Saturday, May 24, 2008

There is a huge speculation in Albanian real estate market

By Gjergj Erebara in Tirana

If you listen advises of experts from construction industry, seems that housing market in Albania is an excellent opportunity for investments. “At this moment, Albania is a good market that should improve the housing stock, increase office space, develop retail schemes and shopping centers,” said Philip Bay of real estate consultants Colliers International, during a conference held in Tirana. “(We’re) at an early stage of real estate development that will become an attractive market in three to five years,” he said.

But someone thinks this is not true and that consultant firms are not explaining all the truth and risks involved to investors. Consultant firms are investing in media coverage; they are coordinating interviews with politicians while their journalists are pushing clamorous worlds in the mouth of interviewed politicians. One of them had tried to find a date for full membership in EU. Some other consultants are convinced that “Albania will become EU member in 2014”. The most clamorous declaration from a real estate consultant that I have heard was “investment in Albania can be paid back in only three years”. All this is just bullshit!

So, I am trying to explain some risks and some truths from Albanian real estate market, in order that foreign investors can be impartially informed.

A square meter of apartment in Albania costs only 200 euro to be build, while prices range from 600 to 1200 euro for square meter. This year is perhaps the worst moment to buy an apartment here, because offers are artificially scarce and prices are artificially high. In Albania, to build apartments, one should receive a special permit from local government. For almost one year and half, government had not accorded enough building permits. Tirana’s municipality accorded only permits for 1036 new apartments, down 89% compared to 2006. This artificial tighten in supply-side had caused an artificial increase of prices. There is a real risk for investors that a shift in urban planning policy can bring more building permits and inevitably, much lower prices.

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