The demand for apartments in Tirana continues to decrease for new buildings near the center, according to the builders. For some of the players, the market is oversaturated. Real estate transactions recorded the lowest growth in the last two years, also affected by the steppe due to SPAK. In contrast to the restrained demand, the supply will continue to grow.
Dorina Azo
After two years of growth, the demand for buying apartments in the capital is showing slowing trends. The builders in Tirana claim that for 2-3 months, the demand is much lower than at the beginning of the year.
The trend has been established for the new residential facilities that are being built near the center.
The demand started to shrink since the fall of last year. Despite its performance, the price trend is increasing compared to last year.
Even according to the survey of the Bank of Albania in May, the Construction Confidence Indicator (TBN) 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.
Currently, the demand is decreasing compared to years, according to Ylli Sula, the leader of the "Key Data" index for the real estate market.
"In the previous two years, demand rates were unusual from the normal trend of previous years. There is already a saturation of the market, as the previous pace was not maintained for a long period", he asserts.
The growth of real estate activity has slowed significantly in the first quarter of this year, according to the latest data from INSTAT on Gross Domestic Product.
Sales and purchase transactions in the country reached 36 billion ALL, or almost 360 million euros, in the January-March period. While this is a new record in terms of value, growth rates are the lowest since mid-2011, before the market began strong double-digit expansion.
INSTAT data show that real estate activity increased by 5.9% on an annual basis in the first quarter of this year. Growth rates have halved compared to 2023, when they peaked at 11.3%, the highest level in at least a decade.
Unlike real estate activity, the construction sector has continued strong growth, signaling for the first time in the last two years a mismatch between demand and supply. Construction rose 14% in January-March 2024, up from 9.8% expansion last year.
The downward trend of apartment purchases also appears in the data of the State Cadastre Agency, where the number of real estate sales transactions in Tirana for 2023 fell by 21% compared to the previous year.
According to the representative of the real estate agency "Remax", Juliana Nela, it should be taken into account that sales transactions do not give a clear overview of sales, since a significant part of transactions in the real estate market are also carried out through order contracts.
This happens in cases where the properties are bought before completion or before their registration in the Cadastre, while the sales contract is concluded at a second moment, after the registration of the property. But considering the considerable volume of new constructions in recent years, it can be concluded that even contract sales occupy an important part.
For the first 3 months of 2024, according to INSTAT data, the area of new permits granted for residential constructions is 252 thousand/m². Compared to the same period of the previous year, the area of new permits granted for residential constructions has increased by about 7%.
While the area of new permits for buildings in the first 3 months of 2024 has decreased by 14% compared to the same period of the previous year.
Has maturity arrived?
But has the construction sector reached maturity, after two years of continuous demand growth?
Some of the builders in Tirana, who are developing projects with new residential constructions, claim that the market has reached maturity and is in a dormant period. After this period, this sector is expected to enter a phase of decline, reflecting market saturation, orienting old construction entrepreneurs to other sectors.
Others think the market still has room.
The builder Avenir Kika, at the same time the chairman of the Tirana branch of the Builders Association of Albania, said that the decline in construction transactions was influenced by the expectations over 6 months of most buyers for the approval of the revaluation law, which is expected to reduce the tax from 15 % to 3%.
"Personally, I would not talk about maturity, before the approval of the revaluation law. The results will be visible one year after the approval of this law. As soon as the law is approved, transactions will increase," he asserts.
Even for real estate sales agents, with in-depth knowledge of the sector, one cannot yet speak of maturity, as it is expected that, according to them, the demand will wake up during the summer period.
"There seems to be an oversaturation of the market. But it is still not possible to predict the progress of the demand during the summer months, as the awakening of touristic factors is expected, which will be channeled to the demand.
Albania's promotions in tourism and the increase in the number of foreign tourists will increase the flow of demand for apartments in the country", said Juliana Nela from the real estate agency "Remax".
Why is the purchase demand following a downward trend?
For experts in the sector and builders, one of the reasons for curbing demand is related to the decline of informal buyers due to the seizures and confiscations of assets by the Special Structure Against Corruption and Organized Crime (SPAK) after investigations undertaken against figures in the political field. , but also of entrepreneurship, which is having an impact on the real estate market.
The value of the assets seized and confiscated together, from the assessment carried out in 2023, according to the data of the SPAK report, is calculated at the value of 41 million euros, of which 54% is occupied by the confiscated assets in the amount of 22,5 million euros (440 million ALL + 18 million euros) and 46% is occupied by the seized assets in the amount of 1,9 billion ALL (19 million euros).
