The prices for apartments have skyrocketed and continue to rise.

Real estate prices in Montenegro continue to rise, despite the decline in construction material prices on the international market and the warning from the European Central Bank about a "chaotic drop" in real estate prices in the eurozone.

In response to the question of why apartment prices are rising now, even though the prices of building materials are falling and the trend in Europe is completely opposite, representatives of the construction sector say that interest from foreigners has significantly increased in recent months, and they "don't ask about the price." "More than 80,000 foreigners have officially arrived in Montenegro, mainly Russians, Ukrainians, and Turks, who are much wealthier than the average Montenegrin. They already make up 15 percent of the population and want to buy real estate. Our current apartment prices are very low for them, so they are investing significant amounts of money in their purchase. Right now, it's impossible to find an apartment in Podgorica for less than 1,700 euros per square meter, and in the best locations, the price significantly exceeds two thousand," said the interviewee from "Vesti."

The Monstat report from June stated that the average price per square meter for new buildings in Podgorica was 1580 euros. The increase will continue as long as foreigners have money. "During the summer and now, there has been a significant new increase in prices, so the average figure for the third quarter will exceed 1700 euros per square meter. We have examples of successful sales to foreigners in the Moraca area, near the Temple, at a price of 2800 euros per square meter, and the foundations for the building have just been laid," said the source to "Vesti".

In response to the question of how long the price increase will last, he said that as long as there is interest from foreigners to buy at these prices. "Even a few thousand wealthy foreigners can significantly raise prices for a long time because our entire construction operation across Montenegro can build a maximum of three to four thousand apartments a year, while the interest from foreigners currently exceeds that. The prices of construction materials saw a significant rise last year, and now they are decreasing. Regardless of this, prices will remain high as long as there are buyers for them," the interviewee told "Vesti".

The apartment payment has increased from 382 to 630 euros. At the beginning of 2019, the average price per square meter of an apartment in Podgorica in commercial sales was 1209 euros, according to Monstat data. Based on this price, a 50-square-meter apartment cost 60,000 euros. At that time, according to the Central Bank, the average effective interest rate on mortgage loans was 4.53 percent. This means that the total loan amount to be repaid over 20 years was 91,000 euros, with a monthly payment of 382 euros. Now, with the expected increase in the average price per square meter to 1700 euros, the cost of this apartment has risen to 85,000 euros. The interest rate now stands at 6.42 percent, so the total loan amount for 20 years will be 151,000 euros, and the monthly payment will be 630 euros. The price of the apartment itself has increased by 25,000 euros over four years, the total loan debt has risen by 66,000 euros, and the monthly payment has increased by 250 euros. For someone to buy this apartment on credit now, they would need a net salary of at least 1300 euros.

The European Central Bank recently raised the refinancing interest rate, which will also affect the new rise in interest rates in Montenegro. They also announced that this is the last increase in an attempt to curb inflation. The rise in interest rates has reduced consumption and investment, which has further impacted the decline of the economy.

Square meters are expensive for Europeans. The European Central Bank (ECB) warned in June about a significant decline in real estate prices in the eurozone, which could have negative consequences for banks with a high share of mortgage loans. "Looking ahead, the decline in real estate prices could become chaotic, as rising interest rates on new mortgage loans increasingly threaten their affordability and increase the burden of interest on existing mortgage loans," the ECB warned at that time. They also cautioned that regions where institutional investors hold large positions in the real estate market could be more severely shaken if capital leaves. Such dangers are not yet present in Montenegro, where builders and banks are doing well. Syndicate funds are even building at 600 euros per square meter. The Monstat report for the second quarter indicated that apartments were sold through syndicate funds at a price of 589 euros per square meter in new construction. This data pertains to the central region, which includes Nikšić, Danilovgrad, Cetinje, and Tuzi. This price only included the construction costs of the syndicate fund, as they received free land from the cities and were exempt from land development fees and utility payments. Considering that there is virtually no difference in construction work, and according to Monstat data, the costs for utilities, land, and other expenses in Podgorica amount to 301 euros, the total costs for the builder cannot exceed 1100 euros per square meter.

Prices were rising, but Monstat was sent old data. Last week, Monstat published a report titled "Consumption of Construction and Operational Materials," which outlines total expenditures on about 150 types of construction materials throughout 2022 and the total amount spent on their purchase. By dividing these figures, one can determine the price of each material per unit, square meter, or kilogram. When comparing these prices from 2022, they completely match the prices from 2021 in the same report. "Vesti" sent this report to several builders and construction material traders, asking them to confirm whether these were the prices that were in effect last year. Last year, builders claimed that due to the onset of the war in Ukraine, there was a significant increase in prices for construction materials, which forced them to raise apartment prices. Monstat selects several large traders based on a sampling methodology and sends them questionnaires about prices for construction materials. Builders and traders initially claimed that they did not receive such questionnaires and that someone at Monstat had copied old prices. They then checked with their companies to see if anyone had received these questionnaires. One of them later told "Vesti" that they did receive the questionnaire, but their employees found it tedious to fill it out for more than 150 types of products, so they sent them some data they had already provided. This is an illustrative example that shows how statistics can be "an exact sum of inaccurate data."