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Tax increase, builders warn apartment prices will increase by 20% in 2024

2024-01-22 11:30:32Biznes SHKRUAR NGA REDAKSIA VOX

Tax increase, builders warn apartment prices will increase by 20% in 2024

The Association of Builders of Albania predicts for the year 2024 an average increase in apartment prices by 20% in Tirana, as the increase in taxes, after the change in reference prices, will affect construction costs.

Even for properties in coastal areas, it is expected that there will be an increase in prices due to the increase in taxes. At the end of 2023, the Municipality of Vlora proposed to the Municipal Council for approval, the increase of the infrastructure impact tax from 4% to 6%.

"In construction, direct costs will not be higher, while the impact of taxes from the government is expected to be increasing. If the maximum infrastructure impact tax (8%) is applied in Tirana today, some cities, such as Vlora, have questioned the increase of this tax from the current 4% to 6%.

The changes in the reference prices to date have had an impact only in the city of Tirana, with the increase in the reference price in the entire territory of the capital, which is expected to increase the cost of construction by an average of 40% more.

Of course, this increase in costs will be accompanied by higher prices. I believe the price will increase by 20% on average", says the chairman of the Association of Builders of Albania, Erjon Harizi.

The flow of constructions is expected to be high in the capital as well. In 5 years, namely the period 2018-2022, according to the data of the draft budget of 2024, the Municipality of Tirana has collected 32.9 billion ALL from the infrastructure tax for new constructions.

Collections from this tax have increased after 2018. In 2022, from this tax, the largest Municipality in the country collected 7.4 billion ALL. The expected receipts from this tax for 2023 are predicted at 7 billion ALL.

The collection forecasts for this tax, referring to the draft budget data, are expected to be in the amount of 6.3 billion ALL in 2024. In 2025-2026, the collection will be from 6.5 billion ALL.

In relation to the draft budget, the Municipality of Tirana underlines that the planning for the collection of this tax presents difficulties, since the realization depends on the applications, which are the object of the development of the real estate market.

For the planned period, the income from this tax is expected to rely mainly on the new developments that are expected to be added to Tirana in the well-planned area of ​​New Boulevard, where the Detailed Local Plan has also been approved by the National Council of the Territory, which paves the way for development.

The infrastructure impact tax from new constructions is subject to all entities that seek to be provided with development permits and construction permits for residential, administrative, production, service and other facilities.

The structure in charge of this tax is the General Directorate of Planning and Territorial Development, which, while accepting the requests, examines them and, after approval by the holder, also performs the clearance of this permit against the prior collection of the value according to legal provisions.

For builders with unjustified costs, the sector is also burdened by other taxes, including the 3% social housing contribution tax, inert waste taxation.

For this reason, after the entry into force of the increase in the reference prices on which several taxes are calculated, including the building tax, the infrastructure impact tax, the education infrastructure tax, in the month of September, in the letter that the Association of Builders sent Prime Minister Edi Rama, suggested the revision of the methodology for the calculation of the infrastructure impact tax.

Builders proposed that the value of the tax be calculated on the cost of construction and not on the value of the sales reference price, divided by area.

Among other things, they also raised concerns about the land tax that for 10 years, according to the Association of Builders, is an unfair practice, based on the decision adopted in 2015 "On the approval of requirements for the management of inert waste" and that of 2005 -s "For the approval of the Albanian waste classification catalog", according to which, construction entities are obliged to deposit in landfills against payment even the uncontaminated soils that come from excavations. The association also demanded the repeal of the law on social housing contribution, calling it unconstitutional.

For the chairman of the Association of Builders, Erjon Harizi, the increase in costs from many absurd taxes on which the builders have been charged will continue to affect the sales prices for buyers even in 2024.

"On construction permits, a 3% tax is applied to the homeless, in fact no homeless person benefits from this tax. There is also a high cost from the land tax that builders pay in licensed landfills, i.e. the tax on uncontaminated land.

This is absurd, also the fee charged is too high. This tax also has its own impact on the price of an apartment.

Construction contributes about 11% to the Gross Domestic Product, but in recent years, a decrease in profit from year to year has been observed in the construction sector.

This has mainly come from the 10-fold increase in taxes in the construction sector, thus bringing about a significant increase in the price of apartments and therefore, for a part of the population, buying an apartment becomes a mission impossible.

The increase in taxes ultimately affects the final buyer", underlines Mr. Hariz.

 

The purchase of expensive properties and apartments in towers will decrease in 2024

The decline in demand for expensive apartments with prices above 2,000 euros/m² and for properties under construction such as towers will continue to decline during 2024.

Real estate agents have previously claimed that in the second half of 2023 there was a drop in demand for expensive apartments in the center of Tirana.

According to the chairman of the Association of Builders, the trend will continue during 2024. On the contrary, the builders' expectations for the demand for housing at cheap prices will not be shrinking.

"The decline in demand may have started for properties with very high prices, mainly for towers and apartments with prices above 2,000 euros/m², while for average prices no decline in demand is observed.

In 2024, the demand for apartments with low and medium prices will be the same as in 2023, so there may not be an increase of 15% per year as has happened, but a decrease is not expected for this price range", underlines Mr. . Hariz.

The main buyers of apartments in the coastal areas of South and Tirana remain foreigners and diaspora Albanians, according to the chairman of the Association of Builders. The main advantage for the purchase remains the investment.

"There is a lot of interest in Southern properties from buyers from diaspora countries and from foreigners. Even in Tirana there is a lot of demand from the Albanians of Kosovo and North Macedonia, but also foreigners. A good part is bought for investment, so not as a first apartment.

In Tirana, the rental market is a very profitable business".

 

 


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