TIRANA, Sept. 5- The construction sector is experiencing a historical crisis, especially in sales, says the latest report on the industry by BoA. Overblown prices, limited permissions granted by municipalities and an overall lack of liquidity that affect demand are some of the main causes behind the considerable fall in revenues of what has been considered the most profitable business in Albania.
BoA is careful to point out that there is no lack of demand but its governor, Ardian Fullani, has warned for the past year of a potential bubble effect. Other sectors of the Albanian economy seem to be performing better, especially the services and processing industries. The construction crisis is expected to last throughout this year.
A market in difficulty
BoA has collected data for the first quarter of 2007, analyzing official sales records and periodical reports on the industry, concluding that a significant fall has characterized this period. Sales have been 31 percent lower than the previous year. Seasonally compared. sales were 40 percent lower than the previous year.
Overblown prices
A simple analysis sees the limited supply being due to the permissions problem and the high demand for apartments causing very high prices for housing industry. This has been connected to the spike in loans for Albanians who have decided to buy an apartment.
The annual norm of the sales index for the industry was 17 percent higher for the first three months of 2007, higher than the average of the last five years. The annual rate, though, was only three percent higher, reflecting a fall in the demand. The market reflects yet another trend, that of apartments not selling, especially in the capital where prices are higher.
A two-year trend
The decreasing trend has carried on from 2006 and seems to continue throughout 2007 with more concerning pace.
Only in Tirana and in Durres, where sales have been most intensive during the last years given the attractiveness of the location, the fall has been a significant 40 percent. During 2006 in Tirana the number of construction permits has fallen by a third, and for 2007 no permits have been granted at all. The relative weight of the construction sector as a percentage of GDP is expected to fall from 25 percent in 2004 to 9.5 percent in 2007.
