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UNDP study on construction in Albania: Resources are unclear, population is decreasing, but new permits are increasing

2022-12-23 17:44:49Biznes SHKRUAR NGA REDAKSIA VOX
UNDP study on construction in Albania: Resources are unclear, population is
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In Tirana, the United Nations Development Program UNDP presented today at a technical table a study according to which the sources of the great demand for new construction permits are unclear, while the population is decreasing and a significant part of the housing is lira and their stock has increased.

The study estimates that in Albania there is no market demand for this increase in new constructions, but in the last 8 years real estate prices have increased by 102%.

The UNDP study notes that the construction industry was revived from 2017 onwards, where the main place is occupied by housing, which covers 76% of the new construction area approved in 2021. In Tirana (62%) and Durrës (7%) more than 2/3 of new constructions are being erected.

UNDP study on construction in Albania: Resources are unclear, population is
Construction permits in Albania, compared to other countries

But the authors point out that the sources of the numerous requests for new construction permits remain unclear, as long as housing ownership in Albania is among the highest in Europe.

A significant portion of housing is vacant as the population declines, but new permits predict over 11 million square feet of new housing in the last decade.

The authors claim that even internal migration cannot increase the demand for housing, because while the population of Tirana has grown together by only 4 percent, on the other hand, the housing stock has increased by over 27 percent in the last decade.

Even more paradoxical is the finding that the market has no demand for such a large increase in new construction, but on the other hand real estate prices have increased by 102 percent in the last decade, an increase that the study describes as rapid. and unprecedented.

Housing prices in Tirana, Durrës and other coastal cities have tripled compared to just a few years ago.

The average selling price of apartments in September 2022 for the whole country is €1,146/m2 and this has come about due to inflated prices in Tirana and coastal areas.

In the capital, the average price is €1,365/m2, depending on the area from €770 to €2,290/m2. In coastal areas, the average selling price is €1,600/m2, ranging from €950/m2 in Shengjin to €2,500/m2 in Dhërmi. As for Tirana and the coast, the average price is €380/m2.

UNDP study on construction in Albania: Resources are unclear, population is
Housing prices in Albania compared to other countries

The study notes that high price fluctuations are seen, which indicates that the real estate market in Albania is still volatile and vulnerable to expectations, emotions and speculation.

The real estate market in Albania is supply-driven because sellers do not have any need to sell and the number of buyers is quite low. This market is even shaped by the offer, the study points out, because the offer for housing has increased more than the demand.

"In 2021, sold homes accounted for 2.89% of the total housing stock and 66% of building permits issued that year. There is an increase in the flow of foreign capital in the Albanian real estate market, a part in coastal areas, which in 2021 accounted for about 12.5% ​​of transactions. Savings have also increased, so it is unclear how the remaining 50% of transactions were financed. They can be attributed to cash savings, remittances or exchanges," the study concludes.

Housing is not affordable for a significant part of Albanian families, the authors claim. If a middle-income family buys a house today at current prices, it can quickly drop below the poverty line, but the future impact will fall on young couples or internal migrants.

"Until now, Albanian families have sought better opportunities in Tirana and Durrës, and the significant growth of the tourism industry could provide significant employment opportunities for families from poor regions. This could also be beneficial for the tourism industry, which is struggling with labor shortages and is currently hiring people from abroad. But drastic price increases in coastal areas make it impossible for immigrant families to afford housing. "Unaffordable housing is one of the main causes of disruption of the natural flow of labor, and the lack of workers can affect the tourism industry by slowing its growth," the study states.

The vast majority of the data belong to a 10-year span, however researchers have also measured the impact of the crisis in Ukraine in the last year on Albanian construction.

"The Ukraine crisis of 2022 has caused a price increase negatively affecting all production chains and almost every sector of the economy, including construction," the study says.

It lists the rising cost of energy, oil and building materials such as bricks, cement and steel, which increased construction costs by at least 11 percent, and which will be reflected in even higher property sales prices. real estate, harming the weakest./ VOA

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