Builders are pessimistic, expecting a drop in orders and apartment prices

After the construction boom of the last two years, the first half of the year is showing signs of slowing down.

According to the June Bank of Albania (BSH) business confidence survey, the construction sector is not optimistic for the fourth month in a row. Even in April - June, the balance has turned negative, which means that pessimism prevails over optimism.

According to the Bank, the Construction Confidence Indicator (TBN) fell by 2 percentage points in June, down to -3.14. However, this indicator is 19.4 percentage points above the long-term average, according to BSH. During this year, the balance was positive only in February and March.

According to the bank, the decline in TBN was mainly determined by declining estimates for current construction activity and commissioning contracts. Also, the expectations for the prices they will set in the future have registered a decrease, while those for employment appear to be improving

Businesses are waiting for fewer orders. The balance of responses[1] to the ordering contracts question was negative at -22.5, indicating that more builders expect fewer orders. This is the lowest level this year.

Businesses are asked: How do you currently value orders (order contracts)? 1. More than enough (above normal); 2. Sufficient (normal for the season); 3. Not enough (below normal)

Price expectations are also falling, although the balance remains positive at 10.3, but this is the lowest level since November 2023. Companies are asked: How do you expect the prices you set to change over the next 3 months? 1. They will grow; 2. They will not change; 3. They will fall.

Real estate agents claim that the increase in apartment prices has begun to affect the downward trend in demand for properties with a selling price of over 1,500 euros/m². On the other hand, the increase in prices in the center moved the demand to the outskirts, causing the latter to increase to 1000-1200 euros/m².

Another factor that has restrained the request is related to SPAK's investigations. According to real estate agents, buyers with regular income are reluctant to buy in buildings whose builders may be subject to SPAK.

Even a series of investigations by SPAK against figures from the political field but also from the business sector, is having an impact on the real estate market.

A source that is supplying the market remains the purchases of foreigners, especially in coastal areas.

The latest data from the Bank of Albania revealed that during the first quarter of 2024, incoming foreign exchange flows in the form of foreign direct investments were mainly concentrated in real estate, to the extent of 23%, the financial intermediation sector, to the extent of 21 %, of hydrocarbons, to the extent of 13%, of energy, to the extent of 5%, as well as of communication, to the extent of 5%. In value, foreign investments in real estate were around 81 million euros in the first quarter.

In 2023, according to INSTAT, real estate transactions reached 137 billion ALL, or about 1.3 billion euros. This is the highest level of sales ever recorded.

In 2022 and 2023, real estate activity grew rapidly, at 11.2 and 11.3%, respectively, the highest rates of all other sectors.

Both real estate and construction activities, which in recent years have entered a new growth cycle, have been the main factors that have influenced the economic growth of 2023.

INSTAT announced that the economy grew by 3.44% in 2023. The data shows that construction and real estate accounted for almost 50% of this growth.