Real estate purchases from informal money (illegal activities, corruption, etc.) are estimated to have been one of the main sources that have supplied the real estate market over the years.
"Investments in real estate still remain among the most preferred forms of money laundering, mainly in apartments, buildings, land, orchards, service units, etc., whether in the city of Tirana, but also in coastal tourist areas (Vlora, Durrës and Lezhë)", it is stated in the 2023 annual report of SPAK.
Ylli Sula claims that by analyzing the increasing trend of granting construction permits for residential constructions at a time when construction costs have increased and the demand for purchases has decreased, he understands that the construction sector is supplied by the hardening of informal money.
For the agents of the real estate market, the main reason for the decline in demand in the capital remains the high prices of properties in the center, unaffordable for housing purposes by families. On the other hand, demand continues to grow in the suburbs.
Dritan Leka, from the real estate agency "CPM", said that the demand for apartments in Tirana has always been constant, while for constructions in the center, finalizations for purchase contracts are shrinking.
"This has come about because of the high prices of residential apartments in the areas near the center. In the center you cannot find apartments with sales prices below 2,000 euros/m².
The high level of prices makes it impossible for many individuals to buy apartments for the purpose of housing in these areas".
But due to lower prices than the center of Tirana, demand continues to remain high in the peripheral areas. "The demand has increased in the suburbs, as there are apartments with prices up to 1,500 euros/m².
In Paskuqan, one of the peripheral areas that has been developing excessively in the last two years, the demand for purchases continues to be high", says Mr. Leka.
The real estate market in Tirana, according to real estate agents, is following the decline in demand that started in the fall of last year, influenced by the increase in prices. They predicted that the trend of shifting demand towards the suburbs will continue for a long time, due to lower selling prices compared to areas near the center.
The head of the "Future Home" real estate agency, Fatjon Hysenbelliu, claimed earlier that the drop in demand started from the center for properties priced above 1,500 euros/m². This trend was also seen for other housing in areas close to the center.
In contrast, the demand for residential apartments in buildings built in the last 2-3 years and in newly completed constructions in areas outside the Small Ring in Tirana remained the same as the previous year.
"The trend of increasing property prices, unaffordable by the general mass of the population, as well as the increase in demand for purchases in the coastal areas of the South, are some of the reasons that are affecting the contraction of demand", he claimed earlier.
Likewise, Juliana Nela, from the "Remax" real estate agency, claims that demand has increased, especially from immigrants, mainly the category of individuals who emigrated abroad before 30 years ago.
"This year, from this category, the real estate market in Tirana is seen as very attractive to buy an apartment at economical prices for investment or residential purposes. The demand from this category has increased", she said.
Prices inhibit demand
Dritan Leka, from the real estate agency "CPM", said that the demand for apartments in Tirana has always been constant, while for constructions in the center, finalizations for purchase contracts are shrinking. "This has come about because of the high prices of residential apartments in the areas near the center. In the center you cannot find apartments with sales prices below 2,000 euros/m². The high level of prices makes it impossible for many individuals to buy apartments for the purpose of housing in these areas".
Trend of selling prices of apartments
From the data of real estate agencies, it results that the prices of apartments within the year have increased in some areas near the center by up to 16%. In the area near the "Dinamo" stadium, the maximum selling price was 2,500 euros/m². This year it reached 2,900 euros/m². The increase is 16%.
Near the Olympic Park in Tirana, in one of the new complexes being built, according to the sales office, apartment prices range from 2,200 euro/m² minimum value to 2,900 euro/m² maximum value for apartments on the last floors of the building.
In this area, according to the agents, sales prices ranged from 2,300 to 2,600 euros/m². The increase is 10%.
While in the area of the former Block, the maximum price for residential apartments continues to be 3,500 euros/m². As for the new constructions inside the Ring of Tirana, the sale prices of the apartments are over 2,300 euros/m².
Price increases were also noted in the peripheral areas, influenced by the increase in demand.
In Kombinat, apartment prices have reached 1,200 to 1,300 euros/m², from 1,100/m² last year.
In the Astir area, prices fluctuate from 1,200 to 1,300 euros/m² in the first lines of construction from 1,250 euros/m² that was years ago. In this area, prices have increased by 4%. In the area of Fresk, the sale prices of apartments from 900 1000euro/m² have reached 1,100 euro/m². The increase is about 11%.
