Where Rental Demand Is Highest in Seaside Towns

The allure of coastal living is timelesssun-drenched beaches, the sound of waves, and a slower, more relaxed pace of life. Seaside towns have always drawn tourists, investors, and locals alike. But in recent years, the rental market in coastal destinations has surged dramatically. In Montenegro, a gem on the Adriatic coast, this demand has been especially strong. Understanding where rental demand is highest in these seaside towns can help investors, homeowners, and potential renters make smart, informed decisions.

Whether you're a property investor seeking yield, or a homeowner wondering where to buy a second home, identifying high-demand areas is crucial. In Montenegro, where tourism is a vital part of the economy, towns like Budva, Kotor, and Tivat are becoming hotspots for short and long-term rentals. According to recent data sourced from tourism bureaus and real estate analysts, these towns consistently outperform others in occupancy rates and rental income. For those exploring montenegro real estate, understanding the nuances of rental demand across the coastline is essential for maximizing returns.

Key Points

• Rental demand is booming in Montenegro's seaside towns, driven by tourism and lifestyle appeal.

• Budva, Kotor, and Tivat are among the top-performing areas in terms of rental occupancy and income.

• Foreign buyers and digital nomads are significant contributors to the growing rental market.

• Investment opportunities vary based on seasonality, rental type (short vs long term), and infrastructure.

• Being informed about local regulations and market trends is key to successful property investment.

Understanding the Rental Demand in Coastal Regions

Rental demand in seaside towns is shaped by several factorstourist arrivals, infrastructure development, lifestyle amenities, and even geopolitical stability. In the case of Montenegro, the country has seen increasing popularity due to its visa-friendly policies, beautiful landscapes, and relatively low cost of living. These conditions create a favourable environment for both short-term visitors and long-term renters.

Holiday Rentals vs. Long-Term Rentals

In towns like Budva and Herceg Novi, short-term holiday rentals dominate. Tourists book apartments and villas via platforms like Airbnb, especially during the summer months. This seasonality propels rental yields but also requires careful management. On the other hand, cities such as Podgorica and Tivat are seeing a rise in long-term rental demand, largely from expatriates and remote workers settling for longer stays.

Tourism Trends and Their Impact

Montenegro welcomed over 2.5 million tourists in 2023, many flocking to its coastal towns. This surge has pushed property owners to convert residential units into rental accommodations. The coastal beltfrom Ulcinj in the south to Herceg Novi in the northis increasingly being targeted by investors looking to benefit from both capital gains and rental income.

Top Montenegrin Seaside Towns with High Rental Demand

1. Budva The Rivieras Rental Magnet

Budva is often referred to as the heart of Montenegros tourism industry. Known for its beaches and nightlife, it attracts both domestic and international tourists. This influx, especially from May to September, makes it a prime destination for rental income. Studio apartments in Budva can command nightly rates of 80150 during high season. Despite being more expensive, rental occupancy remains high due to consistent tourist flow.

2. Kotor Heritage Meets Hospitality

A UNESCO heritage site, Kotor offers a blend of history and natural beauty. It is particularly popular among cultural tourists and cruise ship visitors. The Old Town is filled with rental opportunities, from quaint studios to luxurious penthouses overlooking the bay. While prices per night here might be slightly lower than in Budva, Kotor benefits from a longer tourist season thanks to its cruise terminal and cultural calendar.

3. Tivat Luxury and Stability

Home to the luxury marina Porto Montenegro, Tivat attracts high-net-worth individuals, digital nomads, and business travellers. Because of its modern infrastructure and international schools, Tivat has also seen increasing long-term rental demand. Monthly rents for two-bedroom apartments in the Porto area can reach 1,5003,000. It's a preferred destination for those investing in montenegro real estate with an eye on luxury and international clientele.

4. Herceg Novi The Understated Performer

Often overlooked in favour of flashier towns, Herceg Novi offers a more affordable entry point. With proximity to both Dubrovnik and Tivat airports, it is an attractive location for cross-border travel. Rental yields here are promising, especially in the Igalo area, known for medical tourism and spa resorts.

5. Ulcinj A Growing Niche Market

Ulcinj, with its long sandy beaches and multicultural flavour, is becoming increasingly popular with tourists from the Middle East and Albania. The town is seeing a gradual transformation with new resorts and residential developments. This growing interest is setting the stage for rising rental demand in years to come.

Factors Fueling Rental Demand in These Areas

1. Infrastructure Development

Ongoing infrastructure projects, such as the Adriatic-Ionian motorway and upgraded airports, are making coastal towns more accessible. This increased access boosts tourism and, in turn, rental demand. Tivat Airport, for instance, has seen a 25% increase in arrivals since 2022.

2. Digital Nomads and Remote Work

Montenegro's potential digital nomad visa and fast internet infrastructure are making it an attractive base for remote workers. Tivat and Kotor, with their high-quality housing and amenities, are particularly favoured by this group.

3. Seasonal Events and Festivals

Towns like Budva and Kotor are hosting more cultural and musical festivals, extending the tourist season beyond the summer months. This creates more consistent short-term rental opportunities throughout the year.

Rental Yields: What Investors Should Know

Understanding rental yields is essential. In high-demand areas, gross yields can range between 6% and 10% annually. Short-term rentals often deliver higher returns during peak seasons, while long-term rentals offer stability. For example:

• Budva: Gross yields of up to 10% during summer months.

• Tivat: Long-term leases offer 68% annual returns.

• Kotor: Balanced performance due to year-round tourism.

Property Types in Demand

Studios and one-bedroom apartments are particularly sought after for short-term stays, while families and professionals prefer two to three-bedroom units for long-term leasing. Villas and luxury apartments cater to the high-end market in areas like Porto Montenegro.

Legal and Regulatory Landscape

Renting property in Montenegro is relatively straightforward, but there are regulations to consider. Property owners must register with the local tourism board and pay applicable taxes on rental income. Short-term rentals are also subject to a tourist tax, payable per guest per night.

Taxation

Montenegro offers a flat income tax rate of 9%15% on rental income, depending on the amount. Investors should also be aware of municipal obligations and maintenance costs associated with renting.

Tips for Successful Rental Investment

• Location analysis: Prioritize towns with consistent tourism and strong infrastructure.

• Professional management: Use local agencies to ensure smooth guest turnover and compliance with regulations.

• Seasonal pricing strategy: Adjust rental rates during off-peak and peak seasons for optimal income.

• Legal compliance: Register your property and report guest stays to avoid penalties.

Frequently Asked Questions (FAQ)

What is the best seaside town in Montenegro for rental income?

Budva consistently offers the highest short-term rental yields due to its popularity among tourists. However, Tivat is better suited for stable, long-term rentals, especially among expats and business travelers.

Is it better to invest in short-term or long-term rentals?

Short-term rentals can offer higher returns in peak seasons but require more management. Long-term rentals provide consistent income with less hassle. A mix of both, depending on the property type and location, is often the most effective strategy.

Are foreigners allowed to buy property and rent it out in Montenegro?

Yes, foreigners can purchase property in Montenegro without restrictions. They can also rent out their properties, provided they comply with local regulations and taxation requirements.

How does tourism impact rental returns on the coast?

Tourism directly influences rental yields. High visitor numbers, especially in towns like Kotor and Budva, result in increased demand for short-term housing, pushing up rental income during the tourist season.

What are the main challenges of renting property in Montenegro?

Challenges include managing seasonality, ensuring legal compliance, registering with the tourism board, and handling property maintenance. Using a trusted local property manager can help overcome these hurdles.