So, INSTAT confirms that the annual difference of the Index of the Cost of Construction for the second quarter of this year, has grown by 0.8%. Meanwhile, according to this index, the cost of construction has also registered an increase if we compare it to the previous quarter, by 0.1%. This shows that building has become a more expensive activity for construction firms, due to the increase in the price of materials and the cost of labor. Based on simple logic, this added cost of construction should have been reflected on the price of properties, but according to the Central Bank, this is not the case. According to the latest monetary policy report issued by the Bank of Albania, these prices have seen a significant fall of up to 11%. “The index of the price of properties registered a fall during the two first quarters. In the second quarter, its real annual difference was -11.5%”, experts of the Bank of Albania say.
Which items led to a rise in the cost of construction?
According to experts of the Institute of Statistics, the increase in the cost of materials by up to 1.6% compared to the same period a year ago, led to an increase of the cost of construction. According to INSTAT, another item which contributed for this increase was the rise in “salary expenses” by 2.5%.
INSTAT experts say that these two items have also seen a rise from one quarter to another. “Compared to the first quarter of 2017, in the second quarter of 2017, ‘salary expenses’ have gone up by 1.1%, while ‘material expenses’ have gone up by 1.0%”, they say. Experts add that “transport expenses” and “energy expenses” have seen a fall during the second quarter of this year.
BoA: Rents go up, property prices go down
To rent a property today is more expensive than it has been before. But the situation is different when it comes to purchasing a property. According to the Bank of Albania, property prices this year have seen a fall of up to 11%. “Indexes of property sale prices and property rent prices have moved in opposite directions during the first half of 2017”, experts of the Central Bank say about the performance of property market prices.
Meanwhile, the Central Bank reports that while “the index of property prices registered an annual fall of 11.5% during the first two quarters of the year, the index for rents continued to rise, while this trend has started in the third quarter of 2016”. As a result of such situation, according to the experts of the Bank of Albania, the price/rent ratio registered its lowest level since the first quarter of 2015.
Experts of the real estate market: Great supply in properties pushed prices down
The great supply of properties, at least in the capital, seems to be the biggest reason of the drop in their prices. This is confirmed by experts of the real estate market, according to whom, the construction of new apartment blocks in the capital, is creating new stocks of unsold new apartments. The great supply in properties leads to a drop in the price for new properties. This way, a fall has been registered in the price of purchase for properties, in contrast to a while ago when their prices registered an increase.
Number of construction permits goes up, more properties and price reductions
Construction permits approved by the competent authorities for residential properties have seen an increase, particularly this year. This has led to an increase in the number of new constructions and a reduction of their process. According to statistics, in the first quarter of this year, the total number of issued construction permits was 11.058.422, while in the second quarter of 2016 this number was 8.815.910. Construction permits for residential purposes have doubled. According to INSTAT, in the first quarter of this year, their number was 8.861.840 while in the second quarter of 2016 the number of construction permits was 4.358.701.
