Data show it takes Albanians 27 years of paid rent to purchase a house. The house price to income ratio in Albania stands at 38.5 times higher than the country’s GDP per capita
TIRANA, May 14 – Albanians face the highest house prices in the region compared to rents they pay and the GDP per capita, according to a study carried out by the central bank surveying 12 regional countries.
Data show it takes Albanians 27 years of paid rent to purchase a house which under the price-to-rent ratio suggests it is much better to rent than buy. At 27, Albania’s price-to-rent ratio is lower only compared to Greece’s 31 and Czech Republic’s 29.
The survey also shows Albania has among the highest house prices in the region compared to GDP per capita, measuring the standard of living. The house price to income ratio in Albania stands at 38.5 times higher than the country’s GDP per capita lower only compared to Serbia and Turkey.
The Albanian Finance Ministry says the GDP per capita was at 3,415 euros in 2012, up from 3,261 euros in 2011.
Both the price-to-rent and the house price to income ratios are calculated by taking into account average rent and house prices of 100-120 m2 in city centres, says the central bank.
Newly published data show house prices continued their downward trend even in the first quarter of 2013 with prices dropping by 10.8 percent year-on-year and by 13 percent inflation adjusted. Rental prices also dropped by 11.7 percent in the first quarter of 2013, and by 13.8 percent inflation adjusted.
“Developments in the housing market were mainly affected by demand factors. The decline in the average salary and sluggish demand for home purchase in 2012 have conditioned demand in the market. Data from the confidence index in the construction sector and the lending survey signal a recovery of consumers’ demand for home purchase in the second quarter of 2013. This development, combined with the decline in the number of construction permits and the mortgage loans will determine the price movements in the coming period,” says the central bank in its monetary policy report for the first quarter of 2013.
Reports show citizens are becoming more reluctant to buy new apartments because of falling revenues and especially a sharp decrease in immigrant remittances.
Apartments prices in Tirana vary from 700 to 2,500 euros/m2 in downtown Tirana compared to 400-650 euros/m2 in uptown areas of new ring road and Fresku.
The construction sector, once the key driver of the Albanian economy, but now accounting for only 11 percent of the GDP, declined by 15.4 percent year-on-year in the final quarter of 2012, and was also 1.4 percent down compared to the third quarter of the year. In crisis since 2008, due to falling purchasing power especially from crisis-hit migrants, the construction sector has failed to recover during the past four years also due to lending standards becoming tighter as bad loans stand at a record 24 percent. The construction sector which has been in crisis since 2007 saw its FDI stock drop to Euro 186 million in 2011, down from 227 million in 2010.
Latest Bank of Albania data show the construction sector leads the non-performing loan portfolio with 32 percent. Unpaid government bills for finished construction works and difficulty in obtaining new construction permits has also influenced.
