Apartment prices drop by double digits in third quarter

TIRANA, Dec. 11 – After increasing by 3.3 percent in the first half of 2012, apartment prices registered a double-digit shrink in the third quarter of the year, reflecting sluggish demand as consumer struggle with crisis impacts and lending standards remain tight. The house price index dropped by 10.2 percent in the third quarter of 2012 year-on-year, with the deflated index down by 13.2 percent, says the Bank of Albania in its latest monetary policy report for the third quarter of 2012. Meanwhile, rental prices also dropped in the third quarter of the year. On a rising trend since the third quarter of 2011, rental prices dropped by 5.5 percent in real terms in the third quarter of the year. “Developments in the housing market were influenced more by demand rather supply factors. The slowdown in demand for new homes was affected by consumers’ low confidence regarding future developments, the slowdown in available income and tight lending standards. As far as supply is concerned, indirect quantity and quality indicators based on surveys support the assessment of lack of supply for new houses. Lending standards for the construction sector also continue remaining tight,” says the central bank in its report.
One of the key drivers of the Albanian economy until 2008, the construction sector has been continuously shrinking in the past three years due to lower migrant remittances, and tighter lending standards. INSTAT data show construction accounted for 11 percent of the GDP in 2010, down from 15 percent in 2008. The construction industry has been the worst performing sector in the first half of this year.