Montenegro has undergone a significant residential construction surge over the past decade, with a recent report from the United Nations Economic Commission for Europe (UNECE) indicating a growing disconnect between the housing market and demographic trends. The analysis reveals that while the number of housing units is on the rise, nearly half of these properties remain unoccupied.
The 2023 population and housing census reported a total of 392,909 housing units, marking an increase of 78,205 since the 2011 census. In contrast, the population growth during this period was only about 2%, suggesting that the housing supply is outpacing population growth significantly.
According to UNECE, approximately 54% of residential units are continuously inhabited, leaving nearly 46% of the housing stock not permanently occupied. This situation presents a considerable challenge for policymakers in Montenegro.
The construction and real estate sectors have become vital components of Montenegro’s economy, contributing around 8.8% to GDP in 2023, with construction alone accounting for 3.5%. Residential development, particularly along the Adriatic coast and in urban areas such as Podgorica, Budva, and Kotor, has been a key driver of this economic growth.
A substantial portion of new developments is attributed to tourism, foreign investments, and second-home purchases rather than fulfilling local housing needs. High-end apartments and tourism-focused residential projects have drawn buyers from various regions, including Europe and the Middle East. While this influx has led to considerable capital investment, it has also shifted the focus of housing construction toward investment rather than permanent residency.
The UNECE report emphasizes the need for investors to distinguish between construction activity and actual housing demand. Despite ongoing support from tourism and foreign capital, local absorption rates for new residential units appear weak relative to construction levels.
The organization advises the Montenegrin government to implement policies aimed at converting vacant homes into permanent residences. Future strategies should address not only new developments but also existing housing utilization, affordability issues, and long-term demographic shifts.
This report comes at a time when property prices in Montenegro remain high despite an increase in housing supply. The interplay between foreign demand, tourism-related investments, and limited availability of prime coastal properties has so far mitigated oversupply concerns typical in other markets. However, the widening gap between available housing units and resident numbers poses an escalating issue for policymakers.
The findings underscore challenges faced by many economies reliant on tourism. While construction continues to bolster GDP growth and attract investments, much of the newly built housing serves as financial assets or seasonal rentals rather than as permanent living spaces. Moving forward, Montenegro’s housing policy may need to prioritize occupancy rates, affordability, and urban sustainability alongside continued expansion of its housing stock.
