Apartment price increases slow down

TIRANA, August 13 – Apartment price increases slowed down in the second quarter after sharp rises during 2009 and in the first quarter of 2010, the central bank said in a report.
The house price index in the second quarter increased by 4.3 percent year-on-year compared to the 11.1 percent average in 2009 and 11.2 percent in the first quarter.
The slowdown was a result of falling demand under conditions of a stable supply, said the Bank of Albania in its monetary policy report for the second quarter.
Demand for apartments and houses remained at low levels in the second quarter of 2010 mainly because of lower income in the labour market and a drop in remittances.
Tight lending standards for home loans also had an impact. Home loans to individuals registered negative growth rate for the second quarter in a row during this year.
Home supply remained stable considering the increase in the number of construction permits at the end of 2009 and the low number of transactions.
Meanwhile, rental prices registered a sharp increase during the April-June period, ending the declining trend registered since the second quarter of 2009.
Apartment prices in the first quarter of this year rose by 15.8 percent compared to the same period last year.
Some 40 percent of the price increase was estimated to have been caused by the depreciation of the Albanian national currency, Lek, against Euro, the currency in which apartments are sold in Albania. The national currency lost more than 12 percent against the European currency in one year.
The drop in the volume of construction was mainly caused by the contraction of private constructions, said the Bank of Albania in a recently published report. As a result, cement consumption and the number of construction permits dropped by 3.3 and 15.7 percent year-on-year, respectively in the first quarter of 2010.
The value of construction permits for the “buildings” category, which has been on decline since the third quarter of 2009, fell by 49.8 percent at the end of March.
The report says the crisis in the construction sector reflects business and consumer hesitation to invest because of tight lending standards and the low level of programmed public investments.
The construction sector continued its poor performance even in the first three months of this year, dropping by 21.1 percent year-on-year and 4.3 compared to the last quarter of 2009, according to INSTAT.