Home prices up 1.6%, rents drop by 16.2% in Q2

TIRANA, Aug. 30 – Home prices in Tirana rose for the second quarter in a row mainly because of a slight reinvigoration in supply and demand. The latest Bank of Albania monetary policy report shows the House Price Index rose by 1.6 percent year-on-year in the second quarter of 2011. The slight increase is a result of higher construction permits during the first half of this year and easier lending standards for home loans increasing demand. Meanwhile, rental prices in Tirana continued dropping for the second quarter in a row, decreasing by 16.2 percent in real terms.
The depreciation of Albania’s national currency against Euro, which is the currency used for sale of apartments, has considerably influenced. “Adjusted for exchange rate effect house prices dropped by 1.2 percent in nominal terms and 5 percent in real terms” says the Bank of Albania.
Data show lek depreciated by 3.28 percent in annual terms against the euro during the second quarter of this year. Last June, Euro climbed to a historical record of 142.84 lek. The central bank explains the situation with higher demand for Euro and lower foreign currency inflows from FDI and remittances. The tense political situation after the May 8 local elections and the instability of global financial markets are also estimated to have contributed to lek’s depreciation against the Euro.
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.
A recent World Bank report ranked Tirana the worst city in the region for dealing with construction permits as no permit has been issued since 2009.
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.