A survey carried out by the Bank of Albania shows confidence in the crisis hit construction sector grew by 3.4 percent during the first quarter of 2011, registering an improvement for the second quarter in a row
TIRANA, May 9 – After a falling trend which started in September 2009, apartments returned to higher prices in the first quarter of this year mainly because of a slight reinvigoration in supply and demand. Latest data published in a monetary report by the Bank of Albania show apartment prices rose 1.5 percent year-on-year in the first quarter of 2011. Higher construction permits, which had been in decline for the past four quarters, were a key reason. “This indicator, although improving, continued limiting the future quantity of homes available for sale, supporting the high level of current sale prices,” said the central bank in its report.
The depreciation of the national currency, lek, against the Euro, the currency in which apartments are sold has also affected the situation. Latest central bank data show the European currency stood at a record 142.4 lek at the end of April 2011 compared to 137.6 a year ago.
Meanwhile, rental prices dropped by 4.5 percent in the first quarter of 2011 after a 13.5 percent increase in the final quarter of 2011 in annual terms.
A survey carried out by the Bank of Albania shows confidence in the crisis hit construction sector grew by 3.4 percent during the first quarter of 2011, registering an improvement for the second quarter in a row, but remaining 4.7 percent below its long-term historical average. The increased optimism in this sector was a result of higher production and demand despite the deterioration in the employment.
Infrastructure, relations with banks and the financial sector as well as legal and institutional framework are reported to have improved, while internal political situation remains an obstacle for construction companies to carry out their normal activity. The capacity utilization rate in the first quarter of 2011 was at 61 percent, 6.6 percent below its historical average. The construction sector’s expectations about the second quarter of 2011 dropped compared to the final quarter of 2010, increasing insecurity about the continuance of confidence boost.
Despite confidence in the industry and crisis-hit construction sector growing slightly, the indicator was unable to balance the overall index. Albania’s Economic Sentiment Indicator (ESI), measuring both consumer and business expectations dropped by 7.3 percent in the first quarter of this year, extending the gap to 14.7 percent below its long-term historical average.
Latest INSTAT data show the construction and post-telecommunication sectors continued suffering registering negative growth rates in the final quarter of 2010.
The construction sector, once the main driver of the Albanian economy, continued remaining in crisis, shrinking by 14.8 percent year-on-year and 3.7 percent compared to the third quarter of 2010.
The construction sector was the hardest-hit even during the first nine months of 2010 shrinking by 20 percent in the first quarter, 29 percent in the second quarter and 22 percent in the third quarter.
Reports show citizens are becoming more reluctant to buy new apartments because of falling revenues and especially a sharp decrease in immigrant remittances. This is confirmed even by data of the Albanian Association of Constructors which says some 4,000 apartments remain unsold because of falling purchasing power.
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 know as Bllok, where prices go up to 2,500 euros/m2.
Meanwhile, construction costs continue increasing despite the severe crisis this important sector to the Albanian economy has been suffering since the second half of 2009. Latest Institute of Statistics data show the construction cost index rose 0.5 percent year-on-year during the final quarter of 2010 but was up only 0.1 percent compared to the previous quarter. One year ago, the change was -0.5 percent.
