House prices down, rents continue upward trend

TIRANA, Aug. 6 – With the long-ailing construction sector continuing suffering, house prices registered a slight decline for the second quarter in a row after a 4.7 drop in 2013, according to a survey conducted by the country’s central bank.
The survey shows the house price index dropped by 3.4 percent in the second quarter of 2014. Meanwhile, rental prices rose by 5.1 percent, registering growth rates for the fourth quarter in a row.
“Excluding the final quarter of 2013, house prices have been on a downward trend in the past couple of years, reflecting the sluggish demand and presence of unsold inventory.”
Rental prices rose by 13.1 percent in the first quarter of 2014. “The historical trend of this indicator is characterized by high fluctuation which signals an unstable rental market in the city of Tirana,” says the report.
Surveys show citizens are becoming more reluctant to buy new apartments because of falling revenues and especially a sharp decrease in migrant remittances. Tighter lending standards as bad loans have reached a record 25 percent have also influenced. Apartment 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. Thousands of apartments also remain unsold, especially in the cities of Durres and Vlora which have seen a boom in construction, says the Association of Constructors. The low number of construction permits issued by local government units is another reason for the crisis in the long-ailing construction sector.
Latest INSTAT data shows the long-ailing construction sector, once the key driver of the Albanian economy but suffering since the outbreak of the global crisis in 2008, shrank by 5.3 percent year-on-year and was down by 4.5 percent compared to the final quarter of 2013.