20 December 2007 In a market already saturated with domestic demand, foreign buyers who once looked askance aim to invest.
“A pretty ratty place” is how Christopher Watts described Albania in an article for Forbes magazine seven years ago.
"Even by Balkan standards, Albania is unimpressive,” he wrote.
But that was 2000, and today Watts, a British journalist, has changed his tune.
He is one of the growing number of foreigners buying Albanian real estate. They come seeking profits and a different style of living.
“I like the rhythm of life here,” Watts says.
His recently purchased property is located in a lush suburb of Tirana, the Albanian capital, between the botanical gardens and the zoo and not far from an artificial lake.
The sales price of 730 euros per square metre was hardly a bargain compared to real estate prices in Tirana seven years ago. Prices have skyrocketed in recent years, fuelled by domestic demand, itself unleashed by the growing availability of mortgage loans, fast-flowing remittances from family members working abroad and a strong migratory trend from rural to urban areas.
Nonetheless, Watts’ buying price was inexpensive when compared to prices found in many property markets of post-communist Europe, including the Balkans. So buyers such as Watts are willing to bet that Albanian property prices have plenty of further growth potential. Early results suggest they do. Prices in the neighborhood where Watts’ apartment is located have already risen 23% to 900 euros per square meter.
Albania’s real estate market is in transition. After a period of rapid domestic investment in property, real estate agencies report that the market now seems saturated. Yet, rather than causing price growth to decelerate, as market saturation might be expected to do, an influx of new bidders from abroad is sustaining the upward trend.
The optimism of buyers like Watts is based on bullish forecasting, both economically and politically.
The economic case is straightforward. After Albania’s infamously messy early post-communist period scared potential investors away, this has become the fastest growing economy in southeast Europe. Albania has registered average gross domestic product (GDP) growth of 5% for five years running, with annual inflation held to 3%. Nowhere domestically has economic buoyancy yielded greater change than in the property market, with the construction industry accounting for 47% of overall economic activity last year.
On the political side, Albanian accession to the European Union remains years away, but most signals from Brussels indicate that Albania and all other southeast European countries should get in eventually. Watts and others reckon that whether or not they do, the country’s pro-Western outlook and improving living standards will pay off.
“I hope that the value of the investment will increase for the next 20 years as Albania aims to join the EU, and the quality of life will increase”, says Watts.
The lion’s share of foreign demand for Albanian property converges upon Tirana, and an important share of this is generated by individuals and families with work experience, often diplomatic, in the capital.
Apartment prices in Tirana jumped 107% between 2002 and 2006, and by more than 300% during the 10-year period ending in 2006, according to a study published by INF 93, a real estate agency. During that decade, average prices jumped from 269 dollars per square metre to 776 euros per square metre.
For the most luxurious apartments in upscale districts, prices run as high as 2000 euros per square meter, equivalent to prices found in other regional capitals. Yet less expensive properties can still be found in some preferred districts, such as the so-called “ex-Block” area where Enver Hoxha, the communist-era dictator, maintained his villa. Prices there start as low as 1000 euros per square metre.
Beyond the city, Albania’s property market is more mixed. Even within easy commuting distance of Tirana, brand new developments must overcome substantial infrastructural weaknesses.
“It is true that interest is high, but the problem is the bad infrastructure and the lack of proper [property development] studies in the zones”, says Dritan Caka, director of the real estate agency Dev Information.
One development that appears to have ably overcome this obstacle is the Acacia Hills development in Farka village, near Tirana. Mimi Kruja, Albanian partner of Vista, the US-Albanian company developing Acacia Hills, cites “high interest from Americans, British, Austrian and even from Israeli citizens”.
Vista markets Acacia Hills as a new development of luxury villas, built to an internationally high standard, in contrast to the “shoddy” construction characteristic of much Albanian housing stock, openly derided in the company’s promotional literature. Prices at the development start accordingly high, at 1200 euros per square metre and go up to 1500 euros per square metre.
But even slightly farther away from Tirana, at the country’s Adriatic sea coast, infrastructural and planning problems become much harder to overcome.
Areas such as Golem beach, in Durres, fewer than 40 kilometres’ drive away from the capital, are developed yet lack roads in some places. They also lack substantial green spaces, as areas nearest the beach tend to be crowded with buildings, often constructed without reference to any coherent urban plan.
Indeed, large swaths of the Albanian coast were spoiled during the last decade by high-concentration building, with apartments crammed in next to each other.
Such scenes now mar some of the country’s finest sandy beaches. Local tourists, once drawn to these places, now tend to avoid them. Foreign property hunters keep their distance, too.
Albania’s coastal real estate market is therefore significantly different from those farther up the coast, in Montenegro and Croatia, where coastal cities and towns have seen prices soar.
Prices for apartments in the Albanian coastal cities of Durres, Vlora and Saranda start from 350 euros per square meter and go up to just 1000 euro per square meter for villas – far below going rates in other Adriatic coastal markets.
“Foreign buyers are mainly interested more in areas still undeveloped on the Albanian coast. However, such areas in Albania have a total lack of infrastructure, which makes their development extremely difficult,” says Caka.
The catch for such buyers is that their Albanian place in the sun may exist, but it may be virtually impossible to get there. (BIRN)
By Ornela Liperi in Tirana
Five years on from this article we can see the big change with Albania property market.
ReplyDeleteYes - more and more foreigners are buying because infrastructure has improved drastically, tourism keeps growing nicely at 10-15% rate pa, and that is crucial for foreign investors willing to buy properties by the coast.