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What is happening with the construction? Credit, energy and wages increase. Are these costs reflected in the price of apartments?

2024-09-05 09:31:41Biznes SHKRUAR NGA REDAKSIA VOX

What is happening with the construction? Credit, energy and wages increase. Are

The latest data for the construction sector speak of an increase in lending, an increase in the price of energy or wages, but also speak of an increase in building permits parallel to these increases in apartment prices. Are these costs justified when from the last Census over 40 percent of apartments are unoccupied?

But official statistics speak of the opposite 

According to INSTAT, the Construction Expenditure Index in the second 3 months of the year increased to 112.3, indicating an increase in total costs, which are also translated into the final price.

"The Construction Expenditure Index in the second quarter of 2024 reached 112.3, compared to the fourth quarter of 2021 as the base period. The annual change of the Construction Expenditure Index in the second quarter of 2024 is 2.5%, a year ago this change was 4.7%."

The main reasons for this increase in price, according to the Institute of Statistics, are the increase in energy costs and wages.

"Compared to the same quarter of a year ago, the largest increase in prices is observed in the group "Energy expenses" with 5.9%, followed by the groups "Wage expenses" with 3.8%, "Transportation expenses" with 3.5%, "Other costs" with 2.1%, "Machine costs" with 1.6% and "Material costs" with 1.1%."

It is the hydrosanitary, construction, but also the electrical and communication materials that had the greatest impact on the price increase of the group of materials.

The loan for construction reaches the highest value in 8 years

Similarly, credit to the construction sector has returned to growth this year and has touched the highest levels for at least the last eight years.

According to Bank of Albania statistics, for the first seven months of the year, the value of new loans for this sector reached 28.4 billion ALL, 39% more compared to the same period last year. In total, the active loan portfolio has reached the value of about ALL 76 billion, increasing by 7% compared to a year ago.

The record numbers of construction loans are following the positive cycle of the sector, which in recent years has been among the main contributors to economic growth. Also, construction seems to be one of the sectors that is supporting the rapid growth of lending to the economy this year.

However, to a significant extent, this increase may also be related to the financing of important road infrastructure projects, of the public-private partnership type.

As for residential construction and real estate in general, the banking sector, credit in recent years has experienced a new cycle of growth, driven by developments in the real estate sector, especially in the capital and the coast.

Last year, lending to this sector suffered a kind of inhibition, also related to the cycle of interest rate increases and the slowdown in price growth. However, this year it seems that business and the banking sector have been engulfed by a new wave of optimism, which is evident from the very high rate of credit growth.

The rapid growth of credit, however, seems to be worrying the Bank of Albania. In the last Statement of Financial Stability, on Wednesday, the Supervisory Council emphasized that the cycle of rapid credit growth should slow down. For this purpose, in June the Governor also decided to apply for the first time a countercyclical addition to the capital adequacy ratio of the banking sector.

However, the total area of ​​approved permits has increased by 13% compared to the same period of the previous year. The value of new construction, based on permit data, also increased, up 4.2% from a year ago.


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