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Saturday, April 13, 2024
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Montenegro’s evolving loan environment and real estate hurdles

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In the near future, citizens can anticipate more favorable borrowing conditions, as all banks are poised to offer housing and consumer loans at reduced interest rates, ranging from 1 to 2 percent. Alongside lower interest rates, borrowers can also expect extended repayment periods. However, despite these improvements, challenges persist in the real estate market, complicating citizens’ efforts to secure housing.

For quite some time, the average salary has proven insufficient to cover basic living expenses, prompting individuals to resort to loans for significant investments. The recent agreement between bankers and the Central Bank to decrease interest rates by 1 to 2 percent for consumer and housing loans is a welcome development.

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Bratislav Pejaković from the Banking Association highlights this shift, noting that the average interest rate for newly approved loans, which previously hovered around 7 percent, is now expected to drop to approximately 5 percent.

Yet, favorable interest rates are just one aspect of the equation. Some banks are also extending the maturity period for housing loans up to 30 years, while offering interest rates as low as 3.99 percent for young couples purchasing their first home.

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Despite the optimism surrounding lowered interest rates, data from real estate agencies paints a different picture. While there’s been a slight decline in demand since the start of the year, prices have remained steady. The average price per square meter of an apartment remains at 1,700 euros, with certain areas commanding even higher rates.

As such, real estate agents caution against expecting a significant impact on housing affordability despite the improved lending conditions.

Stefan Mišković from a leading real estate agency suggests that the benefits of lower interest rates may not translate into increased purchasing power, especially for those who have already bought properties under less favorable terms.

With expectations tempered by market realities, it’s likely that a substantial decrease in prices won’t materialize before the end of 2024. Consequently, citizens continue to grapple with the age-old dilemma: whether to rent or buy a property given the prevailing economic conditions.

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