On the occasion of the International Day of Construction, on the 10th of October 2009, Albanian contractors called on the government to design a strategy of support for their business sector. Albanian construction business owners believe that the sector is facing crisis and have over the last months increased their cries for help and for more liberally-oriented policies. Over 4,000 apartments are reported to be unsold at the national level.
Yet, while the construction sector claims to have been heavily affected by the global financial crisis, reports from the National Institute of Statistics (Instituti i Statistik쳬 INSTAT) speak of continuing growth in the sector.
The calls for support for the sector and the growth data released by INSTAT are largely echoed in the press. “The constructors say crisis, INSTAT observes growth” writes Agon (11.10.2009). “Constructors say: “We are at crisis; the government should adopt a stimulant package” reports Gazeta Tema, (11.10.2009). Other newspapers believe the fluctuations in the exchange markets where the Albanian National currency, the Albanian Lek, has been continually depreciating over the year are harmful to the business climate in the real estate sector. “Exchange rates constrain the real estate market” suggests Koha Jon련12.10.2009).
Late data released by INSTAT shows that the construction sector grew 9.8 % in the second quarter of 2009 compared to the second quarter 2008, and 3.6 % in the second quarter 2009 compared to the first quarter 2009.
Liquidity Crunch
This data seems to register construction activity, but they do not seem to reflect the state of sales. The Association of Albanian Constructors (Shoqata e Nd쳴uesve t롓hqip쳩s멠speaks of the accumulating stock of unsold apartments, of a lack of liquidity and difficulties in obtaining funding. Since fewer apartments are selling, there is a liquidity crunch in the sector which accompanies the rise of unsold stocks. The difficulties in raising funding to begin or to finish construction-work is seen as one of the determinant factors in the slowing down of the sector, believe the contractors.
Not only is the stock of unsold apartments high for a small country like Albania, but the activity has been affected by the global financial downturn and the economic climate and macro-economic framework reigning in Albania, they believe.
“The Association of Albanian Constructors expresses the concern that the construction sector and the company’s active in this sector are the most affected from [by] the financial crisis. It suffices to mention the fact that during 2008 in this sector over 700 construction companies from the 2500 companies registered at the national level have made not a single Lek of turnover (have not worked at all). In this general climate, the construction and real estate sectors are facing sensible problems and difficulties due to the fall of consumer demand and a marked drop in sales has been observed” declared Ilir Hebovija, Vice-Chairman of The Association of Albanian Constructors (quoted by Agon, 11.10.2009).
Prices constant as Lek fluctuates
It is noted, however, that in this situation there have been few – if any – price reductions observed. The prices are too high for the average Albanian estimates the press, which asserts however that though postponed, the demand for lodging remains still very high. Koha Jon먳 business editor, Blerina Hoxha, believes the real estate market to have suffered indecision and stand-back from the market due to the instability of the exchange rates in the country and quotes in October alone where the exchange rates between the Albanian Lek and foreign currencies, especially Euros, have seen a large swing (difference equal to 8 points).
With the aim of improving the business climate, the Association of Albanian Constructors presented a draft support and stimulation package to the government. Among others, the AAC asked the government not to use reference wages and reference sale prices in the sector and a reinforcement of the public control on the banks, in order to make sure that they continue to finance the local economy.
The Bank of Albania has advised second-tier banks to deposit long-term funds in order to be able to credit housing demands. Actually, the majority of deposits seem to be short-term. The central bank also encourages the use of the local currency in crediting, in order to avoid or smooth exchange rate risks.
BOX
Construction is one of the most active sectors of the Albanian economy. In 2008 this sector made up 14 % of the Gross Domestic Production (GDP). That year the construction sector assured 17 % of the sales of all the productive non-agrarian sectors and has employed an average of 18 % of total employees that have been employed in productive sectors besides the agricultural sector. Source: Koha Jon묠12.10.2009.
