heart of Budva), (3) Zone 3 - the downtown of Budva, from Jadranski put till bypass road (boulevard 29th November, through Zrtava fasizma street and Topliski put (road); and the last, not the least, (4) Zone 4 – the outskirts of Budva. With fast development, Budva started attracting various types of tourists, and different types of real estate investors. By the coast, the high price of land, and communal taxes, inevitably encouraged expensive and more luxurious buildings. Following such paths, the prices in Zone 1, started to surpass €3,000 per sqm, reaching as high as €5,500 per sqm, in Royal Gardens or Dukley Residence. Other projects, a bit further from the Old Town, but with magnificent views, start at €3,000/sqm. In zone (2) the prices go from €2,300 and up. The buildings are done with high quality and many can offer great views, however, being in adjacent to Jadranski put, tend to expose this properties to noise. In zone (3) the prices range between €1,500 and €2,000 per sqm and depend on the quality of the building and its surroundings. This area is good for long term rentals, and gives its residents a more urban feeling, while being only a short walk from the promenade. In the last zone (4) the price per sqm can be found for less than €1,500, but an average would be €1,400. There are some nice properties for those who have a limited budget and want a waterfront property (or at least, close to the sea). The rentals are good, but only in the peak season.
Between the pulp fiction and the realistic return on investment
Whoever searched for properties in any emerging market, including Montenegro, came across the projects offering fantastic returns – 10 to 15 % ROI per year. The projects promising fantastic returns make you wonder why on earth are these still on the market? Very often such adverts are not in line with the reality. Yet, there are exceptional cases with such a high returns, which, more often than not, you will not find on the websites. Such super-hot properties are sold before being advertised, as professional agents will have the list of clients to whom they would offer such a property when it pops up. So, what is the realistic yield, and what ROI to expect in Budva? The real estate market in Budva is stable and quite developed, with the tourism sector improving annually. The level of ROI will depend on the location and quality of the apartment. In zone 1, the ROI might not be so great currently, as the properties paid above €4,000 will be gaining value in the future, and these are investments that will not give an immediate capital appreciation and are rather lifestyle investments. While these are rented at a high price, the high-end tourism in Budva is still developing, and it might not be so easy to find the clients so easy. In other zones, the short rentals can give you from 7 to 10 percent, and this will depend a lot on the skills you have in Booking and Airbnb and similar platforms. Note, that these returns are possible if you are managing your rentals by yourself which, if you are a foreigner or with a full-time demanding job, might not be an option. Thus, giving it to a local agency will secure you 5 to 7 % percent per year. Not bad, with an expected capital appreciation if your property has a nice unobscured view. The long term rentals, where possible, will give you safe 5% net, however, if you have a good agent, he can guide you to properties with 6, 7 or 8 percent yearly returns.
Where and why to invest?
As you could understand from the text above, Budva has something to offer for every buyer. If you are looking for a more luxurious place, but with a more dynamic lifestyle than is offered by Tivat for example, Budva is the right place. You will find a well-furnished, great view apartment for less than you will pay in any of the large real estate projects in Montenegro. The quality of the property will be impeccable, but do not expect similar services like concierge, or room service… Yet, some of the new properties are promising to have exactly those kinds of services, and let’s hope they will deliver! If you have a nice budget, but you prefer sandy beaches and a more open sea than the Bay of Kotor, Budva is the right place for you. For a budget aiming in zone 2, you will have a nice place, and if you add a hundred on your budget per sqm, you might have an excellent view as well. You will always be able to rent the property, to cover your costs, and to have a reasonable return. Zone 3 is a good investment! Those apartments can be rented short term and long term. If you want to keep it as an investment for the future – yes, rent it the whole year, and wait for capital appreciation. With a one-bedroom or a smaller bedroom, you have a fast-sellable property. If you have just enough for an apartment in Zone 4, or you will rather buy a larger apartment for your family on the outskirts of Budva, than a one-bedroom somewhere closer to the sea, you will not make a mistake. You can find a nice property that sometimes might have a nice view of the town. You will be close to all budget-friendly restaurants, stores, and places where the locals go. You will still be able to rent the property, but mostly in peak season. Keep in mind that, apartments closer to the sea and the Old Town have a higher booking speed, and usually, the outskirts of Budva are being booked once the rest is full. This, in a good season, gives you some 45 secure days with a maximum rate, and everything on top of it can be considered as a bonus.
What is the most wanted apartment?
The most wanted property in Budva is a one-bedroom apartment up to €90.000, preferably in Zone 1 or 2! Well, it is difficult to have that trophy, but you might settle down with a nice two-bedroom or one bedroom with a view, in zone 3!
What is missing?
Budva needs residence buildings with concierge and professional property management! For the prices in the upper market, the service needs to follow, otherwise, you are buying only walls and furniture, and attracting only real estate investors looking for a safe ROI. With the introduction of services to the property, you will attract lifestyle buyers, because Budva can definitely offer a nice living standard to nomad businessmen or nomad IT entrepreneurs.
COVID-19 interruption - what to expect in 2020?
The COVID-19 is destroying the touristic year 2020 not only in Montenegro but everywhere in the world, and we are only at the beginning of the season. The real estate market in Montenegro is still resisting major price reductions, but if the season proves to be weak, there will be those who will try to sell an extra apartment or those developers who sold only a few units in their projects and will offer reductions to complete the construction without using bank money. There will be buying opportunities, and the best way is to get in contact with your real estate agent and make sure they call you when they receive an interesting listing. Once the pandemic is over, the virus is finally put under control, and the world leaders become more responsible and act to prevent future pandemics, people will start travelling again. The world travelers might be even more hungry to explore new places and to live in countries that offer a more quiet and healthy lifestyle. Well, we believe Budva and Montenegro will be on their bucket lists, and in particular during offseason, when you can enjoy peace, sun and Mediterranean food - three great ingredients for a happy life… the rest is up to you.
Post scriptum
We at RE/MAX believe in Budva, we truly do! It is the place that does not leave you indifferent. It is very alive, diverse and always has something to offer to every single tourist visiting Budva and Montenegro. From tasty street food to the amazing fish restaurants hidden behind gardens of the old houses, Budva’s gastronomy will not disappoint you. You can enjoy a Balkan style trashy music show, or find a theater show between the walls of the old town… From a fancy beach bar to hidden beaches where you will feel like being on a desert island… Or you can just go for a short boat ride to reach the Islands of St. Nicholas… or in local slang Hawai. But once you discover its small jazz bars in the old town, hidden restaurants and astonishing beaches you will fall in love with Budva and its skyscrapers will appear to you us giant umbrellas offering a shade to the downtown, rather than concrete monsters… Once the Covid pandemic is over and unleashed tourists start pouring in Budva, they will make Budva great again! So yes, it is a good investment!
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