The tightening of the capital, the rich "abandon" Tirana, buy properties in Dubai, Montenegro, Greece

2023-03-04 09:25:26Biznes SHKRUAR NGA REDAKSIA VOX

The tightening of apartment prices in Tirana has increased the demand of the rich for properties outside Albania.

Real estate agencies claim that more apartment purchases are being made in Dubai, Montenegro and Greece, due to the narrow price gap and lower rental investment payback time.

There is also interest in residential houses in the USA, while Switzerland has more expenses from Albanians for commercial properties. The builders predict that the prices of new apartments in Tirana will not decrease.

The high prices of apartments in Tirana have accelerated the spending of Albanians for the purchase of property abroad in recent years. The narrow price difference, especially with the region, has increased the demand to buy properties for investment purposes, through the granting of leases in Tivar in Montenegro or Thessaloniki in Greece.

Overseas property buyers are entrepreneurs and high-income individuals. Other rich people have invested in some expensive areas of Europe, for residential purposes, while Switzerland is also preferred for commercial properties, due to the non-limitation of the law.

Market experts claim that this trend has developed in recent years in Albania, including the one for home purchases across the Atlantic Ocean, in the US states, due to fiscal incentives for investments in the real estate sector.

In addition to Europe and the region, the last two years have seen increased demand for property purchases in Dubai. Real estate agencies claim that the reason for investing in this market is the high prices in Tirana, especially in the center, the very high rate of return on investment through leasing over 20 years compared to Dubai, which is up to 10 years.

For certain properties with a favorable geographical position, the return on investment in Dubai goes up to 5 years. Other reasons for the increase in demand in this market are fiscal benefits, from zero taxes for taxpayers, acceptance of cash for purchases and non-declaration of their origin.

According to the data of the national accounts section of INSTAT, in 2020, the expenses of Albanians resident in Albania for properties abroad reached 65.5 billion ALL. Compared to 2019, expenses have decreased by 6%.

Spending increased after the crisis of 2008. From 6 billion ALL spent on properties abroad in 2007, a year later, in 2008, this value increased more than fivefold, to 32 billion ALL.

During the period 2008-2013, the expenses of Albanians resident in Albania for properties abroad were about 208 billion ALL or 1.8 billion euros. In 2013, there was a drop in the indicator, where it can be seen that only 11 billion ALL were spent, or three times less than in 2012.

Property purchases abroad started again at a rapid pace after 2014. According to INSTAT data, from 2014 to 2018, Albanians' spending on properties abroad reached 1.5 billion euros.

In the period from 1996 to 2020, the record is held by 2019, where investments reached the value of 69.7 billion lek, or 606 million euros. In the last 24 years, the income for the purchase of properties abroad reaches the value of about 5 billion euros.

How do apartment prices in Tirana differ compared to European cities?

Apartment prices in the center of Tirana are more expensive than in some European cities, such as Thessaloniki in Greece or the city of Udine in Italy (20 km from Rome) according to Numbeo data for 23 cities listed by "Monitor" (the selection of cities was made based on the demand of Albanians for properties abroad according to the data of real estate agencies and builders' investments).

In relation to some European capitals, such as: Athens, Brussels or Budapest, the price difference is very narrow. The average price of apartments in the center of Tirana, according to Numbeo, for the year 2023 is 2,203 euros/m² and 1,064 euros for properties outside the center.

The prices of the center of Tirana are 300 euros cheaper than those of apartments in the center of Athens and the city of Tivari, where real estate agencies underline that the investments of Albanians for properties have increased this year, and 600 euros more than Belgrade.

A narrow price difference appears in relation to other European cities. In the center of Budapest, apartment prices are 1,300 euros/m² more expensive than in the center of Tirana, in Brussels they are 1,600 euros/m² more and 2,000 euros more than apartments in the center of Eindhoven in the Netherlands. The center of Tirana has a high price difference with cities such as: Zurich, Paris, Munich and London, where the prices of apartments in the center vary from 12,000 to 19,500 euros/m².

The tendency to buy property abroad has been developing for years in Albania by the rich who buy apartments in elite areas of Europe and the USA, due to the high increase in apartment prices in the capital, according to Ylli Sula, the head of the "Keydata" index. . He points out that many rich people invest in property purchases also for income diversification reasons.

