What Actually Happened
In March 2025, Montenegro enacted two new laws simultaneously: the Law on Construction of Buildings and the Law on Spatial Planning. The legislation overhauled the permitting system from scratch — reintroducing formal construction permits after seven years of a simplified "construction application" system, shifting approval authority for buildings under 3,000 m² back to the municipal level, and aligning technical standards with EU norms.
The result was predictable: a bureaucratic reset. Projects already in the pipeline stalled while developers, municipalities, and legal teams adapted to the new framework. The 82% drop was a system shock, not a demand signal.
The system has since stabilised. But the pipeline gap it created — very few new units approved in H1 2025 — will not be filled quickly. Construction cycles in Montenegro typically run 18 to 36 months from permit to delivery. That means the coastal market enters 2026 and 2027 with structurally constrained supply.
Supply Scarcity Meets Sustained Demand
The timing is striking. While new construction was grinding through a regulatory reset, demand did not pause:
- Property prices rose 18.7% nationally in 2024
- Average coastal valuations crossed €2,000/m² for the first time in 2025, with prime locations in Tivat and Kotor Bay reaching €4,200–€5,500/m²
- Foreign buyers now account for over 40% of transactions in prime coastal markets — up from roughly 10% five years ago
- Tourist arrivals exceeded 2.6 million in 2024, sustaining short-term rental demand across the coast
When supply contracts and demand holds, the arithmetic is straightforward: fewer units compete for the same pool of buyers.
What This Means in Practice
For buyers in 2026, the supply picture has a concrete implication: new-build inventory on the coast is genuinely limited. Projects that were approved before the regulatory reset and are now nearing completion represent a narrow window. Once absorbed, the next wave of permitted projects is 18–36 months away from delivery.
This is not a reason to panic-buy. It is a reason to understand the market accurately.
The properties that exist today — completed units, off-plan in advanced construction, and well-located resale stock — are competing for buyer attention at a moment when the pipeline behind them is thin. Sellers know this. Developers with near-complete inventory know this.
For investors targeting rental yield, the supply constraint reinforces short-term rental returns. With Budva achieving 60–70% annual occupancy and gross yields of 6–9%, and Tivat sustaining 50–60% occupancy with better shoulder-season performance, the demand base is not softening. New supply that would dilute those yields is delayed.
The Honest Caveat
The 82% figure circulated widely as a bearish signal — and it deserves scrutiny in both directions.
The drop was procedural. But a 36% year-on-year decline in total permits for the first three quarters of 2025 is not noise — it reflects real friction in the development pipeline. Some projects stalled may not restart. Rising construction costs and tighter developer financing are genuine headwinds.
The supply squeeze benefits existing asset holders. It does not automatically guarantee appreciation for every property in every location. Quality, legality of title, location, and liquidity remain the variables that determine individual outcomes.
The Structural Picture
Montenegro's construction permit data, read correctly, tells a specific story: a regulatory transition created a temporary shock, the system has stabilised, but the gap in the pipeline is real and will take years to close.
For a buyer evaluating whether to act now or wait for more inventory: the inventory is not coming in the near term. The question is whether the assets available today, at current prices, represent value against that backdrop.
That is an individual calculation. But the supply side of the equation is no longer neutral.
ADRIOM DOO is a licensed real estate agency based in Bar, Montenegro, specialising in coastal and investment properties for international buyers.
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