Real Estate Prices Up by 13.8% in Second Half of 2019

TIRANA, April 16

The real estate market in Albania seems to be offering properties at ridiculously high prices compared to customer buying power. The recent Report on Financial Stability published by the Bank of Albania (BoA) confirms that y-o-y house prices (calculated according to the Fischer Index) during the second half of 2019 increased by 13.8 percent. Meanwhile, compared to the base period of reference, 2013, the price grew by 33.5 percent.
In the meantime, the housing prices in Tirana, downtown area, suburbs, and outskirts during the same periods increased respectively 14.9 percent and 34.7 percent.

According to BoA, the housing market indicators showed an increase in both demand and supply during July-December2019. Overall, low-interest mortgage loans gave a boost to housing demand. Based on the report, mortgage lending reached Lek 120 billion by the end of 2019 or six percent more compared to the end of 2018. Further on, the rate of problem loans sat at 4.4 percent in 2019 compared to 5.5 percent in 2018.

On their part, even realtors confirmed an increase in the number of residential properties sold in Albania as well as a decline in the number of unsold units.
Meanwhile, data on building permits and floor area show a high interest in new constructions.

Realtors said they were optimistic about the real-estate market developments as the market was considered stable. In the next period, real-estate professionals expected an equal number of property listings as well as a growth in the housing market prices.

Overview of the survey on real properties
The survey on the housing prices performance and situation assessment by real-estate agents was conducted with 230 subjects whose principal business is that of real-property sale, and construction activities, that account for 70-80 percent of the total turnover. The survey was drafted by BoA and conducted by the Institute of Statistics (INSTAT).

An overall overview: The real estate assessment for the overall market situation showed no major changes compared to the previous period (first half of 2019). When asked about the market situation compared to the previous period, the number of agents that said ‘good’ was almost equal to the number of agents that said ‘bad’. About 60 percent of the answers to this question were neutral, meaning that there was no difference between both halves of 2019.

Median home price
The median home price increased significantly throughout Albania, yet it remained stable in coastal cities. The median home price in Tirana increased by 15.3 percent in the downtown area and about 25 percent in the city outskirts. Meanwhile, the median home price hike in the capital city suburbs was trivial. In other areas, the price increased by 15.4 percent compared to the previous period. The trend can be attributed to the post-earthquake impact. Demand for low-rising buildings grew after the November earthquake.

Number of listed properties
Realtors reported a lower number of new property listings. The net balance between those that reported a growth in the number of listings and those that reported a decline was -11.5 percent. Moreover, the bulk of unsold properties, both residential and commercial, declined.

Average time to sell property
The average time on the market for a property to sell at the country level was 10.3 months, or slightly more compared to the previous six months. Meanwhile, realtors in Tirana said that the average time to sell a property was 9.2 months, down two months compared to the previous period.
Meanwhile, the average time to sell a property on the coastal area increased from 8.3 months to 10.3 months.
The same indicator for other areas increased from 9.2 months to 11.3 months.

Mortgage lending
According to realtors, about 65 percent of residential and commercial properties were financed by mortgage loans. The numbers increased compared to the first half of 2019 when it was 46 percent.

Future expectations
Realtors had positive expectations both in the short and long-term. They also expected price hikes.

Rent price and demand
Most realtors (Tirana area) reported a constant rental demand both for residential and commercial properties. Further on, they reported that rents remained unchanged.

Currently, the COVID-19 outbreak is expected to have an impact on the real estate market and services.

These are the findings of the BoA survey on the real estate market in Albania. On the other hand, the same report highlights the following findings from another survey:
The total number of employed people decreased compared to the first half of 2019 and to the previous year. The decline was reported from people working in the private and public sectors, and self-employed.
The overall level of household expenditures and income shows that families show their spending and income decline.
These two surveys show a sharp contrast between the consumer buying power and the housing market prices.

Source: BoA
Why are properties in Tirana so expensive?

If one makes simple research on a three-bedroom house/apartment in Albania and three-bedroom house/apartment in Italy results can be interesting.
One of the listings in Albania is an empty three-bedroom apartment in Tirana, 124 square meters, surrounded by other residential buildings, really close to each other, for the price of Euro 165,000.

For the same price of €165,000 in Italy, one of the listings was a  furnished 3 bedroom villa, in Salento-Manduria.
Habitable surface: 125 square meters, garden 1,000 square meters, land 8,500 square meters, pool, olive grove, forest, fruit orchards, energy efficiency standard, etc.

Make your own math.

Real estate experts attributed the price hike in the Tirana housing market to local taxes, but they don’t exclude money laundering. This is a worldwide phenomenon and according to the European Parliament, abuse of the real estate sector (property in the form of land or buildings) has long been described as one of the oldest known ways to launder ill-gotten gains. It allows criminals to enjoy assets and derived funds having camouflaged the origin of the money used for payment. A report by the European Parliamentary Research Service (EPRS) includes the following :
examples of real estate money laundering display some or all of the following features:

• complex loans or credit finance (used as a cover for laundering money, their repayment can be used to mix illicit and legitimate funds, black and legal money);
  non-financial professionals;
• corporate vehicles;
• manipulation of the appraisal or valuation of a property (undervaluation, overvaluation and successive sales at higher values);
• monetary instruments;
• mortgage schemes;
• investment schemes and financial institutions.

 

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