House prices slightly drop, rents up by 13%

TIRANA, May 7 – House prices dropped by 1.8 percent in the first quarter of 2014 and were down by 10.2 percent compared to the final quarter of 2013, says the Bank of Albania in its monetary policy report for the first quarter of 2014.
“Excluding the final quarter of 2013, house prices have been on a downward trend in the past couple of years, reflecting the sluggish demand and presence of unsold inventory.”
Meanwhile, rental prices rose by 13.1 percent in the first quarter of 2014. “The historical trend of this indicator is characterized by high fluctuation which signals an unstable rental market in the city of Tirana,” says the report.
After a downward trend for several consecutive quarters since more than one year, house prices registered a turning point in the final quarter of 2013 when they rose by 8 percent year-on-year and were up by 2.3 percent compared to the third quarter of 2013, according to central bank report. Meanwhile, rental prices slowed down to 0.5 percent in the final quarter of 2013 after a double digit increase of 10.5 percent in the third quarter of the year.
Surveys show citizens are becoming more reluctant to buy new apartments because of falling revenues and especially a sharp decrease in migrant remittances. Tighter lending standards as bad loans have reached a record 25 percent have also influenced. Apartments prices in Tirana vary from 700 to 2,500 euros/m2 in downtown Tirana compared to 400-650 euros/m2 in uptown areas of new ring road and Fresku. Thousands of apartments also remain unsold, especially in the cities of Durres and Vlora which have seen a boom in construction, says the Association of Constructors. The low number of construction permits issued by local government units is another reason for the crisis in the long-ailing construction sector.
The long-ailing construction sector, which has been in crisis since the onset of the global crisis in 2008, registered a turning point in the final quarter of 2013 when it grew by 3.66 percent year-on-year and was up by 14 percent compared to the third quarter of the year.
Unpaid government bills for finished public works and difficulty in obtaining new construction permits has also influenced.
Albanians face the highest house prices in the region compared to rents they pay and the GDP per capita, according to a study carried out by the central bank surveying 12 regional countries.
Data show it takes Albanians 27 years of paid rent to purchase a house which under the price-to-rent ratio suggests it is much better to rent than buy. At 27, Albania’s price-to-rent ratio is lower only compared to Greece’s 31 and Czech Republic’s 29.
The survey also shows Albania has among the highest house prices in the region compared to GDP per capita, measuring the standard of living. The house price to income ratio in Albania stands at 38.5 times higher than the country’s GDP per capita lower only compared to Serbia and Turkey.