Albanian families hold more real estate than savings

Tirana Times
By Tirana Times April 30, 2019 14:05

Albanian families hold more real estate than savings

Story Highlights

  • As a great number of Albanian households claim to have at least one real estate property, almost half of the households however, have no financial wealth or savings. More than quarter of the households are also on a loan.

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TIRANA, Apr. 29- A Bank of Albania observation found that 95 percent of Albanian families own one-to-two properties (real estate) on average, however, 43 percent of them said they had no savings or financial wealth. The findings of this observation are surprising as earnings per capita in Albania are of the lowest among other European countries, yet families own a relatively high number of properties.

The findings are based on a survey the BoA conducted on 1118 families regarding their current wealth. According to their declarations these families owned 1645 real estate of different kinds. 1064 families or 95 percent of the surveyed respondents had one-to-two properties, mostly residence properties, or the combination of a residence property with another real estate object, such as land, store, office, premises, etc.. About 3 percent declared they owned more than two properties and 2 percent responded they don’t own any real estate.

Satisfying levels of real estate are also owned by borrowing families. At the moment of investment, 94 percent of these families already own one-to-two properties, and this has increased in the second half of 2018. In most cases, these properties are a residential home or a combination of a house and a land surface. From these borrowing families, 4 percent have declared to own more than two properties, and 2 percent have declared to own no real estate whatsoever.

 

Half of the families without savings

As real estate wealth seems satisfying from almost all families, less than half of them however have no savings. 43 percent of the surveyed families declared to have no savings or any other financial wealth, such as bank accounts or deposits. This level has increased by 14 percentage points compared to the previous observation. From the analysis made on families which have declared to hold financial securities of various kinds, it resulted that in 64 percent of the reported cases the deposits and/or bank accounts were the main form of financial investment.

On the other hand, the families seem to have diverge their financial wealth to other forms of investment within the system, because their total weight has marked an increase by 5 percentage points of the whole of families in the last six months. The main contribution in this growth has been the increasing investment cases in private pension funds. Overall, the weight of the financial wealth holding within the deposits/bank accounts and other investments within the system, has marked a decrease in the borrowing families group and for the total of the families, coming mainly from the decline in the weight of deposits/bank accounts in the financial wealth structure of the families.

 

Revenue and expenses

During the second half of 2018 the families distribution structure based on the revenue level was shifted towards average income levels, compared to the previous half. 53 percent of the families continue to have earnings of 17-50 thousand lek (138-406 euros), while 28 percent of them said their monthly income was between 50-100 thousand lek (406-811 euros). These levels have only increase by 1 percentage points compared to the previous observation.

Regarding the distribution of the families according to the level of indispensable living expenses, 52 percent of the respondents declared monthly costs of 20-50 thousand lek (162-406 euros). This group experienced an increase of 2 percentage points compared to the first half of 2018, and 1.6 percentage points compared to the previous year. On the other hand, during the second half of 2018 has been noticed a light drop on families which spend more than 50 thousand lek (406 euros) per month, but on annual terms this group has experienced growths.

The opposite trend is noticed in the case of the two groups with the lowest expenditure levels. As a result, the distribution structure of households by spending level seems somewhat shifted to a higher monthly expenditure level. The income and expenditure indexes have marked increases during the observed period, resulting in approximate values. Anyhow the income index has been slightly higher than that of expenditure, resulting in an improved ratio balance between the household income and expenditure. The eurozation of the household income in Albania remains low where only 14 percent have responded to have their salaries in currency (mainly in euro), in different value ratios. This indicator has remained unchanged for the past two years.

 

Income sources

The total number of household members which ensure income from employment or self-employment in state and/or private sectors, or other income sources, has marked an increase by 2.2 percent in the six-month terms, and 1.8 percent in annual terms. In the second half of 2018, the growth in annual terms came from the increase of private sector employments with 3.9 percent, and the growth of self-employed by 7.6 percent. In the state sector the number of employees has decreased by 11.7 percent during 2018.

The number of families which have declared other steady income sources such as rent, bank interests, etc., has slightly increased by reaching 11 percent of the respondents, or 118 families in total. In this household group, 59 percent have declared as an alternative income source the interests from savings (deposits, treasury bonds, etc.), 25 percent have declared an income from property leasing, and 4 percent received an income from the interest earned from third party loans. The rest of the household declared a combination of sources such as property leasing and interests from savings.

 

Families on loans

About 26 percent of the households declared that during the second half of 2018 they had a loan to pay off regardless of its form, source, or value of this loan. This weight has dropped by 2 percentage points compared to both the previous half and year, remaining under the observed historical mean. In these households the income and expenditure indexes have marked a decrease during the period. About 70 percent of the loan value is provided by formal sources and 30 percent though informal ones. This structure reflects the significant decline in formal borrowing compared to the previous six months and compared with the previous year. In the composition of the surplus of the currency, it turns out that about 86 percent of it is denominated in lek and 14 percent in euro.

According to the purpose of use, about 27 percent of the loan surplus is declared for the purchase/repair of a property, 44 percent for the development of a business and only 9 percent for consumption. During the observed period, the weight of borrowing for property purchase/repair has declined, while the weight of borrowing for business development and consumption has increased.

82 percent of borrowing households declare that the loan installment has not changed during the second half of 2018. The net balance of the rest of respondents shows a slight drop of the loan installment during the observed period, but in lower paces compared to the first half of 2018. About 59 percent of borrowing households state that their solvency has not changed, while the net balance of the rest of the responses results in an improvement in their solvency compared to the previous six months and a year earlier. For the first half of 2019, about 80 percent of households expect no change in their solvency, while the net balance of the rest of the respondents indicates a weaker expectation.

The ability to borrow during the first half of 2019 is somewhat declining compared to the previous six months and compared to the previous year, which indicates a still unsustainable demand for borrowing from households. In about 31 percent of the reported cases, household borrowing results in loans from financial institutions, where 27 percent of cases are in the form of credit and 4 percent are in the form of credit cards and overdrafts. This weight dropped by about 7 percentage points compared to the previous six months and by 4 percentage points compared to the previous year. In about 44 percent of cases, borrowing is reported in the form of cash, marking an increase of 6 percentage points compared to the previous six months and an increase of 3 percentage points in annual terms. Significant weight continues to be the unpaid commodity with 22 percent of borrowing cases, but falling during the observed period.

 

Tirana Times
By Tirana Times April 30, 2019 14:05