Rental prices register sharpest drop since 2009

TIRANA, Nov. 13 – Rental prices registered a 17 percent decline in the third quarter of 2014, the sharpest quarterly decrease since the onset of the global financial crisis in 2009, said the country’s central bank in its quarterly survey.
The sharp decline in rental rates was affected by a sluggish demand for home purchases and increased supply for rented apartments. “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.
Meanwhile, house prices in the third quarter of 2014 were down by 5.8 percent.
“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.”
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. Apartment 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.
Having been one of the key drivers of Albania’s growth in the pre-crisis decade, the construction sector has been one of the hardest hit in the past five global crisis years.
The severe situation this long-ailing sector is facing is also unveiled by its 22 percent shrink in the second quarter of this year and its negative contribution by 2.8 percent to the quarterly GDP when the country’s economy suffered a slight decline.
Declining remittances, tighter lending standards on home loans and lower number of construction permits have considerably affected this sector which used to be one of the key drivers of Albania’s average growth of 6 percent annually in the pre-crisis decade.
INSTAT data shows the construction sector accounted for 12.2 percent of the GDP at the end of 2013 down from a record 18 percent in 2008 just before the onset of the global financial crisis.
The standstill in this sector is also unveiled by a recent survey conducted by the central bank, revealing that a record high of two-thirds of real estate agents reported they had failed to sell any property, the highest rate since the launch of the survey in the first quarter of 2013.
“As far as commercial property is concerned, the situation appears more pessimistic with an overwhelming majority of 92 percent of interviewees declaring lack of sales for the first half of 2014,” says the survey, adding that real estate agents remain pessimistic in the short-run.
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.