TIRANA, Sept. 11 – With the construction sector continuing suffering crisis impacts, both apartment and rental prices continue declining. A central bank report shows apartment prices dropped by 12.7 percent (inflation adjusted) in the second quarter of 2013 while rental prices were down by 8.3 percent year-on-year.
“The performance of house prices in the second quarter of 2013 has mainly reflected sluggish consumer demand and a poor performance in home loans. However, based on the lending survey, standards on mortgage loans were eased in the first two quarters of 2013 and households’ demand for home loans slightly increased. This development accompanied by expectations for a reinvigoration of supply (the improvement of construction sector confidence and an increase in the number of construction permits) will determine the price movement in the period ahead.
The latest developments in the housing market show the price-to-rent ratio dropped by 4.7 percent compared to the second quarter of 2012,” says the Bank of Albania in its monetary policy report for the second quarter of 2013.
Albanians face region’s highest house prices
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.
The Albanian Finance Ministry says the GDP per capita was at 3,415 euros in 2012, up from 3,261 euros in 2011.
Both the price-to-rent and the house price to income ratios are calculated by taking into account average rent and house prices of 100-120 m2 in city centres, says the central bank.
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 2,500 euros/m2 in downtown Tirana compared to 400-650 euros/m2 in uptown areas of new ring road and Fresku.
Latest Bank of Albania data show the construction sector leads the non-performing loan portfolio with 32 percent. Unpaid government bills for finished construction works and difficulty in obtaining new construction permits has also influenced.