In Paskuqan, prices have reached 1,050 euros/m² from 850-900 euros/m², due to high demand, according to real estate agents. The increase in prices ranges from 16 to 24%.
The same phenomenon happened in the other suburban area near the Univers Shopping Center. Apartments in the Univers City residential complex have reached prices of 1,000 euros/m². According to real estate agents, due to the high demand, the prices have almost doubled compared to 2020, when the construction of the residential area started.
Unlike builders and agents who report price increases, the Bank of Albania, in its latest report, said that housing prices in the second six months of last year fell by 6% compared to the first half of the year.
According to the Fischer index, calculated with a 6-month frequency by the Bank of Albania, on an annual basis, prices were still rising, but the annual growth rate slowed to 3.2%, from 16.6% that had been their annual growth at the end of of 2022.
The price index for properties sold in Tirana registered a decrease of 10.1% compared to the first 6 months of the year, while it was only slightly higher compared to the value of a year ago.
In the second 6 months of 2023, about 26% of the apartments sold were reported to have been purchased by non-resident citizens. Of these, about 2/3 are citizens of European Union countries.
Overall, according to the Bank of Albania, the share of non-resident buyers has returned to growth after a downward trend since 2020.
Financing through bank credit has continued to figure in a good part of property sales. According to the agents, as in the previous period, about 60% of the residential and commercial properties sold by them were purchased with bank loans.
Of these, in 60% of cases, the loan covered up to 60% of the value.
The average time to sell homes nationally increased very slightly to 10.9 months, from 10.6 months in the previous survey.
Demand for beachfront properties is increasing
The demand for buying apartments in this period is dominated by the market for buying and selling properties on the coast. Aurela Xhaferaj, broker in Vlora at the "Century 21 Albania" agency, said that compared to years, the demand is increasing, especially for areas such as Lungomare or near the main Boulevard of the city. There was also an increase in purchases in Radhimë and Orikum.
"Demand is high, especially from foreign citizens of European countries and immigrants. More small houses are wanted at economical prices, for the purpose of investment through rental or resale. The problem remains the supply, which is low.
Many of the buildings are under construction, and the apartments are not yet equipped with mortgage permits. "Foreign buyers hesitate before buying a property before construction is completed."
Even Erjon Harizi, the chairman of the Association of Builders of Albania, said earlier that compared to years, the demand for properties on the coast has increased by 20 to 30%. Among the most preferred areas for purchasing real estate is Vlora, Palasa and Saranda. The Chairman of the Association of Builders said that 40% of buyers of properties on the coast are citizens with foreign passports.
Even from the sales office of the "Concord Investment" company, it was stated earlier that the demand for resorts in the South of the country has increased, which is more dominated by foreigners influenced by the high flow of tourists. Foreign buyers, according to them, are showing more interest in purchasing property for investment purposes due to the affordability of the prices compared to their neighbors.
Meanwhile, at the beginning of the spring season, property prices on the coast, according to data from real estate agencies for "Monitor", were on average 25% more expensive compared to last year.
In resorts in coastal areas such as Palas, Orikum and Sarandë, the maximum selling price of apartments reached 4,000 euros/m².
On the first line of resort construction in Lungomare, apartments are being sold at a price of 3,500 euros/m². Compared to years, the prices of properties on the front line of Lungomare in Vlora have increased by 25%.
There was more increase in prices in Orikum and Radhimë areas. Property prices for residents in Radhima and Orikum increased by 67 to 88% during the year, according to real estate agency sales price data.
Real estate agents claim that in the first line for the coastal areas of the south you will not find real estate with a price below 3,000 euros/m².
In Golem, the maximum sale price reached 1,500 euros/m² and in Gjirin e Lalëzi, values range from 2,400 to 3,300 euros/m².
In the Kavaja rock area, the maximum sales prices have reached 1,800 euros/m² from 1,500 euros/m² that were years ago (20% increase).
Within the city of Saranda, the prices of apartments, as stated earlier by Eron Çumani, the head of one of the oldest agencies in the city "Saranda Property", range from 1,500 euros/m² for buildings built 10 years ago to 2,200-2,500 euros/m² in new constructions located 500 to 1,000 meters from the sea.
As for the new apartments under construction on the seashore, first line prices start at over 3,000 euros/m²./ Monitor