"For several years, the rich are finding it more profitable to buy property abroad than in Albania, as prices have increased significantly, while the interest on savings deposits is low. In Europe, it is preferred to invest more in residential houses, in elite areas of Milan or Vienna.

A new trend is also the purchase of properties in the USA, due to the lenient fiscal policies that some states offer for this sector".

Last year, in the capital's luxury buildings, such as towers, apartment prices reached 5,000 euros/m².

The company Invest Society, which is developing 4 luxury projects in Tirana, Rainbow Center, West Residences, Book Building, Green Terrace, in the "Book Building" tower, which has started to be built after Sahat, sold residential apartments for 5,000 euros/m².

Rainbow Center in Blloku is a building with 7 floors (of which two floors are shopping centers). In 2022, the sale of residential apartments was completed in this construction.

According to representatives of the sales office, the apartments were sold for 5,000 euros/m² (the building was erected on the site of the former Rovena bar). In other areas, such as the former Block or near the LSI headquarters, apartment prices start at over 3,200 euros/m².

Dubai leads for quick return on investment; Expenses from Albanians are added

In the index for 23 cities listed by "Monitor", the city of Dubai ranks first for the lowest investment return time through leasing. The gross rental yield, which is the total annual gross rent divided by the house price for this city, is 10%. (The higher the value, the better).

After Dubai, referring to data from Numbeo, the most profitable for short-term rental return is the city of Miami in the USA with 9.4%, for a property that is bought in the center. Next is Udine in Italy, where Albanian builders have started building residential apartments, Brussels with 5.2%, the city of Tivari in Montenegro with 5.1% and Belgrade with 4.7%.

The expensive prices of Tirana, but also the high rate of return on investments through leasing, has increased the demand for properties abroad. The low rate of return on investment due to the high level of rents in Dubai and the provision of fiscal facilities, as well as allowing the use of cash, has boosted the demand for property from Albanians in this country.

Sokol Çili, the head of the "Falcon" agency, told "Monitor" that the demand for properties in Dubai has increased in recent years. The agency also offers a wide portfolio of properties in Switzerland, Italy, the Czech Republic and Poland.

The main reasons are the high prices of apartments in the center of Tirana, the high rate of return on rental investment that goes over 23 years, compared to Dubai, which reaches up to 10 years, while for typologies of properties with a strategic position, where the rent is higher, the return on investment reaches up to 5 years.

"In Dubai, luxury property prices start at 3,000-3,500 euros/m², while rents start at a minimum of 6,000 euros.

The optimal return on investment from rental is 5 to 10 years. In Albania, the indicator of return from rent continues to remain higher, almost over 23 years due to expensive prices and low level of rent. This is one of the reasons why many individuals, mainly entrepreneurs, are investing in Dubai.

Other reasons I would list the fiscal facilities it offers to those who invest in the real estate sector, from zero tax for all taxpayers, return on investment 5-8% in the first years, low cost procedures for investment, acceptance of cash and not providing an account of their origin, as well as issuing a visa.

Specifically, for investments worth more than 200 thousand USD, you get a 2-year visa, and for investments worth 545 thousand USD, you get a 10-year visa.

Mr. Çili adds that in addition to the request for the purchase of properties for the purpose of investment, entrepreneurs are also interested in the purchase for the purpose of residence, to move to Dubai.

What are the obligations of Albanian property owners in Dubai? The head of the agency "Falcon Real State" underlines that the house owners are required to pay a regular maintenance tax for the building and the surrounding area (which will be charged once a year) and to make payments for utility bills.

Stela Dhami, from "Colliers International", says that the increase in requests from foreign agencies that provide consultancy services for construction, but also property purchase in Dubai, has also been influenced by international transport lines, which make the free movement of people, who are looking for attractive investment alternatives.

"Having direct air transport lines and places like Dubai, with a very high offer in real estate, become even closer."

In recent years, the demand for property in Dubai by foreigners from countries around the world has increased rapidly. Ionian Antoni, the head of the "Century 21" real estate agency, said that the expenses of Albanians for properties in Dubai are negligible compared to the expenses of other countries. According to the agency's calculations for properties outside Albania, the potential of buyers is 1% of the richest Albanians.

"According to an analysis made of the Dubai market, it was calculated that a local agency sold 30-40 units per day and with our account, if we were to cooperate, we would be talking about 20-30 units per year.

