By Ervin Lisaku
TIRANA, May 11 – Apartment prices in Albania continued rising even in the first quarter of this year despite falling demand and activity of the construction sector, a recent report published by the Bank of Albania (BoA) has shown. The BoA monetary policy report said 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 is 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 has lost more than 12 percent against the European currency in one year.
Developments in house prices in the first quarter of 2010 were affected by the limited supply.
“The tight credit conditions, the slowdown of the annual growth rate for wages and consumers’ pessimistic expectations on their financial situation signal a low demand for houses,” said the BoA report.
The number of construction permits registered a decrease in the second half of 2009 while the construction cost had a declining trend.
The BoA says a full analysis on the progress of apartment prices is limited by lack of data on the number of transactions carried out during the first three months of this year.
Few weeks ago, Albanian constructors threatened they would suspend work for one month if government did not take immediate measures to review the tax legislation and create a favourable business environment. In an open letter to Prime Minister Sali Berisha, Tirana Mayor Edi Rama and the European Commission Delegation to Albania, the Association of Constructors warned the construction sector in Albania is in crisis because of decreasing sales, lack of permits, borrowing difficulties and non-payment for finished public works which have led to one-third of companies suspending work.
The construction sector is one of the most dynamic in the country contributing to more than 10 percent of the GDP in the past years and employing 18 percent of people working in the private sector.
Data published by the Institute of Statistics showed the construction sector was the hardest hit in the last quarter of 2009, recording a 14.4 per cent drop compared with same period of 2008 and an 11.8 per cent decrease from the third quarter of 2009.
Experts doubt BoA data
Construction experts and real estate agencies have opposed the Bank of Albania findings that apartment prices rose 15.8 percent year-on-year during the first quarter of this year. Experts say the central bank has used the wrong methodology , arguing that apartment prices have in fact fallen.
The central bank itself admits the handicap about rental and house price indexes which are made available only for Tirana and based on announcement published on newspapers.
“It is true that many constructors still advertise high prices, hoping that in this way they will stop the price decrease, but when a customer knocks on the door, of course prices are negotiated and price decreases have recently been more and more generous,” a real estate agent was quoted as saying by local media.
Rental prices
Meanwhile, rental prices rose by 2.6 percent year-on-year during the first quarter of 2010 and 21.1 percent compared to the last quarter of 2009. The increase in the rental price index follows decreases registered in the third and fourth quarters of 2009 with 4.4 and 15.6 percent respectively.
The BoA said the price/rent ratio registered a decrease in the first three months of 2010 because of quarterly changes in house sale and rental prices. The ratio currently stands below its historical trend.
