Montenegro, Analysis of the construction sector

We have witnessed a marked increase in real estate prices in the last few months. The reasons for this growth are seen by some in the huge inflation that started a chain of price hikes in malls all over the world, while a smaller number believe that the current rise in apartment prices in Montenegro is realistic and conditioned by less construction, with a constantly high demand, and currently additionally enhanced thanks to higher creditworthiness (higher earnings) of citizens due to the Europe Now project.

The fact is that the average price per square meter in new construction is at a 10-year record. According to the research of the company Colliers Montenegro, which has been conducting research on the residential real estate market for eight years in a row, i.e. apartments with a focus on new construction in market-active zones throughout Montenegro, it is stated that the prices of this type of real estate in 2021 recorded growth, that the coastal and central regions recorded the highest volume of construction during this research, as well as that the prices per square meter in Montenegro in newly built buildings depend primarily on the region of the location itself and the microlocation, the quality of construction, and the level of equipment.

If we look at the official data published by the Directorate for Statistics, we see that the average price per square meter of an apartment in a new building in Montenegro in 2021 was 1,194 euros, of which the average market price was 1,216 euros, while the average price in joint housing construction was only 578 euros. For the sake of clarification, solidary housing construction includes the sale of apartments under more favorable conditions, the construction of which is done for the needs of state institutions, i.e. of employees in those institutions in all municipalities of Montenegro.

Last year’s average in Podgorica was 1,211 euros, in the coastal region 1,359 euros, in the central region 624 euros, while in the northern region the average price per square meter of a newly built apartment was 1,060 euros. The assumption is that such a high price per square meter in the north is primarily defined by Kolašin, where significant construction activity is recorded with sales at high prices, which is conditioned by the project of awarding Montenegrin citizenship with a certain level of investment in the purchase of apartments and condo apartments.

Information on the number of issued permits and applications for new construction works, as well as details on the planned surface area and number of apartments for construction, show that those who justify the current price increase with a smaller offer are right. These data show that, despite higher prices, investors are still not embarking on new projects with the same intensity as in the past years. Namely, the number of apartments scheduled for construction last year fell by as much as 50 percent compared to the year before, and amounted to only 649 units. Five years ago, construction companies were building between 3 and 4 thousand new apartments for the market annually.

The situation is the same with other data – the area planned for construction has been decreasing for years and is currently at a record low level, and the number of reported construction works follows an identical trend.

Here we can return to the freshly stated statement of Blagota Radović, one of the leading builders in Montenegro in recent decades, the owner of Zetagradnja, who stated a few days ago that the current “rampant purchase of apartments in Montenegro is actually a stampede, and that the market will stabilize, it must be stabilized, because we no longer have room to raise final prices, because we will lose customers”.

And how the construction industry in Montenegro performed financially during the previous year, we tried to see below.

For the purposes of this review, we have selected those companies that are engaged in construction, either as direct contractors of construction and other works, or as sellers of construction materials, but with the condition that they are not on the list of blocked companies and that in the previous year they achieved total revenues of more than 10 million euros. According to our list, there are 12 such companies, and a good number of them do not have a clearly differentiated activity, but some are engaged in a combination of activities, from the production of raw materials, the processing of raw materials, the sale of materials, the design of works, the execution of works, all the way to the construction of apartments. Comparing the data on an annual basis, the total revenues of these 12 companies in 2021 compared to 2020 were lower by 1.5 percent, but still at the level of over 432 million euros.

In order to make it easier to see, we have highlighted individual companies that sell construction materials in a different color (Kips, Novi Volvox, Cerovo and Drvomont).

For years, the record baton has been held by the company Bemax, as a company that, in addition to numerous business activities in the construction of large tourist resorts along the coast, has in recent years actively participated in the construction of the Podgorica-Mateševo ​​highway section, as the main subcontractor. Bemax’s revenues recorded an annual growth of 6 percent and ended the year at the level of 141 million euros.

The company Zetagradnja had a revenue of about 3 million euros less during the previous year compared to the year before, with a total of 37.45 million euros registered. Judging by media announcements, this company has moved part of its business focus to Slovenia, where it is currently building two skyscrapers that will be 85 meters high and have 220 apartments, under the auspices of Spektra Invest, which is owned by Slovenian businessman of Montenegrin origin, Izet Rastoder. In third place among builders is the company Eurozox, which has been recording stable revenues at the level of around 25 million euros for years, and as a reference I can highlight a large number of buildings throughout Montenegro. It is followed by the Nikšić company Ramel, which primarily deals with the design, execution and supervision of electrical installations, and in 2021, it had a revenue of 20 million euros, i.e. some 6 million euros less than the year before. The next position on the income list with a total income of over 18 million euros is covered by the Bar company Euromix beton, which, in addition to construction, also produces, processes and sells stone, asphalt, and concrete. Last year, the company Celebić generated revenues of 15 million euros, which is barely half of the revenues generated in 2019. In previous years, this company also boasted on its website about the internationalization of business in Ljubljana, where it plans to build a residential and commercial building in an attractive location in the very center of the capital of Slovenia. The list of companies from the construction sector with revenues exceeding 10 million is closed by Mehanizacija i programat from Nikšić (11.6 million euros) and Fidija from Podgorica (10.6 million euros of revenue).

When it comes to the main material sellers, KIPS’ revenues recorded an annual decrease of 9.8 percent with a total of 66.8 million euros registered, while New Volvox ended 2021 with 52.3 million euros, almost at the same level as a year earlier. The company Cerovo has recorded an identical level of income for the last three years – at the level of around 19 million euros, while Drvomont in this category achieved an income of almost 14 million annual revenues.

According to data from the Monstat portal, the average net salary in December last year in the construction sector was 491 euros, while the same average calculated at the level of these 12 companies was 544 euros. The highest net average monthly salary in the amount of 879 euros was received on average by the employees of the Bemax company, 179 of them, while the lowest net salary was received by the employees of the Drvomont company – only 353 euros.

The largest employer is the KIPS company, which employed an average of 423 workers in 2021, who received an average monthly net salary of 419 euros.

The highest income per employee was achieved by the employees of the Novi Volvox company, 116 of them, who were paid an average of 646 euros per month.

The most efficient were the employees of Zetagradnja, who achieved the highest net profit out of 74 average permanent employees who received an average monthly salary of 662 euros.

For the sake of note, we calculated the average monthly net earnings as in previous analyses, in the way that the cost of wages and salary compensation (gross) from the Statistical Annexes of the financial statements of the companies were divided by the average number of employees, and then by the coefficient for calculating net earnings 1, 4925373, and at the end with 12 months, local media writes.

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