As a result, neither for the foreign party nor for us as the Albanian party, there was no interest. The amount and values ??that Albanians can buy for large markets, such as: Dubai, are very negligible.

Yes, it is true that the marketing done by Dubai agencies is among the most successful.

When they do the marketing and target the whole world, it comes all the way to Albania, but from the attempts made for cooperation with agencies there, there has never been any interest, nor has there been any cooperation with London, New York and Miami when we have analyzed.

Still, the purchasing potential of 1% based on the assumed income of 1% in Albania did not leave much room for profit.

These are luxury investments. Even if an American invests, for example, in Dubai, he does it for the diversification of the property portfolio. Wealthy families in the US have large expenses, but also large surpluses which they reinvest (mostly not in the area where they have their main business).

Reinvestment managers typically allocate the portfolio: 30-50% in property; 30-50% in the stock market; 30-50% in precious materials (precious materials gold/oil/mercury etc., etc.). In this way, the rich person is protected from cases of bankruptcy of the main business, because he has diversified the portfolio.

As a result, when they are very rich, in addition to protection in many industries, they also protect in many countries. So they buy properties in different places, in order not to have the risk that when one place falls, they all fall", asserts Mr. Anthony.

In relation to the investments of Albanians in property in Switzerland, the head of the "Falcon" agency said that the most requested typology by entrepreneurs is commercial property, due to the non-limitation of the law.

Why has the demand for apartments in Montenegro increased?

The longest tourist season in Montenegro, which enables rental income throughout the year, has increased the flow of demand for apartment purchases from Albanians.

Stela Dhami, from the "Colliers International" agency, told "Monitor" that the purchase of residential premises in Montenegro, mainly in the city of Tivari, is being developed as a good investment opportunity for renting by the rich.

Ms. Dhami adds that recently, the prices of apartments in Tirana have increased, this is also a reason for the transfer of investments.

"Albanians of the upper economic class are always looking for alternative real estate investments. This market in the neighboring country of Montenegro has been more developed, especially the hotel sector.

This sector has offered interesting products, where the purchase of real estate can also bring regular income, being part of the hotel industry.

The offer is advanced and brings the possibility of financing and considering the income that can be gained from putting the property to use, this makes it an interesting investment alternative.

With low risk of loss, emphasizing that Montenegro has a more developed hotel market than ours.

Return on investment in coastal properties remains more interesting as a model in Montenegro, because the market itself has been more developed. In Albania, this model has been introduced for several years, but the season remains short to bring those returns as in Montenegro or Croatia"

According to the representative of the "Colliers International" agency, the upper class, which has invested in Albania, seeks portfolio and income diversification.

"This is called the normal trend followed by businesses and individuals everywhere in the world, to increase their profits. Therefore, for this level of society, we can call it a positive trend".

Due to the favorable price of the property in relation to Tirana, Mrs. Dhami claims that there is a demand for properties in the city of Thessaloniki, mainly for residential purposes from Albanians.

In Albania, apartment prices will not decrease

Builders warn that there will be no drop in apartment prices in Albania. Currently, according to an observation by "Monitor", the prices of apartments in many areas of the capital have not changed compared to the autumn of last year.

The apartments in the new constructions at the beginning of the Paris Commune area are being sold again this year from the start of the investment at prices of 2,100 to 2,200 euros/m².

Builder Hajredin Frateri claims for "Monitor" that the minimum prices of apartments in areas outside the center are not expected to fall below 750 euros/m², while the maximum price will continue to be up to 950 euros/m².

"The suburbs will continue to have prices ranging from 750, 850 to 950 euros/m², due to the high demand. Many young families are looking to buy houses between their loans from banks, despite the fact that interest rates on loans have increased.

It is necessary that the second level banks, the economic properties are credited 100%. He predicts a drop in prices in luxury properties, mainly towers due to their high price.

The new buildings, especially in Tirana, are luxurious and target buyers with very high incomes. This income, which is used for the purchase of properties, is often not justified by official sources. The construction sector was one of the main typologies for money laundering by organized crime organizations for 2020 according to the report of the Directorate for the Prevention of Money Laundering.

Real estate market actors said that if the government approves the fiscal amnesty, apartment prices will increase, as informal money flows for their purchase will increase. On the contrary, market experts predict a drop in prices, especially for luxury properties./ Monitor

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