Apartment prices, rents up in Q3

TIRANA, Nov. 30 – Although in crisis since the 2008 global recession, apartment prices in Tirana continued rising even in the third quarter of this year on lower supply and low number of construction permits. The latest Bank of Albania monetary policy report for the third quarter of 2011 shows apartment prices rose by 10.3 percent year-on-year and 8.7 percent compared to the second quarter of 2010.
“Developments in the house prices for the third quarter of 2011 were influenced by a contraction of supply in urban areas and the low number of construction permits in recent years. However, latest data for the second quarter of 2011 show the number of construction permits continued growing signaling future increase in apartment supply.”
“The increase in demand for new apartments was also influenced by the issue of more home loans,” says the BoA report.
Meanwhile, rental prices registered a turning point after dropping during the first two quarters of 2011. In the third quarter of 2011, rental prices registered a slight 1.1 percent increase y-o-y in nominal terms and a 2.1 percent drop in real terms (CPI deflated).
The latest 2012 Doing Business report by the World Bank and IFC ranked dealing with construction permits as one of the worst indicator for Albania.
“In Albania dealing with construction permits became more difficult because the main authority in charge of issuing building permits has not met since April 2009,” said the report.
Since 1998, apartment prices in Tirana have grown by an average of 9.2 percent annually. After 2008, when the international financial crisis broke out, apartment prices in Tirana have grown by 7.8 percent annually.
The construction industry, once the main driver of the Albanian economy, says it is experiencing its worst situation in the past 20 years. Maks Muci, the head of the Constructors Association says the situation is a result of global crisis effects but also lack of construction permits, lack of liquidity and failure to get paid for public works which have all influenced on the severe situation the construction sector is undergoing.
The situation appears more critical in Tirana where no construction permits have been issued since April 2009, Muci told reporters.
Latest INSTAT data show the construction sector which had been in crisis since 2008 returned to growth increasing by 4.8 percent compared to the first quarter of 2010 and 11.8 percent compared to the final quarter of 2010. However, confidence in the construction industry registered an 11.2 percent drop in the second quarter of this year.
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 2500 euros/m2 in downtown Tirana compared to 400-650 euros/m2 in uptown areas of new ring road and Fresku.
The highest prices are reported in the downtown area known as Bllok, where prices go up to 2,500 euros/m2.